The Work Programme: Providers and contracting arrangements

Written evidence submitted by Public and Commercial Services Union

Public and Commercial Services Union

1) The Public and Commercial Services Union (PCS) has over 300,000 members working across the public sector and in private sector organisations largely working on public contracts. PCS is the largest union working in the Department for Work and Pensions with around 88,000 members, and has responded to a number of consultations on provision of welfare services.

Economy

2) There are simply not the jobs in the economy to enable a project like the Work Programme to be successful. Unemployment remains high (1.47 million on JSA as of October 2010) and shows no sign of falling by any significant amount (e.g. there was only a very small reduction of c.3,000 in JSA claimants in October 2010 with a similar sized increase in the month before).

3) The number of vacancies in the economy is falling. These fell by 27,000 in the 3 months to October 2010. All indicators show that the cuts in the public sector are likely to lead to significant increases in unemployment with the Chancellor estimating 490,000 public sector job losses in the Comprehensive Spending Review (CSR), though independent analysts estimate there will be 725,000 public sector job losses [1] . There is no sign of a private sector led recovery to compensate for this.

4) The unemployed, along with other out of work groups, such as lone parents and ESA/IB claimants who are also likely to be referred to the Work Programme, are concentrated in areas where the number of vacancies is lowest and where signs of economic recovery are weakest. This is not a picture of an economy that will be able to find jobs for the 2.45 million unemployed, the c.1 million lone parents on benefit or the 2 million ESA/IB claimants who are also to be expected to actively seek work and become subject to the Work Programme.

5) In circumstances such as these there is little realistic prospect of the Work Programme being a success in getting these groups into work without a major shift in government economic policy that prioritises investment in the public sector and a large scale programme of job creation.

Work Programme and workfare

6) PCS is deeply opposed to workfare programmes and increasing conditionality on claimants. We believe that welfare is a social insurance, giving citizens entitlements to benefits if they are unemployed or ill. Our members do not believe there is any value in further punitive measures.

7) This committee found last year [2] that, "DWP’s own research has found that the "workfare" approach is least effective at getting people into work in weak labour markets and that it is not appropriate for those with the most barriers to finding work" – yet the UK has a very weak labour market and those with the most barriers to work are precisely those most likely to end up on the Work Programme.

8) We would also draw the Committee’s attention to further DWP research [3] , which found that "there is little evidence that workfare increases the likelihood of finding work. It can even reduce employment chances by limiting the time available for job search and by failing to provide the skills and experience valued by employers".

9) The Department’s own Social Security Advisory Committee (SSAC) found [4] "no evidence to suggest that any contemporary ‘workfare’ models were likely to be effective in Great Britain".

10) SSAC has also stated that, in response to the 21st Century Welfare White Paper, "there is little evidence to support the assumption that conditionality reduces unemployment." [5]

11) As Professor Guy Standing has found, "Workfare has proved extremely expensive, and it only manages to be less so because it drives people off welfare and out of the labour market, not into jobs."

12) The Work Programme is the wrong policy, at the worst possible time.

Private providers – record of failure

13) An essential theme of the Work Programme continues the policy of the last government, as pursued through Flexible New Deal and Pathways to Work, that private provision of employment services is the best way to help those out of work to find a job.

14) However, as PCS has consistently argued, all the evidence shows that public employment service provision, provided by Jobcentre Plus, has consistently out-performed private providers. This has been shown by numerous studies:

a. A 2008 research report by Cardiff University concluded that "whenever Jobcentre Plus has been allowed the same flexibilities and funding as private sector companies or charitable organisations it has been able to match, if not surpass, the performance of contractors".

b. Former Welfare Reform Minister Tony McNulty told this Committee in 2009, "the evidence base for public provision versus private and voluntary provision is limited". In its final report, the Committee advised, "DWP needs to build its evidence base" [6] .

c. In March 2009 a leaked DWP report marked "restricted" revealed that private contractors placed just 6% of incapacity benefit claimants on their books into work. This compared to 14% achieved by Jobcentre Plus during the same period. The report described the private contractors’ performance as "not satisfactory" [7] .

15) The superior performance of Jobcentre Plus, when compared with private or third sector provision, should not be surprising. Only Jobcentre Plus has thousands of trained and dedicated advisers, with years of experience in dealing with these client groups and in getting people back to work.

16) Prior to the recession Jobcentre Plus successfully reduced the number of JSA claimants by 1 million. By contrast under the first 11 months of FND, private providers only placed 16,238 people in work for 13 weeks, at the staggering cost of £508million. This works out as £31,284 per job.

17) This shows that the failures of FND and Pathways were not just a failure of private employment provision but also a serious waste of taxpayers’ money, as private contracts happily pocketed the taxpayers money while providing little by way of value for money.

