Memorandum submitted by PCS (EP 06)
SUMMARY
— The Public and Commercial Services Union
(PCS) is the largest trade union within both the civil service
and the Department for Work and Pensions (DWP). PCS represents
just under 300,000 people including 84,000 members working
in the DWP. We also represent members who continue to carry out
public service functions now situated in the private sector.
— Our members have a range of roles that
span the DWP, its many entities, tasks and priorities. PCS members
are not only providers of services but recipients too.
— The union's aims of improving the conditions
of members working lives and raising issues of service quality
and provision continue to be supported by PCS members through
an active and democratic network of lay representatives, who volunteer,
negotiate and campaign throughout the UK.
— PCS welcomes the Select Committee's timely
inquiry and is happy to supplement this written submission with
further information and oral evidence.
— PCS submitted an emergency motion to
the annual Trade Union Congress 2008 which set out policy
to oppose the right to bid and the privatisation of employment
services. This policy was democratically agreed by the trade union
movement and continues to be advocated by PCS.
INTRODUCTION
1. Job cuts and office closures in the DWP
since 2004 have undermined the ability of the Government
to respond effectively to the recession and support unemployed
people. The cuts in the DWP have also curtailed the ability of
PCS members to deliver existing employment services. At the same
time the Government has continued to commission more services
from the private sector.
2. The Government's drive to privatise DWP
work is part of a wider policy agenda of contestability that is
supported by all the three main political parties and involves
opening up markets for public services to new suppliers from the
private and third sectors to create public service industries.
3. The Government commissioned report by
the economist DeAnne Julius published in July 2008 recommends
opening up more UK public services to markets and encouraging
developing nations to follow suit.
4. The Welfare Green Paper in July 2008 stated
that "Jobcentre Plus is recognised as one of the best back
to work agencies in the world". Regardless of the "superb
record" of the public sector in delivering back to work support,
the Government still continues to privatise employment services.
5. Child Poverty Action Group research,
published December 2008 entitled "Contracting out employment
services: lessons from Australia, Denmark, Germany and the Netherlands"
by Sharon Wright examines the international research evidence
and "finds remarkably little justification for the proposed
changes to the delivery of employment services".
6. The Audit Commission in 2008 said
they are "not aware of any evidence that services transferred
to the third sector show distinct improvement in quality after
that transfer" and concluded that "there is very little
evidence, at either national or local level, on the performance
and value for money secured from voluntary sector providers".
7. The sector promoted by the Government
to take DWP contracts is composed of non-profit making voluntary
and community groups, hybrid governmental-charities, long established
charities and profit-seeking businesses. They have different priorities
ranging from representing service users through to those who aim
to increase their own market share of public contracts.
8. PCS believes that it is wrong to allow
private sector contractors to profit from the unemployed.
PRIVATISATION PROPOSALS:
PROVISION OF
SOCIAL FUND
LOANS
9. The welfare reform bill clauses 15-17 establishes
powers for contracting out the provision of social fund loans.
Although ministers have expressed a preference for contracting
Credit Unions to provide social fund loans, the bill would empower
the Secretary of State to contract "any person" to undertake
this work thereby allowing any private company to bid for the
social fund.
10. The prior proposals on social fund had
an exceptionally short consultation period immediately prior to
Christmas 2008 and no response has been published by the
Government. A further period of public consultation was promised
by the Government to take place in summer 2009. However this has
failed to materialise. Yet the Bill proposes to privatise social
fund loans and to restrict availability to loans from Jobcentres
where there is provision by another provider.
11. The figures for the take-up of the social
fund in the consultation document show that the social fund is
very popular. Four million applications for a discretionary payment
in 2007-08 is evidence of the large demand that exists. This
evidence shows the current social fund in a positive light, as
a DWP success story, where the offer of additional financial support
has been taken up enthusiastically, as a much-needed lifeline,
by DWP clients struggling to manage on very low incomes.
12. PCS is opposed to moving the provision
of the social fund out of the DWP because it will put this popular
and successful service at risk.
13. On 20 Jan 2009 the Financial
Services Compensation Scheme stepped in to protect members of
two failed credit unions. They are processing claims for customers
of Khalsa (Bradford) Credit Union Limited in Bradford and Polmaise
Community Credit Union Limited in Stirling, Scotland, which became
insolvent at the end of last year.
