POLICY BRIEFING. Can the Work Programme Work for All User Groups?

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1 Can the Work Programme Work for All User Groups? Author: Andrew Jones, LGiU Associate Date: 5 June 2013 Summary This report, available here is the second by the Work and Pensions Select Committee on the Work Programme (WP). The report covers the WP s performance during the first year of operations, supply chain management, and the Programme s payments structure, but most importantly its success in helping hard to place groups. It is concluded that the WP has the potential to support mainstream jobseeker groups, although it still has to overcome some teething problems. Money saved from lower-than expected performance payments should be used to support the most disadvantaged groups. It is also recommended that the Prime Contractors make effective use of the experience of local stakeholders, including local authorities and local business groups. This briefing will be of particular interest to members and officers involved with employment issues and economic development, but also with social care, housing, drug and alcohol issues, and voluntary and community groups. Briefing in full Background The Work Programme (WP) was launched in June Targeted primarily at the long-term unemployed, it has a number of distinctive features, including a smaller proportion of up-front fees than has been the case in previous employment schemes,

2 a reliance on a relatively small number of prime contractors (primes) to manage contract packages and supply chains, and considerable freedom for providers in designing solutions for jobseekers facing barriers to employment. This last feature is an extension of the so-called black box approach pioneered under the last Government in the Flexible New Deal. The WP s pricing model allows providers to claim higher payments for placing jobseekers facing the greatest challenges into sustained work, which is one of the more important design features to come under scrutiny in this inquiry. The primes are predominantly commercial companies with the capacity and cash flow (at least 20 million annual turnover) to bear the financial risk of operating on a results-based model. There are 18 primes delivering 40 separate contracts in 18 regional Contract Package Areas (CPAs). There are 16 CPAs covering the whole of England, and one each for Scotland and Wales. There are two or three primes operating in each CPA, the intention being that competition between primes will drive up performance. Primes were encouraged by the DWP to deliver services through supply chains of subcontractors from the private, public and voluntary sectors, including niche providers with specialist expertise. The Work and Pensions Committee s first report on the WP was published in May 2011 (available here). Although generally supportive, the Committee highlighted some concerns about the management and regulation of supply chains and whether the proposed differential pricing model would be sufficient to incentivise providers to support those furthest from the labour market. This second report is based on evidence from witnesses from across the welfare-towork industry, academics, the voluntary sector, and charities. It was also able to draw on the first published official evaluation studies of the WP, available here and here. The report deals with: The low job outcome performance of the WP in the first months of delivery. The role of Jobcentre Plus (JCP) in referring and handing over claimants to the WP and its role in sanctioning. WP providers approaches to engaging employers in the programme. The effectiveness of the differential pricing model. The accuracy of the Work Capability Assessment (WCA). The safeguards to ensure that all types of jobseekers receive an appropriate service within the black box. The availability of specialist support within WP supply chains and the regulation of the welfare-to-work market. Job Outcome Performance

3 Official WP job outcome performance data, covering the period from June 2011 to the end of July 2012, were published for the first time in November 2012 (see related briefings). Currently, the DWP now plans to publish the next set of data on 27 June 2013 and on a quarterly basis thereafter. The November 2012 data showed that job outcome performance in the first months of delivery was significantly lower than had been anticipated. The DWP had imposed contractual job outcome Minimum Performance Levels (MPLs), but none of the 18 primes reached the contractual year one MPL in the first months of delivery, meaning that technically they were all in breach of contract. The MPLs were considered by experts to be extremely challenging. One witness argued that the DWP s record of setting unrealistic welfare-to-work performance targets extends back to schemes operated under the last Government. However, it was also pointed out that the targets were set when the economy was expected to perform better than had actually been the case. Other reasons for underperformance included: The speed with which the WP was commissioned in comparison with earlier schemes. The restructuring of the employment services sector that accompanied the WP, including instances where primes had to set up operations in areas where they had never worked before. The Committee expressed concern about the appropriateness of the MPLs and how they were calculated by the DWP. It recommended that the DWP devise a new method of calculating and setting MPLs which are more responsive to the state of the economy, which can be more transparently calculated and applied, and which can be reviewed periodically during delivery. Where there are significant differences in job outcome performance between primes in the same CPA, the DWP has the option to shift 5 per cent of new referrals from the worst performing to the best performing. The market share shift can be applied from two years into the programme (June 2013) and subsequently every 12 months. Another option is contract termination. The Committee recommended that the DWP provide further information about how it has assessed the likely impacts of shifting market share between primes. Further, the Committee was unconvinced that the early termination of a prime s contract could be achieved without significant disruption to services and requested further details about the research DWP has conducted on this matter. Finally, it recommended that the DWP makes clear how it will protect highly-performing subcontractors attached to poorly performing primes. Three types of fees are available to providers:

