Government's flagship back to work programme at risk of financial collapse, says think tank

22 August 2011

At least 90% of organisations involved in delivering the Government's flagship back to work scheme, the Work Programme, risk having their contracts terminated because of unreachable performance targets set by the Department for Work and Pensions (DWP). The Social Market Foundation, the think tank originally behind the idea for the Work Programme and responsible for the analysis, said that without an urgent rethink of the performance criteria this could lead to the failure of the entire scheme with potentially dire consequences for the 2.4 million long term unemployed it is designed to help.

The SMF's analysis uses new data on performance levels of welfare to work providers under Labour's back to work programme, the Flexible New Deal (FND), to forecast the likely performance of organisations delivering the Work Programme. Looking at the Government's stated minimum performance levels for getting adult jobseekers - the main target group - into work, the analysis finds that:

  • The Work Programme will get around one in four adult Jobseeker's Allowance (JSA) clients into work, significantly below the rate needed to meet the DWP's expectations for minimum performance;

  • Providers will fail to meet the minimum performance expected of them by the DWP by around 30,000 jobs over three years;

  • Providers will also undershoot what the Government anticipates would have happened if no welfare to work scheme existed at all, suggesting that the Government's analysis of this 'policy-off' scenario is over-optimistic;

  • Based on FND performance levels, over 90% of Work Programme providers will be at risk of having their contracts terminated by DWP even by year three of the scheme;

  • This under-performance means that funding per jobseeker will be significantly less than anticipated, threatening the financial viability of providers.

"The future of this vital employment scheme hangs in the balance," said Ian Mulheirn, Director of the SMF. "The programme aims to get some of the hardest to reach people off benefits and into work, but past performance shows that providers will be unable to meet the criteria required of them by the DWP.

"The Government has warned that it will terminate the contracts of providers who cannot deliver these minimum levels, but has set these minimum levels almost impossibly high. This threatens to create huge instability in the programme."

The report comes as monthly figures released last week showed a sharp increase in the numbers of people out of work to 2.49 million and a rise of almost 110,000 in Jobseeker's Allowance claimants since bids for the Work Programme were invited.

"The Work Programme is built on shifting sands," continued Ian Mulheirn. "As if the performance targets weren't already too tough, the deteriorating state of the labour market is making the outlook for the scheme even more precarious."

As well as highlighting concerns about providers' capacity to meet the minimum performance expectations, the analysis also raises serious questions over the financial viability of the scheme. It finds that the maximum amount of money the DWP is offering providers for a successful outcome (an adult jobseeker into work for six months or more) is at least 25 per cent less than under the FND if the minimum expectations are met. With funding per jobseeker heavily dependent on performance, and providers unlikely to achieve these levels, the SMF anticipates that the maximum level of funding will fall still further putting huge pressure on providers.

Ian Mulheirn continued: "Since the vast majority of providers will be unable to achieve the expectations on which financial calculations have been based, it appears that the Work Programme is at real risk of financial collapse. It is time for a radical and urgent rethink of the criteria involved to prevent this laudable policy being derailed by poor implementation."

Notes to Editors

  • The analysis compares FND performance over the 19 months from October 2009 to April 2011 with the minimum performance expectations set by the DWP for over 25s Jobseeker’s Allowance claimants under the Work Programme for its first three years of implementation:

  

Year 1 

Year 2 

Year 3 

Minimum WP performance expected by DWP*

5.5%

27.5%

33%

Predicted WP performance

4.1%

20.5%

27.8%

No. jobs short

4,300

17,300

11,600

 

 

 



* jobs over the past year divided by jobseekers referred in the past year

  • The DWP has warned that it will take contracts away from providers who cannot meet the minimum performance expectations (as outlined in the original tender document from December 2010 http://www.dwp.gov.uk/docs/work-prog-itt.pdf)

  • The House of Commons Work and Pensions Select Committee asked the Government to amend performance levels in response to changes in unemployment rates or labour market conditions (paragraph 105 of Work Programme: providers and contracting arrangements: Government Response to the Committee's Fourth Report of Session 2010-12)

  • The SMF has long argued for the application of payment-by-results in welfare to work. The 2009 report Vicious Cycles was described by one publication as “the blueprint for the Work Programme”, and in opposition Welfare Reform Minister Lord Freud cited the SMF as a key influence on the policy’s development

 

 

 

 

 

 

Six-month jobs achieved per month

Months into FND

 
 

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