House of Commons - Support to incapacity benefits claimants through Pathways to Work

Support to incapacity benefits claimants through Pathways to Work - Public Accounts Committee Contents

2 Performance of providers delivering Pathways to Work

8. All the contractors employed to deliver Pathways have performed well below their contractual targets despite the Department paying service fees earlier than planned in order to improve performance.[15] The target job rate agreed with contractors was to move, on average, more than one in three of the claimants required to participate in the programme (37%) into work over the life of contracts.[16] To date, on average, providers have found work for 12% of mandatory participants.[17]

9. Reed in Partnership Limited and A4E told us that while performance has improved over time, for mandatory participants they have achieved on average less than half what they promised in the contracts they signed with the Department.[18] Against an average target of 36% of participants into work, A4E has to date found work for 15% of mandatory participants.[19] Reed in Partnership has so far found only 9% of mandatory participants work[20] against its target of 32%[21] (Figure 3).

10. Provider bids for the work were based on a limited understanding of how mandatory participation in the programme would affect the client group. The assumptions that providers made at the bidding stage about the support needs and work-readiness of this group have proved inaccurate.[22] In particular, providers were surprised by the number of mandatory claimants referred to them who had a history of previous claims, who presented additional challenges.[23] The assumptions made about claimants who volunteered to participate in Pathways (longer-term claimants) have proved more reliable because they were based on experience of delivering a similar scheme for this client group, the New Deal for Disabled People.[24] Providers reported that voluntary participants—who tend to be easier to help—have made up a much bigger proportion of the claimants they have worked with than was anticipated at the Pathways bidding stage.[25]

11. To date, contractors in provider-led Pathways areas have performed worse than Jobcentre Plus, despite, in general, operating in parts of the country with lower incapacity benefits numbers and unemployment levels, and relatively strong demand for labour.[26] While Jobcentre Plus' Pathways performance is still slightly ahead of the providers, the Department reported that more recent performance data showed that the differential has narrowed.[27] Providers also suggested that performance in helping people into work is not simply a function of the vacancies available or the amount of economic activity; other factors relating to individual claimants and housing costs may, for example, be important.[28]Figure 3: Provider performance for mandatory participants

Provider Contract Target (%) Actual (%)

A4e (Surrey and Sussex) 50 13

A4e (South East Wales) 33 12

A4e (West Yorkshire) 32 14

A4e (North and Mid Wales) 32 13

A4e (Devon and Cornwall) 31 16

A4e average 36 15

Reed (London South) 32* 9

Reed (London West) 9

Reed (London North) 7

Reed (Cambridgeshire & Suffolk) 10

Reed average 32 9

Average Performance across all Providers (to date)
37
12

*The average across all the Reed districts, as reported by Reed at the hearing

12. A number of inflexibilities in the programme may have contributed to poor provider performance. The rigid requirement to have Pathways mandatory work-focused interviews at monthly intervals and poor service continuity at the handover of claimants to providers by Jobcentre Plus staff has impeded performance. A delay in the average time it takes for Jobcentre Plus to complete the initial work focused interview, compared with initial Departmental planning assumptions, has also reduced the opportunity for providers to work with claimants in the very early stages of their claim. Providers felt that the recent decision to put Jobcentre Plus staff in their premises to conduct the first work-focused interview has helped them to establish a relationship with participants earlier in the claim process. On the other hand, because of initial delays in the administration of the new medical assessment for the Employment and Support Allowance, providers are working with claimants who were subsequently found to be not eligible for their support.[29] The Department said that it intends to learn from the Pathways experience, recognising the innate difficulty of the claimant group, and intended to give future providers delivering the forthcoming Work Programme a more flexible payment structure which allowed them to develop a longer-term relationship with participants.[30]

13. Providers also referred to the difficulties associated with the recession but they and the Department both accept that, while it has meant that competition for jobs has increased, poor contractual performance by providers is not explained by the recession alone. Factors such as the underestimation of the complexities of the claimant group, which led to overly optimistic bids, are equally important.[31]

14. 70% of payments to providers are linked to performance, with the remaining 30% paid monthly as a service fee. As a consequence of poor performance, providers are not finding the contract profitable.[32] Reed in Partnership reports that it has not made a profit on any of its Pathways contracts to date. From an investment of £3 million in Pathways contracts, it is currently £1 million out of pocket,[33] with the actual cost of supporting mandatory participants into work estimated at two and half times the level assumed when it bid for the contract.[34] Had they achieved their contracted target, Reed expected to make a return of about 10% on capital invested.[35] Providers got their contracting model for Pathways wrong insofar as they priced their bid on the basis that they could deliver a high volume of job outcomes for only limited investment per participant.[36]

15. The Department's systems for assessing provider bids proved ineffective in Pathways and it did not challenge over-bidding by contractors with no bid being ruled out solely because its proposed targets were unrealistic.[37] The Department reported that it has now strengthened its approach and requires suppliers to give a much more detailed rationale for the performance levels they offer.[38] In the meantime, the Department reported that it had so far not terminated any contracts despite poor performance, but that two providers were subject to contract 'breach notices', which may lead to termination.[39]

15 Qq 109-113 and 176 Back

16 Q 144 Back

17 Supplied to Committee by Department via NAO Back

18 Q 24 Back

19 Q 10 Back

20 Q 25 Back

21 Qq 19-65, 73 and 74 Back

22 Qq 1, 12, 71-72, 96-97, and 110-111 Back

23 Q 11 Back

24 Qq 2-7 Back

25 Qq 9 and 131 Back

26 C&AG's Report, para 2.16 Back