1 Introduction
1. In the text of this report, our conclusions
are set out in bold type and our recommendations, to which
the Government is required to respond, are set out in bold
italic type.
Background
2. The Work Programme is the latest government-contracted
employment programme, which aims to support long-term jobseekers
into work and off unemployment benefits. Launched in June 2011,
the Work Programme replaced a number of existing schemes, including
the remaining New Deals for young people, adults, disabled people
and lone parents, the Flexible New Deal and Pathways to Work,
the previous scheme for Incapacity Benefits (IB) claimants. It
therefore consolidates employment support for a very wide range
of jobseekers, including many with health problems and disabilities,
into a single mainstream programme.[1]
Participation is mandatory for most of the jobseekers referred
to the Work Programme; failure to engage with the programme can
result in benefit sanctions being applied.
3. Jobseekers are referred to externally contracted
Work Programme providers if they remain unemployed and on benefit
after receiving the support offered to them through Jobcentre
Plus (JCP) in the early months of their claim. Work Programme
providers take responsibility for offering the interventions long-term
jobseekers require, which might include help with building CVs,
interview techniques, confidence-building, mentoring, work experience
and skills training, for example. Participants are attached to
Work Programme providers for two years. They remain on unemployment
benefits until they find work and typically continue to report
to JCP every two weeks to "sign on".
4. The table below sets out the nine separate
groups of participants in the Work Programme, the point at which
jobseekers in each group are referred from JCP to Work Programme
providers and whether their referral is on a mandatory or voluntary
basis.
Table 1: Work Programme payment groups
| Payment Group |
Point of referral |
Basis for referral |
| JSA aged 18-24 | At 9 months on JSA
| Mandatory |
| JSA aged 25+ | At 12 months on JSA
| Mandatory |
| JSA Early Access[2]
| From 3 months on JSA |
Mandatory or voluntary depending on circumstance
|
| JSA Ex-IB | At 3 months on JSA
| Mandatory |
| ESA Volunteers | At any time from point of Work Capability Assessment
| Voluntary |
| New ESA claimants | Mandatory when expected to be fit for work within 3-6 months, otherwise voluntary from point of WCA
| Mandatory or voluntary depending on circumstance
|
| ESA Ex-IB | Mandatory when expected to be fit for work within 3-6 months, otherwise voluntary from point of WCA
| Mandatory or voluntary depending on circumstance
|
| IB/IS (England only) |
From benefit entitlement |
Voluntary |
| JSA Prison leavers |
Day one of release from prison
| Mandatory |
Policy intentions
5. One of the key objectives of establishing a single mainstream
contracted employment programme was to create a simpler and more
cost-effective welfare-to-work system through a single commissioning
process, benefitting from economies of scale and reduced transaction
costs, with consequent savings to the Exchequer.
6. The Work Programme has a number of innovative
design features, which aim to address some well-established deficiencies
of predecessor programmes. It operates a more results-based model
by linking a greater proportion of providers' payments to sustained
job outcomes and paying a smaller proportion in up-front fees
than has previously been the case. Three types of fees are available
to providers:
- Attachment fees—relatively
small initial payments made when contact is first made between
provider and participant. DWP plans to withdraw attachment fees
altogether from April 2014;
- Job outcome fees—larger payments made when
the participant finds work, comes off unemployment benefit and
remains in work for a total of up to 26 weeks within a 104-week
window; and
- Sustainment fees—monthly fees paid to providers
for up to 80 subsequent weeks as long as the participant stays
off benefit and in work.
7. The Work Programme operates through DWP contracts
with large prime contractors (primes), predominantly commercial
companies, deemed to have the capacity to bear the financial risk
of operating on a results-based model and sufficient cash-flow
(at least £20 million annual turnover) to finance interventions
with reduced up-front funding. There are 18 primes delivering
40 separate contracts in 18 regional Contract Package Areas (CPAs)
across Great Britain: 16 CPAs cover the whole of England; Scotland
and Wales each count as one CPA. There are two or three primes
operating in each CPA, with the intention that competition between
primes will drive up performance. Primes were encouraged by DWP
to deliver services through supply chains of subcontractors from
the private, public and voluntary sectors, including niche providers
with experience of supporting jobseekers with more complex barriers
to employment.
8. The Work Programme is designed to allow providers
greater freedom to choose how best to support unemployed people,
without prescription from government—an extension of the
so-called "black box" approach.