14. As well as the consequential effects
of an economic crisis, we do not believe that any credit union
has the capacity to take over social fund work. There is certainly
no credit union capacity to take on the national delivery of four
million applications for credit a year. DWP does have the capacity,
as it has proved year after year for the last 20 years.
15. The DWP is by far the best placed organisation
to deliver the social fund and is able to deliver this service
to every person in the country who needs it.
16. PCS is not opposed to credit unions
and we support the principles underpinning them. Indeed PCS is
currently investigating how a credit union could be set up for
the use and benefit of PCS members. We are however opposed to
extending their role into the delivery of public services.
17. Underpinning PCS concerns about involving
the third or private sector in delivering the social fund is our
total opposition to the jobs of our members being transferred
out of the civil service into the third or private sector. The
proposals as they currently stand would appear to include the
possibility of a transfer, under the TUPE regulations, of PCS
members into the third or private sector. PCS is absolutely opposed
to such a development.
18. Our members are proud to be public servants
and proud of the successful work they do in delivering the social
fund. They do not want to work in organisations that seek to expand
or make profits at the expense of the poor.
19. The proposals in the Bill run the risk
of scrapping an effective system and replacing it with an untried
and untested alternative without the resources to deliver. PCS
believes that this would be an unacceptable risk to take.
20. When the social fund was first introduced,
the aim was for DWP staff to provide money advice to clients and
a significant investment was put into training staff to do so.
Over the years this role has largely faded away but PCS can see
no reason why DWP should not revisit this concept.
21. There has been a significant increase
in the volumes of claims for social fund loans which has put pressure
on our members in DWP. According to the social fund commissioner's
annual report, it is failing to cope with requests for help. Sir
Richard Tilt, the commissioner, said applications for loans had
gone up from one million to three million over the past couple
of years and the system could not cope with demand. Fewer than
half of those who phoned a crisis loan telephone line managed
to get through to an adviser. In some places, such as Bristol,
the success rate was less than 7%.
22. Tilt called for the £141 million-a-year
fund to be increased to £200 million as a matter of
urgency, given the current economic conditions. He warned that
failures in the system would end up driving people into the arms
of loan sharks.
23. The response of DWP to the increased
demand for Social Fund has been to propose restricting access
to crisis loans for living expenses to a maximum of three loans
in any 12 month period. This proposal is with ministers at
the moment. If it is decided to introduce this restriction the
most likely outcome is to drive the poorest people in society
into the arms of loan sharks.
24. PCS wants to see the Government scrap
the proposals relating to the social fund contained in the Welfare
Reform Bill. Instead they should be replaced with plans to provide
more grants not loans and introduce measures to increase levels
of accessibility. We also think the Department should increase
the staffing numbers to help to deal with the large number of
claims received.
PRIVATISATION PROPOSALS:
JOBCENTRE PLUS
25. Clause 25 of the Welfare Reform
Bill allows for the contracting out of functions currently carried
out by Jobcentre Plus (JCP) employees on behalf of the Secretary
of State.
26. The trade union movement are fundamentally
opposed to the contracting out of Jobcentre Plus.
27. From evidence available it is clear
that privatised employment programmes do not outperform those
provided by Jobcentre Plus. When the public and private sectors
are allowed to compete on equal terms the result is a decided
victory for Jobcentre Plus.
28. "The 25 PSL (private sector
led) teams as a whole only met 78% of their job entry targets
in year one of phase 3 of action teams, compared to the 40 Jobcentre
Plus teams, as a whole, who achieved 140% of their job entry targets.
PSL teams, as a whole, achieved 69% of their outcomes from non-JSA
customers, compared to Jobcentre Plus teams, as a whole, who achieved
76% (again, exceeding the target of 70%). PSL teams, as a whole,
moved into work proportionately more clients who had been out
of work for a short time than Jobcentre Plus teams. They were
also proportionately more likely to work with clients with just
one of the target disadvantages than Jobcentre Plus teams, as
a whole, were." Review of Action Teams for Jobs research
report 328, IES for DWP 2006
29. The Observer newspaper in March 2009 reported
in the article "Minister in welfare cover up row" that
the Observer obtained secret documents which were sent at the
end of January by senior officials at the DWP to Jobcentre Plus
directors and managers containing figures showing how private
firms had performed far worse than Jobcentre Plus in delivering
the Pathways to Work programme.
