Select Committee on Work and Pensions Third Report


8  COSTS OF PATHWAYS TO WORK AND RESOURCES FOR THE REFORM PROGRAMME

375. In January 2006, in his statement on the Welfare Reform Green Paper, the Secretary of State announced that "over the next two years we will be investing a further £360 million from within my existing resources - my own budget- to extend Pathways to Work to every part of Britain by 2008".[487] Supplementary evidence sent by DWP to the Committee emphasised that this money was being allocated primarily for Pathways, but would "cover a range of welfare reforms as set out in the Green Paper."[488]

376. Whether or not there would be sufficient resources for the reform programme outlined in the Green Paper, particularly the roll-out of Pathways to Work, was an issue of great concern in the evidence we received. We discuss the adequacy of the £360 million allocated to the national rollout and the costs of the current Pathways pilots in the section below. Later in this chapter we consider the opportunities available for existing claimants and the IT required to deliver the new benefit. Finally, we consider the potential impact of the efficiencies agenda on planned reforms.

Is £360 million adequate for national rollout of Pathways?

377. Many respondents to our inquiry were of the view that the funding announced was inadequate and that services in the Pathways areas risked being watered down.[489] Lorna Reith, Chief Executive of Disability Alliance, told us that she was worried that full roll out might end up being a "Pathways light" version of the programme.[490] Richard Exell, Senior Policy Officer at the Trades Union Congress (TUC), told us the £360 million allocation was his "number one concern" and suggested that at least £500 million was needed.[491] The Child Poverty Action Group (CPAG) also argued that £500 million was required if Pathways was to be rolled out at current spending levels.

THE COSTS OF THE CURRENT PATHWAYS PILOTS

378. There was disagreement between witnesses and the Secretary of State about the cost of the rollout of the Pathways to Work pilots to a third of the country. In oral evidence and a subsequent supplementary note to the Committee, Dr Mark Baker, Head of Social Research and Policy at the RNID, claimed that £320 million had been allocated by DWP for the purpose. He pointed out that in June 2003 the DWP document, "Helping people into employment: The Government's response and action plan", had announced that £100 million would be spent on seven initial pilots. Dr Baker highlighted that the Chancellor's Pre-Budget report in December 2004 had then announced that a further £220 million would be used to expand the pilots from seven areas to a third of the country.[492] Consequently, Dr Baker argued, it appeared that a total of £320 million had been spent on rollout to a third of the country. He expressed concern that the allocation of £360 million to the remaining two thirds of the country would therefore mean that national rollout was "going to be done slightly on the cheap".[493]

379. However, in oral evidence to the Committee, the Secretary of State denied that this was the case, arguing:

    "The first roll-out to Pathways to a third of the country cost us £150 million, incurred by the Department in rolling out Pathways to Work for a third of the country…We are now spending an extra £360 million over and above, if you like, the initial costs of roll-out to a third for the remaining two thirds of the country. I do not think anyone can say we are not fully funding the roll-out of Pathways. The total annual cost will be over £500 million, £150 million in the first third, £360 million in the remaining two-thirds."[494]

380. We asked the Department to detail the agreed allocations for the Pathways pilots for each year and to clarify the figures of £100 million in DWP's June 2003 document and £220 million in the 2004 Pre-Budget Report. They sent us the following table:

Table 2: Agreed allocations to Pathways

WhereWhen agreed? Description
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
Original 'Pathways 7'Spending Review 2002 Compulsory flow, voluntary existing cases interventions
19
41
41
41
(41)
(41)
Expansion from 'Pathways 7' to 1/3 of country PBR 2004Compulsory flow, voluntary existing cases interventions
-
-
25
90
107
107
'Somerset'PBR 2004Compulsory existing cases interventions for all
-
-
2.5
-
-
-
Original 'Pathways 7'Budget 2004 Compulsory existing cases interventions for longer duration cases
-
5.6
19.4
19.4
19.4
19.4
Total  
19
46.6
87.9
150.4
167.4
167.4