18) DWP claims that the Work Programme will be different as it will be funded by results. However the reality is that there will still be upfront funding for contractors under the Work programme, although the exact amount has not yet been decided. As we saw under FND, contractors will be keen to argue that this needs to be maximised in the event of difficult future trading conditions and they may well again threaten to walk away from the contracts unless upfront funding is increased. The differences between the Work Programme and its predecessors are cosmetic rather than substantive and there is no evidence to suggest improved performance will result.

19) There is no evidence to suppose that the contractors who win the Work programme will perform any better than their predecessors on FND and Pathways. In fact it is probable that many of the same providers that failed to deliver FND and Pathways will again be awarded Work Programme contracts and will simply repeat their previous failures.

Impact of the new ‘Framework’

20) The new Framework that is being created to award contacts to the Work Programme will inevitably favour the larger contractors who have the financial power to win and sustain such large contracts and also the muscle to undercut the smaller, more specialist providers. PCS believes that there is a role for smaller specialist providers in the employment service. However we believe that they can best be used if directly contracted by Jobcentre Plus to supply that specialist expertise that Jobcentre Plus may lack when dealing with groups (e.g. disabled, people with mental health issues, drug users, etc.) that have particular issues and problems that can benefit from the expertise that many specialist groups can provide. There is no cost effective argument to support the use of a private contractor as a middleman to provide these specialist services.

Funding

21) George Osborne said in his Comprehensive Spending Review (CSR) statement that:

"The Department for Work and Pensions will make savings to help deliver these schemes, by increasing the use of digital applications and reducing overheads".

The DWP is losing 15,000 jobs, over 9,000 of which will be lost in Jobcentre Plus. A further ‘rationalisation’ of Jobcentre Plus offices has also been announced. These cuts will deprive claimants access to the best staff and service available, described in the CSR report as "internationally acclaimed as effective in getting people back into work" [8] .

22) We believe, and the evidence suggests, cutting funding in Jobcentre Plus, a proven and acclaimed welfare delivery organisation, to subsidise inferior contracted provision is financially inept and will result in far worse service levels and outcomes.

Sub-Contractors

23) The record of private providers on FND and Pathways is that they promised to sub-contract provision to such groups when bidding for the contracts but too often failed to actually put this promise into practice. This was something that Jobcentre Plus was aware of but was unable to do much about once the contract was let. There is no evidence to suppose that the monitoring of the contracts under the Work Programme will be any more robust than it was under its predecessor programmes. The fact is that once a contract of this type is awarded, especially one like the Work Programme does, that emphasises the flexibility of providers to operate as they see best, the contracting body, and the taxpayer who funds it, loses control over how the taxpayers money is then spent.

24) Previous similar schemes have led to reports of abuse of Jobseekers and fraud by private sector providers:

"Job hunters say up to 200 of them are crammed into [A4e’s] premises in Minshull Street, Manchester, where they have two computers, and no telephone access, for job searching and just one toilet each for men and women. They have presented photo evidence claiming to show that many have to stand through training sessions due to lack of classroom space and that there are poor standards of cleanliness.

"[…] Many said they were scared to speak out for fear of having their benefits cut but more than 60 people signed a petition documenting problems including overcrowding, blocked fire exits, poor ventilation and "filthy" toilets. It was shown to A4e and DWP representatives." [9]

25) The capacity of Jobcentre Plus or DWP to effectively monitor the Work Programme contracts will also be fundamentally undermined if the planned 40% reduction goes ahead of DWP staff whose role it is to monitor such contracts. This in turn increases the risk of taxpayers’ money spent on the Work Programme being wasted.

Impact on PCS Members

26) PCS is also concerned about the impact of the Work Programme on our members’ jobs. As things stand at present DWP believes it is probable that some, possibly a large number, of PCS members will be transferred to the private sector as a result of the Work Programme, under TUPE legislation. Far from providing any security of future employment or of future terms and conditions, the experience of PCS where our members have been transferred to the private sector is of greater job insecurity and worse terms and conditions. For example many PCS members were made compulsorily redundant within weeks of their TUPE transfer when DWP sold its File Storage services to Capita in 2006. Other examples show PCS members who have been privatised and subsequently lost their pensions when the provider went bust (e.g. Astra).

Union Recognition

27) Other privatisations of PCS members have been to employers who have refused to recognise a trade union and who have been openly hostile to union organisation within their organisation. PCS believes that there is no place for such companies in delivering public employment services and that an essential condition of the Work Programme should be that every successful contractor guarantees that it will recognise trade unions.

28) PCS members in Jobcentre Plus are dedicated public servants and wish to remain such, and should all be allowed to do so. PCS does not believe there is any room for profit-making by the private sector in providing essential services to the most vulnerable in our society.

November 2010