30. An official DWP report marked "restricted"
revealed how the private companies placed just 6% of incapacity
benefit claimants on their books into work, rather than the 26%
they had claimed would be possible when they bid for contracts.
This compared to 14% achieved by Jobcentre Plus during the same
period. The report described the performance of the private contractors
as "not satisfactory".
31. Nevertheless the Government continue
to press ahead with the privatisation of employment services despite
evidence that in-house provision performs better. The Welfare
Reform Bill goes even further than the current arrangements and
allows more services to be contracted out.
PRIVATE SECTOR
PERFORMANCE
32. The "Public Services Industry Review"
by Dr Julius reveals privatised services now represent a £79 billion
industry, a 130% growth since 1995.
33. Here are some examples we have previously
highlighted which are associated with privatised services:
34. The Manchester Evening News reported
claims by jobseekers that they were being treated "like cattle"
by A4e (a private sector provider of back-to-work provision).
They said up to 200 of them had been crammed into premises
where they had two computers, no telephone access for job searches
and just one toilet each for men and women which were "filthy".
One jobseeker, Mark Jones, told the newspaper: "in six weeks
I did absolutely nothing all day, every day. No training was offered,
no job search facilities made available and no work experience
placements arranged".
35. Apprenticeship group Carter and Carter
had DWP contracts for Pathways to Work and for the New Deal for
Disabled People. But the company went into administration in March,
10 months after the death of its founder Phil Carter. The
company received most of its funding from DWP contracts and the
Learning and Skills Council, but by January 2007 had net
debt of £86 million and its shares were suspended in
October. In November, the Guardian newspaper reported it had to
return government payments for tuition at its North East Skills
unit "after an inquiry found falsification of some supporting
documentation".
36. Instant Muscle, another DWP provider
went bankrupt earlier this year. The firm had won an £11 million
contract last November to carry out interviews on claimants in
Surrey and Sussex. Established as a charity in 1981, Instant Muscle
became a company in 2005 but retained its charitable registration.
37. It has been reported by the Daily Mirror
that New Deal contractor Maatwerk has been dropped after up to
six rogue staff made 7,000 jobseekers sign fake papers saying
Maatwerk found them jobs, in order for the Maatwerk staff to qualify
for payouts of up to £3,000 a time. Jobseekers were
paid £150 each to sign bogus forms, although they were
thought not to have known they were helping to cheat taxpayers.
One Maatwerk insider was reported as saying "They're often
financially challenged, so £150 for signing a paper
was an easy option. But suspicions were raised when some staff
hardly left the office, yet claimed for large numbers of jobseekers."
38. Further examples of unsatisfactory practices
include Business Employment Services LTD (BEST) who were awarded
a £40 million contract by DWP in 2006 to provide
training for long-term job seekers in West Yorkshire. BEST have
been described by users as hopelessly inadequate with up to 20 people
sharing two computers on which they are supposed to complete training
and job searches. Other users have complained that they were advised
to complete timesheets that indicated training had taken place
when the offices were closed on a bank holiday. On another occasion
all present at the training course were advised to complete two
forms to state they were receiving training when in fact they
were told to take the two days off to look for work outside of
BEST offices.
39. In the UK, an £85 million
contract has been awarded to the Australian firm Work Directions
Ltd who are one of the largest providers of employment services
to the Australian government. Work Directions UK, a subsidiary
of Ingeus, has won six of the first 15 contracts put to tender.
The organisation has been investigated for breaking labour laws
in Australia by underpaying workers and was found to have technically
broken the law and agreed to reimburse money to staff. The organisation
had used privacy arguments to frustrate auditors checking up whether
it had spent taxpayers' money correctly. The organisation has
also lost a number of Australian government contracts because
of its poor performance.
40. In August the Observer newspaper in
"Firms in fraud probe set for Whitehall cash" reported
that two companies subject to a fraud inquiry were on the shortlist
for contracts to get disabled people into work. Out of 28 regions
across Britain, A4e was listed in nine regions and Working Links
was listed in 16 regions. It was reported that the DWP risk
assessment division had found evidence of fraud in at least two
companies but did not report its findings. In addition, the Third
Sector magazine in July 2009 reported that the "Freedom
of Information Act will not apply to charities".
41. In the September 2009 edition of
the magazine Private Eye, it has been reported that A4e sponsored
a meeting with the Minister of State for Employment and Welfare
Jim Knight on "making welfare to work work in the recession".