4 Attachment fees - relatively small payments made when contact is first made between provider and participant; the DWP plans to withdraw attachment fees altogether from April Job outcome fees - larger payments made when the participant finds work, comes off benefits and remains in work for a total of up to 26 weeks within a 104-week period. Sustainment fees - monthly fees paid to providers for up to 80 subsequent weeks as long as the participant stays off benefits and in work. Some witnesses were concerned that low job outcome performance in the early months of the programme would impact on investment in future services. Some believed that funding was being reduced at the wrong time and that more funding was needed during a period of low economic growth and relatively high unemployment. Further, funding for the WP will be further reduced by the planned withdrawal of attachment fees from April One of the co-authors of the official DWP evaluation argued that attachment fees had thus far been a buffer that had kept the whole thing going. The Committee recommended that the DWP review the balance between attachment fees and outcome fees, and consider retaining attachment fees to protect the delivery of services. A large proportion of WP participants will reach the end of their two-year attachment period without finding sustained work, even if primes meet their contractual targets. Primes accepted that the proportion was likely to be between per cent of participants. The first cohorts of participants will come to the end of their attachment to the programme from June The Committee recommended that: The DWP should set out the support that would be in in place for participants who are unsuccessful in finding sustained work during their two years on the WP. All unsuccessful participants should have an end of WP assessment. Specialist support should be in place for those who have made little progress. Those who have made significant progress towards sustained employment should be permitted to voluntarily extend their attachment to the WP. The period in which providers are able to claim job outcome fees in relation to these participants should be extended. The DWP should consider the practicalities of assigning participants who have completed the programme without success, but are close to work, to one of the other primes covering the area. The Committee also expressed concern about a lack of timely and transparent official data. The publication of the first official figures was accompanied by the publication of unofficial figures by the Employment Related Services Association (ERSA). Although unofficial, these were frequently referred to by Ministers as an alternative to the official figures.

5 The role of JCP in the Work Programme The evidence from the official evaluation on local relationships between JCP and WP staff suggests a varied picture across JCP Districts. The Committee states that local JCP managers must take responsibility for ensuring good working relationships between WP and JCP staff. The WP, like earlier back-to-work programmes, can be accompanied by mandates and sanctions. Certain types of job-seekers can be mandated to undertake workrelated activities by DWP officials under the threat of withdrawal of benefits, or sanctions. Together, these two features are what is known as conditionality. The Committee reports that it is in favour of conditionality where it supports the policy intention of encouraging participants effective engagement with the WP. However, concerns are expressed over evidence of the inappropriate use, or threat, of benefit sanctions. The initial findings of the official evaluation suggest that the processes for the application of conditionality and sanctions do not work effectively. It is recommended that the DWP conduct a review of WP conditionality and sanctioning activity as a matter of urgency, and that it publishes its findings by the end of Employer engagement Considerable evidence was presented to the Committee of jobseekers being inadequately prepared to present themselves to employers. In the report, it is stated that providers should desist from simply deluging employers with a random selection of CVs and poorly prepared candidates. However, excellent examples exist of employers engaging effectively with WP providers, and it is recommended that DWP and the Employment Related Services Association (ERSA) encourage good practice. General awareness of the WP amongst employers appears to be low. It is recommended that the DWP work with the welfare-to-work industry to promote the WP to employers and that the DWP and ERSA produce a national action plan for engaging employers in the WP before the end of At a regional level, evidence suggests that collaborative approaches, where providers work together to create employer engagement strategies, are effective. At a local level, providers should make effective use of the experience and contacts of local stakeholders, for example by meeting regularly with local authorities and local business groups such as Chambers of Commerce, to identify employers recruitment needs and prepare WP participants for identified future vacancies. Jobseeker segmentation and the differential pricing model

