The Work Programme: Providers and contracting arrangements

Written evidence submitted by Barnardo’ s

Introduction

1. Barnardo’s works directly with over 100,000 children, young people and their families every year, in 415 services across the UK. We provide alternative provision for young people excluded or at risk of exclusion, and vocational training and work-based learning for 14-19 year olds.

2. Our employment related support services include Future Jobs Fund (FJF) programmes, which allow young people to gain new skills and experience while earning a steady income. Barnardo’s is successful in moving young people into sustainable full-time employment; 80% of the 16-24 year olds involved in FJF funded project, ‘Barnardo’s Works’, have achieved this. Key to the success of Barnardo’s services is a strongly personalised approach, working flexibly with each young person and continuing to support them even when difficulties occur.

3. Barnardo’s welcomes the opportunity to make recommendations on the Work Programme and contracting arrangements. In our response we draw on our experience of contracting with the Department of Work and Pensions (DWP) and the views of Barnardo’s practitioners delivering employment, training and skills programmes.

Summary

4. Barnardo’s is keen to see the Work Programme deliver the aims of the Universal Credit to make work pay and better support young people into work. We are concerned that the DWP’s new proposals could exclude organisations that have a track record and expertise in effectively supporting some of the most vulnerable young people with complex needs. The size of Work Programme contracts is greater than those of the FJF, which will limit opportunities for many Third Sector organisations who may not have the working capital to deliver them. Barnardo’s endorses payments by results, but would like to see payments staged in a way that sustains successful providers. Barnardo’s is concerned about prime contractors passing on insufficient funding to specialist subcontractors, and the potential costs of pensions entitlements for transferring staff to local government.

Barnardo’s recommends:

· The Work Programme delivers to the objectives of the Universal Credit

· Smaller contracts, of a size more manageable for Third Sector organisations

· Scope within the Work Programme for organisations to be prime contractors for their area of expertise, and further maximise beneficial outcomes for groups involved

· A review of the guidance surrounding Fair Deal for Staff Pensions, in the context of the implications for suppliers

· Departmental oversight of the Work Programme to ensure differential funding is maximised at the point of delivery

The Work Programme and the Universal Credit

5. Barnardo’s is hopeful that the introduction of Universal Credit will improve financial rewards for entering work and for working more hours for large numbers of young people.  Currently young people in receipt of income support or Job Seeker’s Allowance lose these benefits at a £1 for £1 rate, after a small initial disregard, making many of them no better off working than they would be on benefits.  Under the new system claimants will lose their benefits at a taper rate of 65%, allowing them to keep more of their benefits in the initial stages of work, thus increasing the financial gains from entering work even for only a few hours a week.

6. However, the success of Universal Credit will depend on the efficacy of the Work Programme and the extent to which employers can be encouraged to offer the type of jobs that many people entering the work programme will be looking for, including those with few hours, or with flexible arrangements. Employers should also be encouraged to consider taking on employees who may previously have been viewed as requiring too much support to be attractive as employees. We know from the experience of the Future Jobs Fund that incentives for employers can also be effective when it comes to helping those furthest from the labour market. Employers can be unsure of whether employing an apprentice will be worth their while and incentives can help change this.

Barnardo’s supports the introduction of a Universal Credit but strongly recommends that the Government ensures that the Work Programme is able to deliver to the objectives of the Universal Credit.

Size and type of contracts

7. Unlike previous DWP programmes where Barnardo’s has been able to operate as a prime contractor and successfully lead a partnership of voluntary and private sector organisations, we may be precluded from the Work Programme framework because:

· Our charitable purpose is to support children and young people, therefore we may be prohibited from taking responsibility for all claimant groups

· The scale of financial risk involved in large contracts may not allow us to fulfil our duty to exercise responsible stewardship of the charity’s assets

· Many Third Sector organisations may be excluded from supply chain management because they are unable to manage prime contracts of this size and complexity

8. As a provider of targeted employment, skills and training programmes for vulnerable young people, Barnardo’s understands that there is a need for specialist provision. Britain is currently at risk of creating a 'lost generation' of young people falling into long-term unemployment because of the recession, unless action is taken now. [1] We know from our experience of helping 16 to 24 year olds to access the labour market that many of them have complex support needs. Many have recently left the care system, or have recently been in custody, and have mental health needs. These youngsters have experienced a range of disadvantage and discrimination and have often led disrupted and chaotic lives. Engaging with them, providing the right support and assisting them to gain some degree of stability is essential if long term sustainable employment is to be a realisitic option. For the Work Programme to be effective, providers need to have the ability to work with claimants to help them address the many non-financial barriers they can face in moving into work. In relation to young people we believe this support is best provided by those who have experitise in the specific needs and challenges faced by this age group.

