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The Government’s flagship back to work scheme, the Work Programme (WP), is at risk of collapse. Under the Government’s new back to work scheme, which began in June, private and not-for-profit providers are paid by results for getting long-term unemployed people (and people on sickness benefits) into sustainable jobs

But the scheme looks likely to substantially undershoot the Department for Work and Pensions’s expectations, according to new analysis from the Social Market Foundation.

The design of WP drew heavily on the welfare-to-work model proposed by SMF in its 2009 publication Vicious Cycles. Welfare Reform Minister Lord Freud, when in opposition, cited the SMF’s work as a key influence on the policy’s development. Consequently, we feel strongly that this laudable policy should not be derailed by poor implementation.

But funding for the new programme is tight and dependent upon achieving very demanding minimum performance expectations set by DWP. In addition, the Department has threatened to terminate the contracts of providers who do not meet these challenging benchmarks. On Monday, the SMF launched a paper that examines the viability of the Work Programme by forecasting the likely performance of the providers during the first three years, based on the actual performance achieved under the Flexible New Deal (FND), Labour’s welfare to work scheme and the forerunner to WP.

Our analysis suggests that WP providers will significantly undershoot the minimum performance expected of them by DWP. All providers look likely to underperform the minimum expectations in years one and two of WP. Even by year three, 22 out of 24 FND contractors would have failed to meet the minimum requirements of WP. This implies widespread contract termination and threatens the viability of the entire scheme. The implied performance level also means that funding per jobseeker on the scheme will be significantly less than anticipated, creating real problems for private and voluntary sector providers already operating on extremely tight funding.

What's more, provider performance is vulnerable to the deteriorating economic outlook since bids were invited, compounding the above problems. Since December 2010, the claimant count has risen by almost 110,000 suggesting that many more jobseekers are likely to move onto the scheme over the coming year.

Widespread provider failure or a late bailout would be bad for jobseekers, expensive for the taxpayer and fatal for many subcontractors, especially not-for-profit providers. In the light of this new evidence and the deteriorating labour market outlook, DWP should revise its minimum performance expectations, and introduce more credible incentives. It should also establish greater transparency about how it derived its estimates of minimum performance, and clarify how they would vary if economic conditions deteriorate, to create greater certainty and strengthen accountability.  And, to advance the Government’s aim to be the “most transparent government in the world”, DWP should publish monthly provider performance data, starting immediately, not in autumn 2012 as currently planned.

Editors Notes:

Ian was appointed Director of the Social Market Foundation in October 2008. He joined the Social Market Foundation as the Chief Economist in February 2008, after three years as an economic advisor at HM Treasury. He has worked in a variety of policy areas including child poverty, savings & investment, welfare to work and higher education funding. He has also undertaken research into the drivers of worklessness in London and evaluation of the Working Tax Credit and the National Minimum Wage. Ian is currently specialist advisor to the House of Commons Work and Pensions Select Committee.

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Written by Ian Mulheirn   
Tuesday, 23 August 2011 14:19

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