6 The differential pricing model allows providers to claim higher payments for placing jobseekers facing the greatest challenges into sustained work. This is meant to stop providers focusing all their attention on the easiest cases. Jobseekers are allocated to one of nine payment groups, based largely on benefit type being claimed, with some sub-categories according to age, and a separate group for JSA claimants with the most significant barriers to work, such as serious drug problems and homelessness. There is also a separate category for prison leavers. The maximum value of payments on offer to providers for placing an ex-ib ESA claimant into sustained work ( 13,720) is just over three times the amount offered for a job outcome relating to a mainstream JSA claimant aged over 25 years ( 4,395). However, there is evidence that the WP is failing to reach jobseekers with the most severe barriers to employment. It is recommended that the DWP reviews JCP processes for identifying jobseekers with severe barriers to employment, such as homelessness and serious drug and alcohol problems, as a matter of urgency. It is recommended that where appropriate, these types of jobseekers are more consistently allocated to the JSA Early Access Group, where they will attract a higher level of funding than those in the mainstream JSA groups. The JSA Early Access group includes ex-offenders and offenders, disabled people, people with mild to moderate mental health issues, care-leavers, carers on JSA, ex-carers, homeless people, ex-armed Forces personnel, and people for whom drug or alcohol dependency presents a significant barrier to employment. Given that there was a consensus amongst witnesses that benefit type is a poor proxy for the level of jobseekers needs and the relative cost of supporting them into work, it is recommended that in future contracts the DWP should consider moving away from differential pricing based on benefit type and instead assess the merits of implementing a needs-based pricing model. It should also give consideration to funding models which reward providers for achieving steps along the way to employment by jobseekers with severe barriers to work and which recognise the need for greater up-front funding for some user groups. It is argued that it is not appropriate for the Government to retain the savings accrued as a result of the WP s early under-performance. It is recommended that the ring-fence around the WP budget is extended to encompass alternative provision. Part of the unexpected shortfall in WP spending should be utilised to extend the Work Choice programme (a voluntary programme of support for disabled people), to further increase resources for Access to Work (a scheme which subsidises work place adaptations for people with disabilities), and to extend the attachment period for participants who make real progress but complete two years on the Programme without achieving a sustained job outcome. Jobseekers with the most severe barriers to employment, it is claimed, are often not ready to engage effectively with the WP. The DWP should use part of the shortfall in WP spending to pilot additional pre-wp provision to prepare jobseekers, such as

7 homeless people and those with serious drug and alcohol problems, for effective engagement with the WP. In commissioning this provision, DWP should draw on the expertise of specialist providers, many of which have not been involved in WP delivery to the extent anticipated. It is recommended that this additional support is in place by early The Committee supports the black box approach to service delivery. A prescriptionfree approach, it is claimed, is preferable to a centrally-prescribed, process-driven system, which might stifle the potential for innovation and be an inefficient use of the DWP s resources. However, there is little evidence of substantive personalisation so far. Accuracy of the Work Capability Assessment The WP, it is pointed out, will support a far larger number of participants with disabilities and health conditions than any previous scheme. A large proportion of Employment Support Allowance (ESA) claimants will be expected to take steps towards returning to work and many will be referred to the WP on either a mandatory or voluntary basis, depending on the results of their Work Capability Assessment (WCA). In the 2011 Report, the Committee concluded that many claimants had received a poor service and an inaccurate assessment of their fitness for work through the WCA. In this inquiry, some providers reported recent improvements in the accuracy of the WCA, but a number reported that claimants who were clearly unfit for any type of work-related activity were being referred to the WP. In some reports, it was claimed that claimants with terminal cancer had been referred to the WP. It was confirmed by the Minister for Employment that there was currently no process by which providers can refer claimants back to JCP if they believe the claimant to be clearly unfit for work despite being assessed as being fit for work following a WCA. In this report, the Committee recommends that the DWP work with providers to agree a process by which participants whom providers believe are clearly unfit for work can be referred back to JCP. The process requires checks and balances to ensure that providers cannot simply refer back any participant whom they do not want to work with. A conclusion reached in the 2011 report on the Invalidity Benefit (IB) reassessment was that there should be a separate component of the WCA focusing on healthrelated or workplace interventions which might support claimants with health conditions and disabilities into work. Some of this was available in the Work Focused Health Related Assessment (WFHRA) which was a component of the WCA and which was suspended in July It is claimed that if the WFHRA had been in place when the WP was implemented, it could have provided a better assessment of benefit claimants readiness for work and might have prevented inappropriate