A second meeting on the same subject and paid for by A4e featured
Secretary of State for Work and Pensions Yvette Cooper. She was
on the panel with A4e boss Mark Lavell.
REGULATION AND
ACCOUNTABILITY
42. At present there is no public information
available which outlines the costs of individual contracts and
their associated aims and objectives (and even less information
is available about sub-contracting arrangements).
43. PCS believes public funds should be
accountable to the electorate and not hidden in commercial in
confidence clauses.
44. PCS believes that the necessary accountability
requires high levels of regulation, additional duties to publish
information, the requirement for service user feedback and intensive
scrutiny and auditing.
45. The current system of regulation does
not work. For example, there are no checks to ensure that people
have the jobs that the contractors claim and there are no requirements
for contractors to provide evidence before they receive payment.
46. PCS believes that an open and transparent
evaluation of pathways to work and phase one of the flexible new
deal is essential. We believe the contracted programmes are not
open to democratic or public scrutiny nor indeed are they accountable.
Further tendering of DWP employment provision, including phase
2 of the flexible new deal, should be suspended until this
evaluation is completed.
47. The lack of transparency in DWP contracts
extends to the customer complaints process. While it is clear
to customers how, and to whom, a complaint against Jobcentre Plus
should be made, the same does not apply if a customer wishes to
complain about the service of a private provider. PCS believes
that a robust complaint process for provider-related complaints
needs to be established, with complaints being overseen by DWP
rather than by the contractor.
48. The centralisation of contract management
in DWP has weakened the link between Jobcentre Plus and the providers.
The relationship is more distant and much of the local interaction
and detailed knowledge of the business, that was essential to
effectively monitor provider perfomance, has been lost.
49. Private companies continue to escape
criticism and scrutiny. They have had government work outsourced
to them and they have been shielded from any suggestion of incompetence
in case the public discovers that decades of privatisation have
not produced the improvements in performance that its protagonists
have promised.
TREATMENT OF
STAFF AND
CLIENTS
50. PCS believes the evidence available
demonstrates that the profit motives of the private sector run
against the interests of unemployed people and the staff who deliver
services.
51. PCS wants fair treatment at work as
well as in service delivery. We believe the customer charter proposed
by DWP lacks information about individual entitlements to services
and the document is too vague to offer clients a sufficient understanding
of their rights. The charter should clearly set out the minimum
service standards clients are entitled to receive.
52. Staff are rightly fearful of being transferred
to the private sector as pay, terms and conditions can be detrimentally
affected and staff may also face harsher working practices and
discrimination in employment.
53. For example, two employment tribunal
cases against the same Christian charity, the Reading-based Prospect,
heard that the organisation which receives public money for its
work with people with learning disabilities had discriminated
against two employees on religious grounds. Prospect has more
than 900 staff around the country.
54. Louise Hender (supported by Unison)
failed to get a promotion because she was not a Christian, while
Mark Sheridan (supported by the British Humanist Association)
felt he was being forced to uphold the organisation's policy which
said non-Christians could not be employed in permanent posts.
The tribunals upheld their cases for constructive dismissal.
CONCLUSION
55. The evidence available demonstrates
that privatised employment programmes do not outperform those
provided by Jobcentre Plus. Nevertheless the Government continue
to press ahead with the privatisation of employment services despite
in-house provision performing better.
56. Our members in Jobcentre Plus have demonstrated
that public service works best. They have successfully adapted
to the doubling in customers in the last 12 months. No private
sector organisation would have had the capacity or the will to
respond as quickly or as effectively to such challenging circumstances.
57. The Welfare Reform Bill goes even further
than the current arrangements and allows more services to be contracted
out.
58. PCS will continue to campaign to oppose
the Welfare Reform Bill and the privatisation of public services.
59. A major flaw in the DWP contracting
strategy is the refusal to consider in-house bids, despite Cabinet
Office guidance to the contrary. PCS made a strong case for the
flexible new deal to have an in-house bid but this was rejected
by DWP.
60. We firmly believe that our members in
Jobcentre Plus would have been able to provide a higher quality
and more efficient service than profit-motivated contractors.
61. We believe services are best improved
by having an active and collaborative contribution from staff,
external organisations and service users.
62. We hope the Committee will challenge
the ideological drive to outsource more of our public services.
October 2009
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