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The Work Programme, introduced by the coalition Government in June 2011, has simplified the welfare-to-work system by replacing a number of contracted employment schemes and consolidating support into a single mainstream programme. It is based on "payment by results" and focused on sustained job outcomes, meaning that providers receive most of their fees only once they place long-term jobseekers into work for three or six months and continue to support them in work for up to a further 18 months. We were supportive of the policy objectives for the Work Programme in our first Report on it in 2011 and we remain so.
The Work Programme's job outcome performance in the first 14 months of delivery was poor but there were some mitigating circumstances for this. Providers were operating in a worse than predicted economic situation. Furthermore, the Work Programme represents a wholesale reorganisation of the welfare-to-work market, with a number of providers setting up new operations in unfamiliar areas of the country. The fact that delivery began just over a year after the initial announcement of the policy, and only six months after the final Invitation to Tender was published in December 2010, was a significant achievement. However, the rapid commissioning process inevitably led to implementation delays which may also have contributed to lower than expected job outcome performance.
The contractual Minimum Performance Levels (MPLs), set by DWP for sustained job outcomes relating to three of the nine claimant groups, have proved to be unrealistic in the circumstances—none of the 18 prime providers (primes) met the year one MPL. Primes remain hopeful that they will meet their contractual targets for jobseekers in the mainstream payment groups in subsequent years and there are some unverified data which suggest that the next set of official job outcome data—due to be published in June 2013—may show a significant improvement.
DWP has contractual options to shift new referrals from poorly performing prime providers to the best performing prime in the same area, and ultimately to remove contracts altogether from primes. If some primes continue to under-perform in comparison to others in the same area, DWP should implement the "market share shift" mechanism during 2013, but this must be done transparently and carefully to ensure that it does not further impair the services offered to jobseekers attached to poorly performing primes. DWP also needs to be clear about how market share shift will impact on subcontractors. DWP has asserted that it is prepared to use the ultimate sanction against poorly performing primes of terminating prime contracts. However, we are not convinced that this could be achieved without significant disruption to services. DWP needs to do more to explain how this sanction could be applied effectively, and any negative impacts mitigated.
The Work Programme's effectiveness could be much improved by better relationships with its external stakeholders. DWP must promote closer working relationships between Jobcentre Plus staff and local Work Programme advisers. At a local level providers should routinely make use of the expertise and knowledge of local authorities and local business groups.
There appears to be a general lack of awareness of the Work Programme amongst employers; we had to proactively encourage their input to our inquiry. We found some excellent and innovative approaches, particularly Transport for London's systematic engagement with the six primes operating in the capital. This is a model which DWP should promote. Providers should invest more in preparing jobseekers for specific vacancies and providing an effective recruitment solution, rather than playing the ineffective "numbers game" of deluging employers with poorly matched CVs and under-prepared candidates.
The Work Programme's differential pricing structure was intended to reduce the risk of "creaming" and "parking"—in which welfare-to-work providers prioritise relatively work-ready jobseekers ahead of those facing greater disadvantages—by offering greater financial rewards to providers which succeed in achieving sustained job outcomes for jobseekers whom DWP considers to be harder to help. However, there is growing evidence that differential pricing is not having its intended impact: the Work Programme appears not to be reaching the most disadvantaged jobseekers. The current pricing structure, based largely on the type of benefit jobseekers are claiming, is a very blunt instrument for identifying jobseekers' needs. In the short term, DWP must improve its processes for identifying jobseekers' barriers to work, including disability, homelessness and serious drug and alcohol issues. These jobseekers should be allocated to the JSA Early Access group, where appropriate. DWP should pilot additional pre-Work Programme support to prepare those with the severest barriers for effective engagement with the Work Programme.
DWP under-spent its 2012/13 Work Programme budget by some £248 million because of lower than expected job outcomes. In a period of low economic growth and relatively high unemployment it is important to keep disadvantaged jobseekers as close to the labour market as possible. DWP should use part of the unspent Work Programme budget to expand proven, alternative employment provision, such as the Work Choice programme; to extend and continue to promote Access to Work to employers and welfare-to-work providers; and to provide support for individuals who have completed their two-year attachment without finding sustained work.
In the longer term, DWP should consider developing a much more thorough, needs-based assessment of jobseekers' needs, which could determine the type of services required by each jobseeker and the appropriate level of up-front funding. Alternative funding models, which recognise the greater up-front costs associated with more intensive interventions, should be considered for jobseekers who are furthest from the labour market. DWP should also consider, for some jobseekers, whether it is appropriate to pay for outcomes which include milestones along the path to sustained employment.
The Work Programme currently has insufficient safeguards to ensure that all participants receive an appropriate service. We support the non-prescriptive "black box" approach to service delivery, which should give providers the freedom to determine the most effective interventions for each jobseeker. However, the black box must be balanced by clear, measurable minimum service standards, to better protect participants from being "parked". Ideally these should be encapsulated within a single set of standards applicable to all primes, and to which all participants are entitled. DWP should also require all primes to survey participants' satisfaction with the programme and use the results as part of its assessment of primes' effectiveness.
One of the key aspects of successful welfare-to-work provision is one-to-one time with a qualified adviser. We were dismayed to learn that caseloads per adviser in the Work Programme are around 120-180 jobseekers. This ratio is simply far too high for an effective service and must be brought down. The industry must also work towards ensuring that all frontline advisers are professionally accredited and qualified, through the Institute of Employability Professionals and other specialist organisations.
The welfare-to-work sector lacks effective regulation; the suspicion remains that many smaller, specialist organisations with experience of supporting jobseekers with the severest barriers, were used by the primes as "bid candy"—to make their bids more appealing to DWP—and then subsequently not used in service delivery. A number of subcontractors also complain that primes have imposed unfair financial terms. The Merlin Standard was introduced by the Government to help regulate the quality of Work Programme supply chains. Its remit should be extended to include powers to impose financial sanctions on primes which treat subcontractors unfairly. The Merlin assessment should also be extended to assess the quality of primes' services from the perspectives of Work Programme participants, local authorities and employers.
Our scrutiny of the Work Programme has been hampered by a lack of transparent official data in the early months of service delivery. Official job outcome data—at prime contractor level only—were not published until some 17 months after delivery of services began. We were concerned that DWP proposed to publish official Work Programme data on a six-monthly basis, which we believed was inadequate for a programme of this size and importance. We therefore welcome DWP's recent announcement, made after we had heard evidence from the Minister for Employment, that it will publish official data on a quarterly basis from 27 June 2013. However, we remain concerned that the data will be published at prime contractor level only. We recommend that official data on referrals and job outcomes are published at both prime contractor and subcontractor level. This would allow more effective scrutiny of the programme and help the market to develop.
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