8 referrals. The DWP s decision to suspend the WFHR Assessment, and its recent decision to continue its suspension until at least April 2016, is described as regrettable. Assuring service standards for all participants With average caseloads of between 120 and 180, WP advisers are being forced to prioritise whom they support. It is recommended that the DWP and the welfare-towork industry devise ways of bringing WP caseloads down. The policy intention of randomly allocating WP participants to one of the two or three primes operating in each Contract Package Area (CPA) was to ensure that each prime operating in the same area receives an equal number and similar mix of participants, thereby allowing their performance to be compared. However, the Committee recommends that the DWP explores options for introducing an element of choice of prime for participants, particularly where it can be clearly demonstrated that specialist services are not offered by the prime to which they have been randomly referred but are available via one of the other primes operating in the same CPA. There appears to be insufficient focus on, or responsibility for, participants satisfaction with the support they receive. It is recommended that DWP require all primes to introduce standardised participant satisfaction surveys at appropriate intervals during each participant cohort s attachment to the programme. The black box needs to be balanced by clear and measurable minimum standards so that participants know what to expect and the minimum level of service they are entitled to. Currently, primes minimum service standards vary greatly in detail and measurability, and some are so vague that they permit providers to virtually ignore some participants if they choose. It is recommended that the DWP develop a core set of basic minimum standards applicable to all providers, and to which all WP participants are entitled. Steps taken by the welfare-to-work industry to professionalise its frontline workforce through accreditation and continuing professional development are welcomed. Availability of specialist support and regulating the market The reporting of official WP data at prime level only, it is argued, is inadequate and does not allow an assessment of the effectiveness of the whole market. In the absence of transparent official data on WP referrals below prime contractor level, the level of specialist subcontractors involvement in WP delivery cannot be assessed with any certainty. It is recommended that official WP data show both job outcomes and referrals at subcontractor as well as prime contractor level

9 It is noted once again that much of the evidence to this inquiry suggests that specialist providers are not involved in the WP to anywhere near the extent anticipated. There is also evidence that some voluntary sector providers are funding specialist WP provision from their own resources, including from charitable donations. This needs to be taken into account when calculating the overall cost of the WP, including in comparison to previous welfare-to-work schemes. It may also indicate that the specialist support some jobseekers need is not available within all supply chains to the degree envisaged. The DWP should also use part of the unspent WP budget to commission the specialist pre-wp provision for particularly disadvantaged jobseekers.. The Merlin Standard is meant to govern the relationship between primes and their supply chain partners, offering an independent standard against which supply-chain relationships are assessed. However, the Merlin standard s current remit does not allow it to address subcontractors grievances in relation to lack of referrals and the alleged imposition of unfair financial terms. A recommendation made in 2011 that Merlin s remit be extended to address such issues and that it should be given more teeth, with the power to impose financial penalties is repeated. Further, it is recommended that the Merlin standard s scope should also be extended to include an assessment of other stakeholders satisfaction with the behaviour of prime contractors, amongst which are included WP participants, local authorities and local employers. Comment The overall conclusion reached in this inquiry is that the WP has the potential to work well for relatively mainstream jobseekers who face less severe barriers to employment, even though it has fallen short in this respect of the targets set by the DWP. The Committee described the differential pricing model as a welcome evolution, but also noted the evidence that it is not having the intended impact. It could be the case that the level of premium attached to the very-hard-to-place is insufficient to overcome the risk to the primes of devoting additional resources to their needs. It is interesting that the job outcome standards set by the DWP only apply to three of the nine payment groups, two of which are mainstream JSA claimants, the other being new ESA claimants. The DWP considered that the degree of uncertainty attaching to the other groups made it too hard to devise targets. Perhaps for certain types of job-seeker, the level of financial incentives associated with employment outcomes can never be high enough for a marketised welfare -towork system. It is undoubtedly true that the WP was set up with great speed and that its organisation involved considerable disruption to pre-existing arrangements. Partly because of this, it is too early to give a definitive verdict, although a clearer picture will emerge with the publication of the next performance figures in late June. The impression that emerges, however, is that it does not (so far) represent a significant

10 improvement on earlier schemes. Further, although the accompanying rhetoric has placed some emphasis on the burden of risk being transferred from the public purse to the primes, in reality it is the people who need their services that bear the burden of risk, and their needs are in jeopardy if a prime cannot function effectively because of poor performance payments. People will very complex needs require a joined up approach delivered through local partnerships, but the primes performance in engaging local stakeholders, including local authorities, appears to be somewhat patchy. Local engagement should be a key criterion on which to assess the performance of primes, and developments in this respect should be closely monitored. If it is the case that poor outcome payments harm future performance, it will be local agencies that will have to step in. For more information about this, or any other LGiU member briefing, please contact Janet Sillett, Briefings Manager, on janet.sillett@lgiu.org.uk Related briefings Social Justice: transforming lives one year on Welfare Reform Update Youth Unemployment and the Youth Contract: Commons Work and Pensions Committee report