The Work Programme: Providers and contracting arrangements

Written evidence submitted by Social Firms UK

Introduction

1 Social Firms UK, is a registered charity and the support organisation for a particular type of social enterprise, a Social Firm. A Social Firm is a market-led enterprise that uses trade to create jobs for people at greatest disadvantage in the labour market (eg people with learning disabilities; sensory impairments; mental health problems; prison records; homeless people or people with a history of drug or alcohol misuse). [1] In every Social Firm, at least

· 25% of the employees have faced a major barrier to employment;

· 50% of its income is generated by trading its goods or services; and

· Profits are re-invested to create more jobs

2 Social Firms UK is a membership organisation with 149 full members (Social Firms) and 183 associate members (CSO and public sector organisations interested in the development of Social Firms). From our 2010 research into the sector we know of over 190 Social Firms throughout the UK, which is an increase of 32% since 2006. Over 2000 people are employed in the Social Firm sector, which spans a wide range of industrial and commercial areas including retail, catering, horticulture, recycling, market research, travel, printing and graphic design, and manufacturing.

3 Social Firms do not receive any Government subsidies, although we estimate that the Social Firm sector contributes over £40m a year in welfare benefit savings alone, and helps to significantly reduce public expenditure in the fields of health, adult social care and reducing re-offending. Some Social Firms are already involved in DWP employment programmes, particularly those designed to support disabled people in the labour market. In addition, there is an interest among a significant number of Social Firms in being involved in the Work Programme as specialist subcontractors.

4 Social Firms UK has sought its members’ views on the contracting arrangements for the Work Programme and these are reflected in the evidence below.

The extent to which the Work Programme will differ from existing contracted employment programmes

5 Experience of previous major welfare to work programmes has shown that the outcome-related funding has led some providers to "cherry pick" the people who are easiest to place and "park" those who face the greatest barriers to employment and so are more difficult to place. Whether "parking" was due to the provider’s lack of expertise or the result of a purely commercial decision to focus action on the most profitable "clients", the outcome was that the programmes did not meet the needs of the people furthest from the labour market.

6 It is clear that potential Work Programme providers are now seeking to include specialist providers in their supply chains who have the expertise in and experience of supporting people facing major barriers to employment back into work. Many of the organisations that can offer specialist support and provision are to be found in the community and voluntary sector and the social enterprise sector.

7 Giving prime contractors the room to innovate through "the black box" approach is a welcome departure from centrally prescribed processes that were a feature of previous programmes. For example, it could provide the opportunity to try out new community-based approaches that would lead to multiple benefits for the individual and their local communities. The Community Allowance [2] , advocated by the CREATE Consortium, of which Social Firms UK is a member, is one such initiative. It would involve using paid part time, temporary or sessional community work opportunities to enable individuals to raise their skill levels and develop a recent work history. It could act as a bridge between benefit dependency and sustainable employment.

The implications for providers of the increase in volume and the change in profile of Jobseeker’s Allowance claimants arising from the migration from Incapacity Benefit and Employment and Support Allowance

8 We envisage some serious implications of the policy to re-assess and "migrate" some claimants from Incapacity Benefit (IB) and Employment and Support Allowance (ESA) onto Jobseekers Allowance (JSA), particularly if the outcome payment system for providers is linked to achievement of sustained full time employment.

9 Prof. Malcolm Harrington’s recent independent review [3] clearly shows the problems with the current Work Capability Assessment process and decision making. 40% of people who have appealed against an assessment that they were fit for work and thus no longer eligible for IB or ESA, have had the decision overturned. A recent DWP survey [4] found that 40% of people who had been assessed as fit for work when making an ESA claim considered that a health problem was their main barrier to work and 22% considered that they were permanently unable to work due to their health.

10 These findings would appear to point toward a situation where increasing numbers of people are being moved to JSA from IB/ESA although they still have disabilities or health conditions that affect the type or amount of work they can do. It follows that they will be in need of additional support. This, in turn, re-emphasises the importance of Work Programme providers having (access to) specialist expertise.

