Risky business

The following piece appeared in The Guardian on 22nd May 2013. It is banging a drum we have been beating on here repeatedly. The underspend on the Work Programme (as noted in the Select Committee’s newly published report) is a stark example of a key point we are trying to make about the relationship between programme spend and programme impact, with lessons across welfare reform:

After six months of deliberation, the Work and Pensions Select Committee this week publishes its second report into the Work Programme (WP). The inquiry set out to answer the question, can the Work Programme work for all user groups? The short answer is: no, two years after launch, it is clearly failing the most disadvantaged jobseekers.

The committee acknowledges that the WP simplified the sector. It has shifted things to payment by results, supposedly reducing risk to the public purse. The contractors are highly variable in quality. Their performance is improving, for some jobseekers anyway, but they are running the service with massive caseloads. “Creaming and parking” (helping the jobseekers that are easier to find work for and ignoring the hard ones) is endemic. Specialist services, to address complex jobseeker needs such as disability or homelessness, are underused, and specialist subcontractors get a raw deal. The WP also fails to engage adequately with employers and has a poor relationship with Jobcentre Plus.

The fundamental flaw is laid bare in the £248m that the committee says the Treasury is clawing back for underspend on the WP in 2012-13 – money that was allocated and that contractors haven’t earned.

The initial WP concept (as set out by Lord Freud, now responsible for the rollout of universal credit) was based on the simple notion that it costs a shedload of money to keep people on benefits– more than £100m a day. Surely, it is better to invest in welfare-to-work programmes to reduce the benefit bill through moving people into work. If the Treasury can’t find the additional cash for extra welfare-to-work programmes, then get private sector firms to fund it and pay them back out of the benefit savings they generate.

Some people, even after years of unemployment, find their own job. Money spent helping this “deadweight” will be wasted. Some people, however, are at risk of getting stuck on benefits and never moving off them. The higher the levels of disadvantage, the more complex their needs are likely to be, and the more expensive any solutions. But the jobseekers that cost more to help will be the ones that deliver a greater return in reduced long-term benefit liability.

It appears that this link between programme investment and savings has been forgotten. The payments made to WP contractors, as noted by the committee, are ineffectively targeted. The contractors are not incentivised to risk spending on jobseekers who appear hard to help. With limited overall funding, contractors are trying to protect themselves by disinvesting in the programme, running with caseloads of up to 180 jobseekers per adviser. This creates a vicious cycle, with high caseloads meaning low outcomes, meaning further disinvestment.

The £248m underspend gleefully recouped by the Treasury represents a massively increased risk to the public purse. It indicates lower levels of “off-flow” from benefits to employment, which will push up the benefit bill in future years. With those most likely to be parked on the WP representing the biggest risk. The programme is applying a sticking plaster, counting the unused splints, and leaving the patient crippled.

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