Tragically for those whom it is intended to assist, a programme designed in very different economic conditions and based on a belief that market incentives would drive a range of providers to secure long-term employment for those who have been inactive in the labour market for a long period may end up not delivering.
Similar programmes have worked in other countries so what is different here in the UK now? The Work Programme has built upon and beyond the Flexible New Deal and previous schemes. Its intentions were good but there are some serious issues emerging.
One key reality is that however effective a programme may be in securing sustainable jobs for unemployed people, there must be the jobs available and this requires economic growth; and a growth strategy.
Only last week, the Employment Related Services Association (ERSA) - the welfare to work industry's trade body said that it is too early to draw firm conclusions about the likelihood of meeting performance targets. This is a new stance for ERSA given that it has previously been supportive of the official Government line that these targets will be achieved.
The statistics are revealing. Referrals to the programme are nearly 20% higher than the original DWP forecast. There have been more referrals of those on unemployment benefit than originally expected whilst the number of people on incapacity benefit and the employment and support allowance referred has been less than 40% of the original predictions. And meanwhile, long-term unemployment and youth unemployment have continued to grow. There is no evidence that "workfare" style compulsion or withholding of benefits will create more employment. These are not the answer.
When setting up the Work Programme, Ministers were very clear that they expected it to offer significant opportunities for third sector, social enterprise and specialist SMEs to be key delivery partners. Unfortunately, the procurement and contracting model which was adopted appears to have gravely undermined this ambition.
This model (of prime contractors procuring and managing a range of sub-contractors with the former having large regional contracts) has meant that only organisations with large balance sheets and the ability to access large chunks of capital could possibly bid. This is because a large element of the fees paid by DWP is based on a long-term unemployed person being in work for a defined period of time. The prime contracts are also regional - and therefore, prime contractors have to have the necessary capital to support business development and fund long-term cash flow requirements.
Increasingly, anecdotal evidence suggests that not all the prime contractors are offering contract opportunities that make commercial and operational sense to smaller providers from the third, social and SME sectors. Indeed, some prime contractors are also direct providers and thus have an incentive to award work to themselves in preference to others in their supply chain. And whilst some prime contractors are able and willing to retain and manage the financial risks of this challenging programme, many are seeking to pass these risks on to their supply chain sub-contractors. Needless to say, this strategy is doomed to failure given that many of the latter are small organisations which simply cannot bear the cost of this approach. And when they are not being offered people to support into work, their problems are merely compounded.
Inevitably I suppose, the DWP will say that this is principally a matter for prime contractors rather than the Department. However, Ministers should be concerned. The political promise is being torn apart.
In the last few weeks, some third sector providers have chosen to step away from the Work Programme. Many others are indicating that they may have to review their involvement because of the financial risks and indeed losses that they are incurring. Even some specialist providers that are well-equipped and experienced in working with some of the most vulnerable and marginalised unemployed are finding that when they are being offered assignments, the candidates do not match their expertise and focus. In these circumstances, it is inevitable that these bodies will question whether they should be prepared to risk their charitable funds to support if they see as an inherently flawed Government programme.
It is also of note that local authorities, which traditionally played a significant role in addressing unemployment, have basically been marginalised and excluded by the Work Programme. And this at a time when local authorities are expected to tackle issues associated with troubled families, social cohesion and regeneration (physical, economic and community). There is a major disconnect here. The Work Programme should be core to the community, well-being and place agendas.
At a time of high unemployment, there is a real risk that within the Work Programme, places with lower prospects of employment opportunities and high unemployment could be by-passed completely. Equally, there is risk that the hardest to place in employment will be "parked" by the providers so that they can secure some funding by placing others.
Of course, one cannot comment on this topic without noting that there have been some recent high profile allegations of fraud within the programme. And it is possible that providers, including prime contractors, could be tempted to game to maximise their returns. Fraud is wrong and so is gaming contracts. I agree that it is important that the fraud allegations are properly investigated and dealt with - but only in the context that fraud is not unique to any one sector the public, business and third sectors. Neither should this be the principal reason for questioning the Work Programme though the DWP clearly needs to consider its monitoring and audit arrangements as well as its approach to due diligence prior to letting contracts.
There have also been some eye-catching headlines about the 'behaviours' of providers and one in particular. Again, I suggest that these need to be treated with care and in the context of wider public sector contracting, and business performance, governance and ethics. There are many more fundamental and substantive reasons to raise serious questions about the underlying mechanics of the Work Programme without over-focusing on these colourful examples as the basis for taking a view on the wider programme.
The Government has invested a great deal of political capital in the Work Programme and its contracting model of prime contractor and payment by results. On the latter, there had to be some early movement away from what was originally going to be 100% results-based fees or there would have been few bidders. Government also wishes to roll the model out across other public services. Some local authorities are introducing so-called 'business sector service integrator' models which are similar in many respects to the prime contractor model; whilst other local authorities are keen to adopt payment by results contracts. So there is a need to understand the implications of the model.
The Open Public Services White Paper made the Government's case for payment by results at the same time that it promoted a greater role for the third, social and SME sectors in public service delivery. Consequently, many third sector organisations are currently exploring the opportunities that social investment or some other access to capital may offer to allow them to consider bidding for public service contracts where payment could follow sometime after expenditure has been spent. However, the fact is that many organisations, however much they try to be creative with their financial modelling, are simply not going to find this attractive or financially feasible.
Payment by results contracts do, undoubtedly, have a role to play - but they are not right for every contract or every service area or in the pursuit of every public objective. The Government would be prudent to pause and review progress; such a review should involve current and potential providers. It is important to test whether the incentives and pressures of such contracting can and do have unintended and perverse consequences.
Having talked and listened to many of the key players on both sides, I believe that given the current state of the Work Programme, now is an ideal time to commence such a review.
Were the Secretary of State to commission such a review, I suggest that it include:
•evaluating performance against stated contractual and political objectives
•testing whether the model is reaching and serving those most in need and in locations across where the need is greatest
•understanding the importance of economic growth for such a programme
•examining client capacity, including monitoring and auditing
•evaluating the opportunities for and impact of the Programme and its contracting model on the third, social and SME providers understanding and designing models for effective business-third sector partnerships and responsible supply chain management
•identifying potential alternative service, delivery and contracting models involving third, social and SME providers and local authorities
•identifying the lessons for wider public service reform, commissioning, procuring and contracting policies ands programmes
Policy areas such as the Work Programme can most assuredly help us to learn what works and what might need to be changed. Evidence can shape future policy. An urgent and swift review (and it need not take long) would be the sign of strong, and responsible government. This would be more effective than extending "workfare" style approaches. And crucially, it could benefit long term unemployed people too!