381. The accompanying note explained that the £100 million figure from the June 2003 DWP document had referred to the allocation for the original Pathways seven areas for the first three years (between 2003/04 to 05/06) - that is 19 plus 41 plus 41, as shown in the first row of the table above. The £220 million in the 2004 Pre-Budget Report referred to the allocation for expansion from the seven areas to a third of the country for the first three years - that is 25 plus 90 plus 107 (more exactly £222 million), as shown in the second row of the table above.[495]

382. The note also explained that the Department had calculated the long run cost of the Pathways pilots in a third of the country to be £148 million per annum, that is £41 million per annum for the original seven areas, as shown in the first row of the table above, plus £107 million per annum for the further fourteen areas that took the coverage of Pathways to a third of the country, as shown in the second row of the table.[496] The note added that this was the comparator being used by the Department in the context of the long run costs of rollout to the remaining two thirds of the country.

383. We regret that the Secretary of State's evidence to the Committee (see para 379 above) painted a confusing picture about the costs incurred in rolling out Pathways. He suggested that the £360 million for national rollout of Pathways was an annual allocation. However, the statement made by the Secretary of State to the House announced that £360 million was the total that would be spent over the next two years.[497] While an annual expenditure of £360 million on two thirds of the country seems to compare well to an annual figure of £148 million on the remaining third, this comparison is far less favourable if £360 million is not an annual figure but a total being spent over two years.

384. The Secretary of State's evidence to the Committee also raised a further complication in comparing the cost of rollout to a third of the country to the cost of rolling it out to the remainder. He pointed out that, "Once Pathways ceases to be a pilot, the £40 a week Return to Work Credit becomes part of the Department's annually managed expenditure and not part of its Department expenditure limit […] Maybe that is the reason why somebody has discovered this illusory gap in funding".[498]

385. We do not know whether other aspects of Pathways to Work will be funded outside of the £360 million figure. We know from the Green Paper that private and voluntary sector providers will manage Pathways in new areas.[499] But we do not yet know the extent of this work and to what extent it will reduce the input of Jobcentre Plus and consequent costs. In its written evidence, the Shaw Trust suggested that the plan to increase contracting-out of programmes might reduce administration costs.[500]

386. The confusion among those submitting evidence over the budget for the national roll-out of Pathways to Work suggests that the Department needs to provide urgent clarification. This would help to alleviate concerns and reassure disability organisations of the integrity of the Government's intentions on the purpose of the reform programme.

387. We recommend that the Department provide us with detailed figures for any areas of expenditure related to the national rollout of Pathways that will come from budgets outside the announced £360 million allocated. It should also detail any savings it expects to make as a result of contracting out services. Without this transparency stakeholders will be unable to assess whether the rollout to the remaining two thirds of the country will be funded to the same level as the pilots. The Committee also believes that the success of the Pathways pilots will only be replicated across the country if sufficient resources are made available for the roll-out.

388. We also recommend that the Department should publish statistics - at least bi-annually - on the incapacity benefits claimant caseload, progress towards the target reductions and estimates of the resources that would be required to achieve the target.

SUFFICIENT RESOURCES FOR EXISTING CLAIMANTS

389. The Welfare Reform Green Paper states that: "As resources allow, we will, over time, consider extending work-focused interviews to existing claimants to ensure that they are aware of the opportunities available to them, including Pathways to Work support as it becomes available."[501] DWP's agreed allocation for Pathways across a third of the country per year, as in the table above, shows that £2.5 million had been allocated in one pilot area - Somerset - to roll out Pathways to all existing claimants. £20 million per annum had also been allocated to roll out WFIs to some existing claimants (those who claimed in the two years before the start of the pilots in 2004-05 and those who claimed in the three prior years in 2005-06) in the original seven pilot areas.

390. As we discussed in Chapter 5, a number of memoranda we received raised concerns that there would be a large number of existing claimants of incapacity benefits who would not have the same opportunities offered to them as to new claimants.[502] For example, RNID wrote: "Given that many long-term claimants will be those with the most complex needs, we are worried that many existing claimants may be ignored by opportunity, and that the proposals risk the creation of a sizeable number of disabled people who will be abandoned to exist on an outdated and obsolete system."[503]

391. We are concerned that DWP does not appear to have put aside resources for existing claimants who wish to access the services offered by Pathways to Work. Every effort should be made to offer existing recipients of incapacity benefits the same opportunities as those which are being made available to new claimants.