11 A further issue that prime contractors and their supply chain will need to deal with is how people who have been on IB/ESA and working part-time under the Permitted Work rules [5] will be treated and the support they may need to enable them achieve sustained employment. Under the current rules, if those people are "migrated" to JSA they could be subject to a "double whammy" of benefit cuts. This is because the JSA benefit rates are lower than IB/ESA rates and the earnings disregard (ie the amount of money a person is allowable to earn before their benefit is affected) is 95% lower for someone on JSA than for someone on a disability related benefit. The complexity and inconsistency of the earnings disregard rules is, of course, one of the underlying issues that the Government is trying to address through its proposals for a Universal Credit. But the Work Programme is due to come on stream in April 2011 whereas the implementation of the Universal Credit for people already on benefits not scheduled to begin until 2014 and will take until 2017 to complete. [6]

The implications for providers of "payments by results" arrangements, with particular reference to the voluntary and social enterprise sector

12 Specialist providers (often found amongst civil society, community organisations and work-integration social enterprises) are vital if the Work Programme is to meet the needs of the wide range of people that it is intended to cater for. However, many of these are small organisations and their involvement in the programme will depend on the sub-contracting terms.

13 100% of the respondents to Social Firms UK member survey on the Work Programme said that upfront payments are needed because they do not have the cash flow capacity to operate on a purely outcome-based payment system. Also, the payment system needs to recognise the additional costs involved in providing support for people with the highest needs. Social enterprises and civil society organisations have to cover their costs if they are to remain financially sustainable and able to continue to play their part in the Programme .

Our survey respondents’ comments on this issue included:

"We would need convincing that any contract is sustainable having seen the problems of agencies [ running other employment programmes] with such contracts."

"There is high degree of risk with end loaded payments for the hardest to help "

"Primes should be required to step out of the black box and give details of how they will assure their work against the risks [ cherry picking; lack of full time jobs; insufficient investment to achieve the results required]….. such as exploiting sub[ contractor]s."

The likely effectiveness of a differential payment scheme in encouraging providers to support harder to help groups

1 4 Social Firms UK considers it essential to have a differential payment scheme. It needs to reflect the additional costs of supporting people with particular needs into and, in some cases, in work. Without it, there is a high risk of "parking" people who need more support with specialist providers who, if they are paid solely on outputs, will not have the working capital to provide the support needed. Ultimately this would mean that people with the most needs do not get the support they require and specialist providers are placed in financial jeopardy.

15 Furthermore, f or some people, it is simply not feasible to mov e straight into a full time job ( the trigger for the outcome payment) . Social Firms ’ experience shows that it is more realistic to look at employability and outcomes against a continuum. For many people developing the motivation and confidence to move into work is a key starting point. Other steps might be voluntary work; moving to part-time work and, for those who can, full time work.

16 All of our survey respondents wanted to see a payment scheme that reflect a realistic return, or entry, into work. Their comments included:

" For some people facing multiple barriers to work achieving soft outcomes are a real challenge and should be recognised. Obtaining certificates/training qualifications is a real achievement for those having a poor history of education. The system as it is, is only adding to barriers for many "

"The payment should be allocated at different stages of development, this way it will be more of an incentive."

"It is grossly naive to think the people with whom we work will be able to access and maintain work even in better economic times without a significant amount of intensive work being conducted with them over a period of many months or years . "

" People achieve different milestones as they progress along the journey into work and payments should reflect this as well as the fact that there may well not be enough jobs and certainly not always a job/skills match for all who require work " .

17 Finally, the last two comments touch on a fundamental assumption on which the success of the Work Programme and its funding scheme is premised – that there will be sufficient labour market demand for the people on benefits who are seeking work. Social Firms UK and our members urge the Government to consider what more it can do to support job creation. Job placement schemes are not enough to achieve the outcomes it wants to see.

November 2010