The Work Programme: Providers and contracting arrangements

Written evidence submitted by the Local Government Association

Thank you for inviting the Local Government Association to submit written evidence to your enquiry.

The LGA is a voluntary membership body and our 422 member authorities cover every part of England and Wales. Together they represent over 50 million people and spend around £113 billion a year on local services. They include county councils, metropolitan district councils, English unitary authorities, London boroughs and shire district councils, along with fire authorities, police authorities, national park authorities and passenger transport authorities.

Local government has a strong interest in the success of the Work Programme – the health of the local economy and getting unemployed people into jobs are top priorities for councils up and down the country.

Local government, in partnership with local businesses, will play an enhanced and leading role in re-balancing the economy - new local enterprise partnerships, of which government has agreed to 24 to date, will lead the economic development of places.

The Deputy Prime Minister has said "we are creating local enterprise partnerships to bring together business and civic leaders to set the strategy – and take the decisions – that will allow their area to prosper. These partnerships will be equipped to promote private sector growth and create jobs locally." [1]

Government has announced too that it will localise council tax benefit [2] , which will not be included in the universal credit. In localising council tax benefit, government is proposing a 10% saving on the £4 billion cost. From 2013-14 local government will bear a direct financial risk if claimant volumes increase, and receive a financial benefit if they fall.

Against that background, the Work Programme has a key role to play - in matching people to the jobs that local enterprise partnerships will promote, and in reducing the pressure on the benefits system, which will include the localised council tax benefit.

The Government has said the Work Programme will be nationally led – commissioned by the Department of Work and Pensions. In the Local Growth White Paper, there is an encouragement to local enterprise partnerships to "work with" nationally led employment programmes.

In many parts of local government, local government is ambitious for a much bigger role.

The Work Programme is likely to be more effective if it is strategically commissioned on the same geography as local enterprise partnerships. This would bring together activity in a place to both promote job growth and help local people secure jobs.

This would not be a new role. Councils have a strong track record in helping people into work and have developed excellent examples of private sector partnerships to create jobs and increase skills to meet labour market needs. For example, they played a leading role in helping young people into work through the Future Jobs Fund. They have funded employment programmes using European funding and various discretionary funds, and engage effectively with the community through a range of family and adult learning programmes.

Local government has built its case for this strategic commissioning role on two principal pillars:

- It would bring employment support together with the other public services that address the key barriers to work, such as mental health, childcare and financial advice, enabling a whole public service approach to employment.

- It would ensure a "fit" with the local labour market and local job growth.

There is a further set of arguments – that local commissioning would help to de-risk the introduction of the Work Programme. It would, for example:

- allow the price for outcome payments to be adjusted to local labour market conditions, in particular, to address the wide variation in the number of claimants chasing each vacancy. In some places, 27 JSA claimants are seeking 1 registered Job Centre Plus vacancy, in other places the ratios as low as 2 to 1.

- discourage cherry-picking. There will be some clients groups, especially those having spent a long period claiming incapacity benefit or lone parents returning to the labour market after a period of caring responsibilities, for whom the Work Programme may not be appropriate. For these people, a model based exclusively on pricing job outcomes carries with it the potential for either providers to set a very high price or for providers to refuse the risk.

- enable the pooling of resources. In the case of some clients, they will require extensive support to ensure that they are ready for a programme designed to get them into work. These risks can be mitigated through the provision of local activity that prepares people for the Work Programme.

- harness the powerful inter-dependencies with other public services. Although private providers are highly incentivised to seek partnerships with the public sector, funding employment support in isolation does not incentivise other parts of the public sector to play their role in helping people into work.

- smooth provider entry and exit where the funding model acts as a barrier for smaller and voluntary sector providers. They might enter or participate in the market but would need access to large amounts of capital to meet upfront costs before outcome payments are made.

- target the programme at local need. In some places, such as those where the availability of jobs is a key issue, it will be more important for programmes to support self employment and enterprise, rather than for providers and their clients to chase the limited number of local job vacancies.

In creating local enterprise partnerships, the government has emphasised the importance of functional economic geography – the LGA would like to see the same principle applied to the Work Programme’s contractual geography.

Government has also emphasised the importance of business leadership - local enterprise partnerships are to be chaired by a prominent business leader, with business representation making up half the board. A role for local enterprise partnerships in commissioning the Work Programme would make it responsive to local business.

There are other ways in which local government can work with Work Programme providers and councils are beginning to explore these with potential contractors.

First, budget reductions mean local partners are exploring radical models to share costs and drive out efficiencies – there is potentially scope for Work Programme contractors to share buildings and other assets with other public service providers to drive down costs.

Second, in the Spending Review, the government announced a first phase of 16 community budgets on the theme of families with complex needs. This is part of a broader encouragement to pool resources, where the costs and benefits of investing in public services, straddle several organisations. Contractors could participate in local pooling arrangements.

Third, local partners have themselves commissioned often through the voluntary sector and delivered successful employment programmes, funded through European programmes and discretionary funds such as area based grant. Where the funding exists for these programmes to continue, there will be a need to co-ordinate with Work Programme providers, building on existing arrangements. Where the funding is being discontinued, it may be possible to migrate successful programmes to the Work Programme.

Fourth, councils can provide Work Programme contractors with valuable insights and information into local priorities, the economic circumstances of the area including future development, detail about client groups, contacts with employers and business representatives and the track record and history of employment support in the area.

Fifth, whilst, Work Programme contractors will be accountable to DWP through their contractual arrangements, local government has a wider role ensuring that public services in its area meet the needs of local people – championing the citizen’s interest.

The fifth dimension is critical and brings together the others. In exercising this role, and to summarise, local government will apply a number of tests of the new Work Programme including – what is the fit with: local employers’ needs, the local enterprise partnership’s promotion of job creation, wider public services, the effective use of public resources in the place and the needs of local people, in particular, the most vulnerable.

There is a body of best practice to draw on, and Local Government Improvement and Development operate a community of practice to help draw it together (http://www.communities.idea.gov.uk/welcome.do) and the case studies at www.idea.gov.uk/worklessness

November 2010