IT requirements

392. Evidence we received from the Public and Commercial Services Union (PCS) stressed that the planned programme of reforms could only continue if there was "a fully developed and tested IT system in place."[504] Worryingly, during the Committee's inquiry into the Efficiency Savings Programme in Jobcentre Plus we learnt that there had been a national failure of the Customer Management System, the system currently being used across Jobcentre Plus, in January 2006.[505]

393. The response on 3 March 2006 to a written answer requesting information on the additional IT needed by the Department for its programme of reforms stated: "We are unable to provide details of IT requirements or their costs until the period of consultation is completed and the final design of the proposals are agreed."[506] In oral evidence the Secretary of State told us that DWP had "started" an exercise in planning IT support for the new Employment and Support Allowance.[507]

394. The IT implications of the increasing complexity of the new ESA benefit structure, where claimants will be able to move between two different components, need to be taken into account.

395. We are concerned that the Department appears only to be in the very early stages of planning the IT needed to deliver the new benefit. The new Allowance is due to be introduced in 2008. Given the poor performance of IT in the Child Support Agency and the recent problems with the Customer Management System in Jobcentre Plus, DWP should not be complacent on this issue.

396. During the last Parliament, the previous Committee conducted an inquiry on DWP's management of IT projects.[508] This concluded that closer parliamentary scrutiny is required to improve the success of DWP's IT projects. The report recommended that IT projects should involve key stakeholders prior to contracts being signed with IT providers and that the Department should present an implementation assessment for each major IT project - similar to a Regulatory Impact Assessment.

397. We recommend that DWP accelerates its IT planning for the reforms. While we understand that IT cannot be approved until the final designs of the benefit proposals are determined, the Department should be able to indicate its likely technology requirements, given the proposals in the Green Paper, and should consult key stakeholders upon these. The Department should provide an implementation assessment, setting out the purpose, timing, costs, IT requirements and major risks of the project - this should include risks posed by making changes to the IT system following implementation.

Potential impact of the efficiencies agenda

398. Some of the evidence we received raised concerns about the impact of DWP's efficiencies agenda on the Department's ability to implement its proposed reforms. In particular witnesses questioned whether there would be sufficient Incapacity Benefit Personal Advisers (IBPAs) for rollout and whether there would be sufficient resources available to give them adequate training.[509] In a memorandum sent to the Committee before the publication of the Green Paper, A4e highlighted the importance of early investment in IBPAs. They argued that that during the early months of the Pathways to Work pilots improvement in job outcomes and claimant activity were slow, because of late training and recruitment of IBPAS, with many not being in post until the go-live date.[510] Age Concern pointed out that the Green Paper did not comment on the need to develop capacity in the medium term by investing in recruitment and training. It pointed out that "the decision to roll-out Pathways to Work through contractors does not avoid capacity problems since voluntary and private sector providers will face similar skills shortages in the short term."[511]

399. The Public and Commercial Services Union's evidence to the Committee argued that there were elements of Pathways to Work that would be "damaged or prevented" by the ongoing efficiencies programme. It stated:

    "The IB Reforms process is very resource intensive and takes up more Adviser time, pro rata, than other Advisory processes. Jobcentre Plus is in the middle of a massive jobs and estate cuts programme [….]The requirements of the IB reforms initiative will create massive problems for the proposed Jobcentre Plus organisation […]

    PCS has raised our concerns about the lack of accommodation for Advisers. We were told at a meeting in May 2005 that the decision to rollout the IB reforms pilot to more Districts had created difficulties because the Jobcentre Plus Rollout programme had used a formula known as the Front of House Desk Allocation Model (FOHDAM) to allocate the number of desks. In Glasgow this has led to the situation where there were no spare desks for IB Personal Advisers, thus hindering the planned rollout.

