Another kind of welfare to work cream

(An edited version of this first appeared on The Guardian’s website on 21st February 2012.)

At the recent hearing, both contractors and the DWP steadfastly refused to reveal to the Public Accounts Committee how well, or badly, the Work Progamme is performing. This week, the department revealed the number of people referred to the Programme; still only a tiny glimpse of what is actually happening. It makes it impossible to determine the extent to which this vital welfare to work initiative is simply creaming off the easy to help and parking the rest.

Failing to get at meaningful data, the Committee reverted to an insistent barrage of questions about the amount of money being creamed off by the contractors. Most of these contracts have been let to private companies, some with overseas ownership, with the destination of the profits of a busy decade of welfare to work as opaque as the Work Programme’s current cost and success.

It is impossible to quantify to what extent these profits have siphoned off money that could have been spent on reducing unemployment instead. In the early years of the New Deal, contractors were paid largely on the basis of the numbers of people referred to them and how long they kept their bums on jobseeking seats. Around 20% of the department’s total spend on outsourced provision was directed to programmes funded on the basis of outcomes in the Employent Zones. The Flexible New Deal was the first big swing towards outcome-based funding, and that only went live in the Autumn of 2010.

The Work Progamme continues the trend and ultimately passes all risk to the providers. This is a new concept to much of the welfare to work ‘industry’. It is possible that they will fall flat on their collective face. This will be to the detriment of hundreds of thousands of jobseekers. It would also turn all those fat cat profits into rather different losses.

The cats argue that since they bear the risk, they have the right to a creamy return. Even in an outcome-funded world, however, doesn’t the state want control over the proportion of total expenditure that is actually invested in frontline services? There are a number of ways that this could be achieved.

If contracts were let with a requirement for ‘open book accounting’ then we could build a shared understanding, between commissioner and provider, of what it really costs to deliver the right assistance. What, for example, is the optimal caseload of jobseekers per employment advisor – the Employment Zones demonstrated this is the most significant variable with the most successful providers running with between 35 and 50 jobseekers per frontline member of staff. (On the Work Programme we are seeing upwards of 150.)

Understanding the cost of the service would enable the commissioner to incentivise and target assistance on people furthest from work. The commissioner could also track and cap profits, ensuring no provider was able to stack ‘em high and sell ‘em cheap while filling creamy bowls.

This would, however, demand a fairly seismic shift in the approach of the department. They would need to accept a role as steward of their market place, sharing responsibility with contractors for their impact. Contracts would also have to be flexible, with payment terms periodically reviewed to ensure maximum bang for each buck.

Given the department’s current reluctance to publish even the most fundamental view of Work Programme performance, it appears the politics preclude their ability to manage with such objective oversight. An Independent Regulator for welfare to work could stand apart from the vested interests of both Minsister and contractor, transparently managing ‘learning contracts’, flexing payment terms within agreed parameters and reviewing how much money falls above or below the providers’ bottom lines. A Regulator could also be accountable for policing the performance of these programmes with disabled people and across ethnic groups, another aspect of delivery currently sitting uncomfortably in the shadows.

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