9. However, the Work Programme will bring together client groups from very different backgrounds, with complex and varied needs and circumstances: long term Incapacity Benefit claimants who may be moving on to Employment and Support Allowance or Job Seekers’ Allowance, lone parents, ex-offenders and young people. Specialist provision under the Work Programme would be compromised by the need to provide services for a range of client groups with different needs.

Barnardo’s Works, part funded by FJF, equips disadvantaged young people who are furthest away from the employment market, with the skills, experience and opportunities to access sustainable employment in a range of industry sectors such as construction, horticulture and mechanics. Each young person is supported by ongoing, relevant training and personal support, to overcome barriers to employment. Young people are given regular supervision by the Barnardo’s team and staff mentors in the work place.

The programme has been designed, managed and delivered by Barnardo’s. Successful outcomes include:

· 83% of 16-24 year olds achieve sustained employment    

· 98% achieve accredited qualifications

· 100% report reduction in anti-social behaviour

· 85% make the transition from state benefit to waged employment

10. If younger age groups were referred to a different prime contractor operating in the same lot, region or Job Centre Plus district, charities that specialise in working with young people would be encouraged to bid for these contracts. The size of these contracts would offer a more acceptable level of risk and the contracts would be in line with their aims and objectives.

Barnardo’s recommends that the DWP consider options for prime contracting for the 16- 24 age group in the new the Work Programme to ensure that young people are supported by agencies with the right level of specialism.

Barnardo’s recommends a reduction in the size of prime contracts. This would allow Third Sector organisations to continue working with the hardest to reach, whilst being able to manage the financial risks of the current labour market.

Pensions and Redundancies

11. Many Third Sector organisations may be unable to manage the cost of complying with the Fair Deal for Staff Pensions. Transferring staff are entitled to an occupational pension scheme which is at least as good as the public sector pension scheme they are leaving. Public sector pensions are set at a rate which Third Sector organisations may not be able to afford, and risk is created when liabilities accrued from employment with previous organisations is passed onto charities. These factors may impact on the number of staff recruited to deliver high quality services, or affect the opportunities for Third Sector organisations to bid for contracts.

Barnardo’s recommends the Government review the guidance on the Fair Deal for Staff Pensions.

The implications for providers of ‘payments by results’

12. An exclusive outcomes payment model on contracts of this scale would mean that the capital requirements would be too high for those in the voluntary and social enterprise sector, either as a prime or as a subcontractor. This is because prime contractors will pass the same payment model along the supply chain.

Barnardo’s recommends payments staged in a way that sustains successful providers and favours a payment model that offers a proportion of funding up front, and then once the benefit claimant enters employment. Payments on a quarterly basis would reflect the benefit savings to the DWP. Under this payment system, up front payments could be reduced once outcomes are being achieved and the provider’s cash flow starts to increase.

Differential payment scheme and management

13. Barnardo’s supports differential payments for the harder to help in order to prevent ‘creaming and parking’, which involves concentrating efforts on those who are closest to the labour market and putting fewer resources into helping those with complex needs. However, we are concerned that higher payments may not be passed on from the prime contractors to specialist providers who have the necessary expertise to help the most disadvantaged. We are also concerned that prime contractors will not give enough referrals to their specialist partners.

14. Programmes of this size and complexity need to be managed effectively to ensure the maximum number of unemployed people receive help, and from appropriate specialist services where possible.

Barnardo’s recommends independent oversight of supply chain management to ensure that all subcontractors are fairly treated according to their agreements with prime contractors, with an ombudsman service to settle disputes.

Barnardo’s believes the Merlin Standard, [2] which promote s excellence within supply chains , should continue and there should be enforceable penalties for prime contractors who manage their partners unfairly. We recommend a limit on management fees to ensure enough funding reaches those who deliver frontline services.