    By the end of 2008 Jobcentre Plus intend to close 577 sites, and PCS has just discovered that there are now proposals to close a further 124 sites, many of them small offices in rural areas. PCS believes that this huge reduction in offices would make it very difficult to deliver the Pathways to Work programme in Jobcentre Plus. Even if it remains possible then customers (who by the very nature of their inclusion in the pilot are likely to be less mobile than most) will find themselves forced to make difficult journeys to attend mandatory interviews. The Department recently made a decision to defer the closure by Atos Origin of 21 Medical Examination Centres. […] We would argue that the same concerns (about the accessibility of services to customers, that claimants might miss appointments and so be deprived of the benefits they need) apply in both instances.

    The ongoing reduction in staffing resources also makes it difficult to envisage how Jobcentre Plus can continue to deliver the service it currently delivers, let alone introducing new processes. This will only add to the pressure on the existing Advisers."[512]

400. In supplementary evidence following the publication of the Green Paper, PCS argued that "the drastic headcount reductions imposed on the Department by the Government's 'Efficiency Challenge' mean that Jobcentre Plus does not have the capacity to extend the successful Pathways approach across the country."[513]

401. In March 2006, the Committee published a report into the Efficiency Savings Programme in Jobcentre Plus. This concluded that service quality had deteriorated in Jobcentre Plus as a result of the efficiencies programme. [514] In particular, our report found that "too much has been done too quickly… and services and programmes suffered as a result". [515]

402. When asked whether IBPAs would be ring-fenced from the efficiency savings work-force reductions, the Secretary of State replied:

    "we are clear that we can do the headcount reduction and build up at the same time our personal adviser network, our range of contact services between ourselves and our customers. To that extent you could say that that is true; they are ring-fenced, yes."[516]

403. We welcome the Secretary of State's assurance that Incapacity Benefit Personal Advisers (IBPAs) will not be included in any headcount reductions. As a major new programme, reform of incapacity benefits and the national rollout of Pathways should not be expected to contribute to the efficiencies agenda. We recommend that resources for training IBPAs are also ring-fenced.



487   HC Deb, 24 January 2006, col 1307 Back

488   Ev 256; Vol 2 Back

489   For example, Vol 2: Ev 145, Ev 169 and Ev 193 and Vol 3: Ev 213 Back

490   Q 168 Back

491   Q 116 and Q 118 Back

492   Ev 147 and Q 172; Vol 2 Back

493   Q 172 Back

494   Q 291 Back

495   Vol 2, Ev 257 Back

496   Vol 2, Ev 257 Back

497   HC Deb, 24 Jan 2006, col 1307 Back

498   Q 292 Back

499   DWP, A new deal for welfare: Empowering people to work, Cm 6730, January 2006, p 75 Back

500   Vol 2, Ev 41 Back

501   DWP, A new deal for welfare: Empowering people to work, January 2006, Cm 6730, p 48 Back

502   For example, Vol 3, Ev 252 Back

503   Ev 145; Vol 2 Back

504   Ev 218; Vol 3 Back

505   Work and Pensions Committee, Second Report of Session 2005-06, The Efficiency Savings Programme in Jobcentre Plus, HC 834-I, para 156 Back

506   HC Deb, 3 March 2006, col 1034W Back

507   Q 275 Back

508   Work and Pensions Committee, Third Report of Session 2003-04, DWP's Management of Information Projects: Making IT Deliver for DWP Customers, HC 311 Back

509   Q 133 [Mr Bert Massie] and Vol 3, Ev 70 Back

510   Ev 89; Vol 3 Back

511   Ev 134; vol 2 Back

512   Ev 218; Vol 3 Back

513   Ev 219; Vol 3 Back

514   Work and Pensions Committee, Second Report of Session 2005-06, The Efficiency Savings Programme in Jobcentre Plus, HC 834-I, p 4 Back

515   Work and Pensions Committee, Second Report of Session 2005-06, The Efficiency Savings Programme in Jobcentre Plus, HC 834-I, para 6 Back

516   Q 325 Back


 
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