Making the Work Programme work
(An edited version of the following article first appeared in The Guardian on 7th February 2012.)
The contracts for the Work Programme were competed on price. That is, would-be providers were invited to say how cheaply they could do it, and the cheapest were then awarded the most contracts. Unfortunately, this entirely misses the point.
This is outcome-based contracting, sometimes called payment by results. The contractors are not paid for inputs, such as how many lessons they teach. They are not even paid for outputs, such as the number of qualifications achieved. They are paid purely on the basis of the outcomes delivered – in this case, for each unemployed person who finds a job and then stays in it.
The saving to the state is in the reduced unemployment and related benefits that we have to pay out, as well as an increase in tax revenue from higher rates of employment.
The further the person is from work, and the more complex their issues, the more likely they are to be unemployed for a long, long time, and to receive higher benefits for themselves and their family. They are more likely to have poor health. Their children are more likely to underperform in school, and to become unemployed themselves. They are more likely to be involved in crime, either as victim or perpetrator. Consequently, the more excluded the individual, the greater the likely savings to the state if you can get them into work, and keep them there.
However, in competing the Work Programme on price, the Department for Work and Pensions have sought savings in the short-term, from the payments made to the providers of the service, rather than from the impact of their service. They have, in effect, asked the providers to cut their costs.
In order to cut their costs, the contractors must reduce the scope and quality of their service. They must see fewer jobseekers and see those jobseekers less often. Their frontline staff must work with much bigger ‘caseloads’ of jobseekers. They must also prioritise rigorously, making sure that they don’t waste precious time on people who need intensive, professional, expensive assistance – like help with debt, depression, alcohol abuse, homelessness, etc. In the harsh parlance of procurement, they must ‘cream and park’, focusing on the quick wins and ignoring the difficult ones.
They are caught in a bit of a vicious cycle but most of the contractors are very business savvy. They’ll make the requisite cuts, deliver a much reduced service, exclude the socially excluded, and get away with it, probably making a bit of profit too. Despite the Minister for Employment, Chris Grayling, apparently relishing the thought of underperforming contractors folding, only one or two of the smaller, least commercial are really at risk.
Though with the cuts and reduced service, there will, obviously, be far fewer outcomes. Tens of thousands, if not hundreds of thousands, of long-term unemployed people will remain trapped in crippling worklessness.
We may also see a number of charities go to the wall as a direct result of the Work Programme contracting. Organisations, like LEAP in Harlesden, run by the remarkable Tunde Banjoko, may well not survive much longer. The Work Programme contractors in that area simply cannot afford to send the sort of jobseekers to Tunde that his organisation can turn round. His specialist, highly localized, very intensive support, that has rescued thousands of young people from the streets in the last decade, cannot survive the price competition. And any grants he might have received in the past from local or regional government have long since dried up too.
Assuming we agree that this is not what was intended for the Work Programme. Assuming we recognize the need, particularly now, for far more than a light touch, generalist response to the needs of unemployed people. There are two things which we should set in train as a matter of urgency.
Firstly, the Department must blow a wind of transparency through every corner of the Work Programme. If we are to hold these contractors to account for what they have promised to deliver, and if we are to head off any disastrous underperformance, we must know who is doing what. We need to see the numbers – how many jobseekers with what backgrounds have started with which contractors; what service have they received; and with what outcomes. We should also see, in some detail, what has been spent to achieve this.
We also need to review, rapidly and openly, whether or not contractors are subcontracting in the way they promised in their tenders. Are they using the charities they committed to? Are they paying them a fair amount?
Secondly, we need to roll out a new layer of provision called Work Programme Plus. Anyone completing two years on the Work Programme, and not finding a job (ie probably reaching at last three years of unemployment), should be referred for a further year of assistance.
In many instances, this is likely to look much like an Intermediate Labour Market (ILM) – a bit like a social enterprise ‘employing’ jobseekers to deliver local, social-impact services. Successful ILMs in the past have, for example, recycled white goods or computers, improved and maintained public spaces on deprived estates, run garden centres, and provided childcare. They can also bring in more professional interventions, such as psychologists and physiotherapists. Jobseekers would be mandated to attend.
Jobseekers with particularly complex issues could be fast-tracked to Work Programme Plus. This fast-tracking would need to be very carefully monitored, and transparently reported, but could also be varied around the country in response to different labour market conditions. It may be possible in some areas to use targeted investment, through Work Programme Plus, to support a large number of new business start-ups.
Unlike the Work Programme, I would also recommend that contractors for Work Programme Plus should be excluded from frontline delivery. All services to be subcontracted through networks of local specialist organisations, many of whom are likely to be charities like LEAP; would-be contractors to be evaluated on the quality of their networks; and no Work Programme contractor to be responsible for the Plus services in the same area.
Contractors would, again, be paid on the basis of outcomes, but with fixed pricing. Much higher payments would reflect the high levels of need, as well as the much greater savings to the state realised by outcomes with this group.