Opportunity knocks, but major challenges lie ahead

We now know who will lead the Work Programme. Matthew Jackson and Gareth Brown examine the hurdles ahead for those charged with delivering the government’s welfare reforms

As part of its wider drive towards public service reform, cost-cutting and localism the coalition government has introduced a range of new policy around reforming the welfare system and streamlining employment programmes.

On the welfare reform side we are seeing a shift away from distinctive benefits allocated to claimants with differing needs; to a universal ‘one-size-fits-all’ credit. Employment programmes have gone a similar way, away from specific or neighbourhood focused programmes to an all-encompassing single Work Programme.

There are several reasons for this shift. Alongside efforts to reduce the deficit, UK government wants to slash the benefits bill. Last year, out of central government’s total spend of £586bn, £137bn was spent by the Department for Work and Pensions. Of this, £125bn was spent on benefit payments of one type or another.

Government also wants to see economic growth driven by an expanding private sector. The Work Programme is therefore designed to facilitate the movement of people from benefit dependency to employment. Finally, ministers want to cut what they see as bureaucracy created by the previous administration. Rather than have a multitude of often overlapping schemes it has created a single, streamlined programme.

While still being delivered by a mixture of public, commercial and social organisations, the leadership drive and responsibility for the Work Programme is being decentralised to large, often multinational corporations.

The ‘prime contractors’ were announced this month and include organisations such as A4e, Working Links and Serco. They are in the process of developing operational plans and formalising engagement with potential sub-contractors and voluntary and community sector (VCS) consortia.

The programme is a massive undertaking – there are around 5.7 million claimants in receipt of out of work benefits (1,466,988 claimants of Jobseeker’s Allowance; 2,596,380 claimants of incapacity benefit or Employment and Support Allowance; 672,310 claimants of Income Support) – but there are numerous opportunities as well as challenges.

THE OPPORTUNITIES

1. A system that’s both more efficient and effective
The Work Programme provides a chance to generate efficiencies and effectiveness. The fact that it is a single programme reduces duplication and given that payment is made on the basis of results there is potential for reducing public sector spend and therefore improving efficiency.

The payment process in previous employment programmes delivered by local authorities, private sector brokers and the voluntary and community sector was upfront, meaning there wasn’t really an emphasis on return on investment.

This shift means contractors will have to develop quality products which are effective in moving people into sustained employment. The upshot appears to be that if your product is poor, you won’t get results and therefore simply won’t get paid.

2. A chance to bring together the commercial, public and social economies
The programme has been developed on the basis of leadership by the prime contractors, predominantly in the commercial sector, and delivery by businesses together with voluntary and community sector organisations.

The relationship between the two is something that hasn’t really happened before on this scale, moving it away from narrow discussions around corporate social responsibility to a more strategic footing.

But recent research by CLES around place resilience shows effective strategies can’t just be based on the relationship between the commercial and social economies and must involve the public sector as well.

The Work Programme has a real opportunity to be an initiative framed by effective cross-sectoral working, bringing all three together.

3. A new way of conducting employer engagement
In the past there has often been an awkwardness in the relationship between public authorities and businesses.

This has largely been down to the fact that the commercial sector has felt stifled by the bureaucracy of the former. The programme offers the opportunity for a new and potentially more productive relationship between prime contractors and an area’s local business community.

In the current economic climate it will become increasingly important that deliverers of the Work Programme understand the offer of employers within a locality when it comes to jobs and additionally that employers understand the skills of the local population.

As well as prime contractors, local authorities will have a role in developing employer engagement strategies to shape this relationship.

4. A way to develop the commercial skills of the VCS
Over the last ten years there has been a broad shift away from voluntary and community sector organisations being recipients of grants to one where they are deliverers of contracts or services.

While some have adapted to the change, others have not had sufficient capacity or skills to do so. The programme is largely based on contract arrangements between prime contractors and sub-contractors, meaning VCS organisations will need to develop commercial skills in order to compete for and deliver activities.

Importantly, the Work Programme has an additional emphasis on VCS organisations developing delivery consortia – indeed many have already done so. This is important as it encourages collaboration and again avoids duplication in a particular locality.

THE CHALLENGES

1. Ensuring there isn’t a mismatch
Prime contractors are predominantly national organisations and some of the framework awards have been made to organisations that aren’t based in the allocated region and haven’t worked there previously.

They may lack knowledge of how that local labour market functions, the needs of claimants and neighbourhoods or of local employment opportunities. This has implications for how contractors target interventions and engage with employers.

Worklessness can often be prevalent at neighbourhood or street levels. While recognising that it will be the role of sub-contractors to deliver in neighbourhoods, the geographical scale of the Work Programme may lead to gaps in provision, in employment brokers in certain neighbourhoods, or in employment opportunities.

2. The threat to organisations posed by payment by results
While prime contractors will receive an attachment fee for each individual moving onto a programme of activities, the bulk of the payment comes once an individual has moved into employment for 13 or 26 weeks dependent on whether they are previous claimants of Jobseeker’s Allowance or incapacity benefit.

Prime contractors are therefore expected to absorb up-front costs to deliver activities at a time of uncertainty in the labour market. What happens, for example, if someone falls out of a job after 25 weeks; do they have to go back to the very beginning of the 26 week period to enable the prime contractor to get paid?