9. The Work Programme has an innovative differential
pricing model, in which providers can claim higher payments for
placing jobseekers into sustained work, according to the payment
group they are in. The policy intention of differential pricing
is to address the previously observed problems of "creaming"
and "parking", in which welfare-to-work providers have
prioritised relatively work-ready jobseekers in order to maximise
their financial rewards. "Creaming" occurs where easier
to place claimants are identified by providers and given greater
support while claimants who face greater challenges are "parked"
and given very limited support.
This inquiry
10. Our first report on the Work Programme was
published in May 2011, just before the programme was implemented,
and considered its design and commissioning.[3]
We were and remain supportive of the Work Programme's key policy
intentions, in particular the obvious benefits of consolidating
the large majority of support into a single scheme with resulting
economies of scale and reductions in transaction costs. We also
welcomed the Work Programme's more outcome-based model, particularly
its focus on sustainable job outcomes, and the extended two-year
attachment period. Broadly, we recognised that the Work Programme's
design represented a significant evolution in welfare-to-work
and an improvement on some previous schemes. However, our 2011
Report highlighted some concerns about how the Work Programme
might operate in practice, notably about the management and regulation
of supply chains and whether the proposed differential pricing
model would be sufficient to incentivise providers to support
those furthest from the labour market.
11. We therefore made clear our intention to
conduct a second inquiry into the Work Programme, to consider
its effectiveness for different groups of jobseekers, with a particular
focus on those who may be considered harder to help. We announced
this second inquiry in October 2012. We received 51 written submissions
from a range of organisations and individuals. We heard oral evidence
from academics and expert commentators; groups representing particularly
disadvantaged jobseekers; subcontractors; emqc Ltd, the company
contracted to assess the quality of supply chain relationships;
primes and the industry body, the Employment Related Services
Association; employers and employers' organisations; and the DWP
Minister for Employment, Mr Mark Hoban MP, and DWP officials.
A full list of witnesses is set out at the end of this report.
12. We also visited St Mungo's, a homelessness
charity and provider of employment services to homeless people;
and Willesden JCP in the London Borough of Brent, for a meeting
with Work Programme participants followed by a roundtable discussion
with Brent Council, JCP staff, local primes, subcontractors, training
providers and the Hilton Hotel, a local employer. We are very
grateful to all those we met and to everyone who has contributed
to the inquiry.
13. We would also like to thank Richard Johnson,
a former Director of Welfare to Work at Serco, for his assistance
as Specialist Adviser to the Committee for this inquiry.[4]
His deep knowledge and understanding of the welfare-to-work market
was invaluable to us and we very much appreciate the contribution
he made to our work.
Structure of this report
14. Our Report begins by considering the implications
of the well-publicised low job-outcome performance of the Work
Programme in the first 12-14 months of delivery. In chapter 3
we examine the role of JCP in referring and handing over claimants
to the Work Programme and its role in the application of conditionality
and sanctioning. We consider Work Programme providers' approaches
to engaging employers in the programme, and highlight some examples
of best practice, in chapter 4. Chapter 5 examines the current
differential pricing model; considers its effectiveness in addressing
"creaming and parking"; and looks at how the pricing
model might evolve in the future. In Chapter 6 we consider whether
there are sufficient safeguards to ensure that all types of jobseekers
receive an appropriate service within the "black box".
The availability of specialist support within Work Programme supply
chains and regulation of the welfare-to-work market are examined
in chapter 7. Our key conclusions are set out in chapter 8.
1 The Government decided to retain Work Choice, a voluntary
welfare-to-work programme, specifically designed to support benefit
claimants with severe disability-related barriers to employment. Back
2
The JSA Early Access group includes: ex-offenders and offenders
(has or is serving a custodial or community service); disabled
people (as defined under the Equality Act); people with mild to
moderate mental health issues; care-leavers; carers on JSA; ex-carers;
homeless people; ex-Armed Forces personnel; Armed Forces reservists;
partners of current or former Armed Forces personnel; people for
whom a drug/alcohol dependency (including a history of) presents
a significant barrier to employment. See DWP, Work Programme
Provider Guidance, para 13. Back
3
Work and Pensions Committee, Fourth Report of Session 2010-12,
Work Programme: providers and contracting arrangements,
HC 718 [hereafter, "Committee's 2011 Report"]
Back
4
Relevant interests of the Specialist Adviser were made known to
the Committee. The Committee formally noted that Richard Johnson
declared the following interests: adviser to Brent Council on
how to coordinate its services with the Work Programme. Back
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