It is doubtful VCS providers will be able to cover the costs of delivering activities at the local level, nor will they be financially sustainable if they have to wait for payment for a minimum of 13 weeks. A discussion needs to be had with prime contractors as to whether sub-contractors can access a portion of the attachment fee as part of the contract.

Payment by results might also lead to contractors going for ‘easy wins’, something that has characterised previous programmes. This potentially further marginalises, for example, long-term claimants of incapacity benefit, for whom it might take years to become job-ready.

3. Undermining the neighbourhood focus of the VCS
In recent years the VCS has been commissioned through programmes such as the Working Neighbourhoods Fund to deliver employment programmes in particular neighbourhoods or for particular communities.

The Work Programme is more generic than this. Sub-contractors and suppliers are likely to be required to deliver at broader geographic levels and offer support to a diverse claimant group.

Organisations may have to diversify their focus and work together in consortia. While this has happened in some areas, predominantly the major cities; the challenge is in areas where the VCS is more fragmented.

4. Plugging the local knowledge gap of prime contractors
As mentioned earlier, some of the prime contractors have been allocated regions or sub-regions which they have not previously worked in. This is not only a challenge in terms of knowledge of the labour market but also in terms of knowledge of local providers of employment intervention

Prime contractors need to quickly understand the offer and skills sets of potential sub-contractors on their patch. If not, it may lead to primes engaging with ‘tried and tested’ providers who have delivered in the past, but not necessarily effectively.

There are also concerns around whether primes will simply ‘poach’ expertise from existing providers to fill gaps in their own organisations, particularly around issues such as mental health. There is an additional challenge here around timescales. Prime contractors will have to move quickly to engage with and contract activities with sub-contractors. Also sub-contractors will need to be proactive in demonstrating their capabilities.

5. Clarifying the role of local government and Jobcentre Plus
Local government can provide much of the local intelligence required for Work Programme delivery around priority neighbourhoods and groups. It needs to create an arena to enable this dialogue to happen.

If councils are to have a true role, it’s probably one of coordination. If some but not all prime contractors are involved in partnership structures this could lead to conflicts of interest. Authorities need to engage and embed them within partnerships. Also, there’s been little guidance or dialogue around the role of Jobcentre Plus and particularly its existing brokerage activities. It could have a strategic, referral and delivery role and this must be clarified with prime contractors.

6. Avoiding duplication of employer engagement activity
A key element is the focus on the supply side and employer engagement. Previous programmes have tended to focus on the demand side and providing claimants with the skills required to apply for jobs and enter employment.

The Work Programme seeks to marry supply and demand, but its competitive nature could prove problematic. With two or three prime contractors in each sub-region there’s a real danger they will all be competing to engage with the same employers. Imagine a scenario where a major employer is looking to fill 100 posts. You may well have a situation where each contractor is competing to get their claimants into the vacancies, potentially annoying the employer.

The notion of supply is also difficult given the current economic context of public sector redundancies and stagnant private sector growth. For employer engagement to work, jobs have to be available in the first place and the jobs need to be matched to the skills of claimants. Again, the challenge here is to prevent the further marginalisation of those furthest away from the labour market as they do not have the skills to compete and contractors will be tempted to broker the ‘quick wins’.

7. Finding a better measure of impact
The programme appears to be very outcome focused with payment on moving people into a sustainable job. While positive the question remains as to what happens both to people who need softer support around training and skills to help them move into employment.

What happens to the softer outcomes such as improved confidence and self-esteem? Their importance must be embedded into the mindsets of prime contractors and a robust model should be developed which enables these outcomes to be collected and monitored.

8. Creating a holistic approach to employment support
Worklessness is very much linked to a host of other socio-economic issues around housing, education, family and where you live. These services are often delivered by local government and housing associations. With efficiency savings being a key driver of current policy, a key challenge for prime and sub-contractors is ensuring employment support takes a holistic approach.

This requires knowledge of the multiple challenges facing individuals in entering the labour market and could lead to a significant increase in demand for services such as mental health support.

A holistic approach to delivering employment support will also be required to deliver effective in-work support, ensuring tailored assistance is provided to overcome barriers once a job has been secured. This could include support to overcome issues within the wider family which could prevent providers from receiving ‘sustainability payments’.

THE WAY AHEAD FOR THE WORK PROGRAMME

• Ensure a broad range of suppliers are engaged at a local level to ensure a holistic approach to employment support can be provided. There is a clear role for local authorities in informing this delivery offer.
• Provision needs to be continually reviewed. That way, it can build on what works and respond to changing needs in terms of, for instance, an increase in the volume of claimants being referred to the Work Programme due to successful service delivery.
• Local government needs to adopt a place stewardship role as a driver of the Work Programme. It should lead a partnership between primes, sub contractors, Jobcentre Plus and ensure employer engagement activity is effective.
• Capacity building needs to be provided in the VCS to enable diversification beyond specific areas and to ensure delivery of a holistic model of employment support. Professionalism and consortia development will be key to their role in the Work Programme.

CLES is interested in undertaking research with prime and sub-contractors to understand how they are responding to the challenges. To take part or find out more, email Matthew Jackson or Gareth Brown or call them on 0161 2367036.