71.A number of more innovative or radical ways of structuring and delivering welfare-to-work were suggested to us, for example scrapping contracted employment programmes and instead investing heavily in JCP; substantially reducing the size of Work Programme CPAs and the value of prime contracts, allowing smaller providers, with established links to, and knowledge of, local areas, to deliver at prime level; or devolving responsibility for commissioning to local authorities or combined authorities in City Deal regions. The difficulty for us was a lack of accessible data on which approaches are likely to be most effective for different types of people in different localities. The evidence is currently insufficiently robust to recommend a major departure from the current structure, particularly given the success of the Work Programme in establishing a GB-wide infrastructure and reducing costs. However, we strongly support the testing of innovative approaches, and suggest below how learning might be more systematically collected and disseminated to inform further evolution of welfare-to-work.
72.We received evidence from a number of local authorities calling, to varying degrees, for greater control of contracted employment programmes in their areas. We spoke to two groups of combined local authorities which were already delivering co-commissioned pilot programmes: the Greater Manchester Combined Authority Working Well pilot; and the Central London Forward (eight central London borough councils) Working Capital pilot. Both were currently working with ESA claimants who had completed the Work Programme without finding sustained work, but they expected, as part of their respective devolution agreements, to deliver substantially expanded, locally-commissioned programmes for a broader range of claimants with complex needs, to run alongside the replacement for the Work Programme from 2017.
73.The central claim of the Greater Manchester and London authorities was that locally-commissioned programmes were more able to integrate services (as discussed in chapter 3), and therefore better address the employment-related needs of their residents. Additionally, devolution gave local authorities the freedom to invest more in helping particular disadvantaged groups, according to local priorities. Kris Krasnowski, representing Central London Forward, emphasised that the Working Capital pilot was “probably investing twice as much” as the Work Programme in supporting people with health conditions and disabilities and was therefore more able to provide more intensive and specialist help. Witnesses from Greater Manchester told us that they were achieving a substantially higher job outcome rate for this group than the current Work Programme.
74.Witnesses from Greater Manchester and London believed that there was scope for much wider devolution of welfare-to-work to local authorities; however, it was acknowledged that this might prove to be more difficult to achieve in more rural areas, and that it was for individual authorities, or regions, to demonstrate their competence:
[…] it is not a question of saying, “Give it to us. We can do it better”. You do have to prove your worth, you have to ensure that there is correct governance in place […]. I am sure that over a period of time we could get to a point where you would be able to say, “Here, we can do it, we can do it locally” and I just hope we will work to that point.
75.DWP acknowledged that local commissioning had potential benefits, in particular: integration of services; shaping of programmes to meet the needs of local labour markets; and greater local accountability, which is a core aim of the Government’s “localism agenda”. The Minister confirmed that the Greater Manchester and central London pilots were of “great interest” and acknowledged that it was important to “understand what works locally” and share learning and best practice.
76.Devolution of contracted employment programmes to local authorities has a number of potential benefits: effective integration of employment support with related, locally-run services; greater investment to support particular disadvantaged groups, according to local priorities; and shaping of employment programmes to match the needs of local labour markets. A process of devolution has already begun in Greater Manchester and London and it is likely in other cities with elected mayors in the future. It is imperative that DWP draws out and disseminates learning and best practice from innovative approaches being taken in devolved areas now and in the future.
77.As noted at the outset of this Report, DWP chose to commission the Work Programme via large primes with the financial wherewithal to cope with PBR. The primes were expected to construct supply chains made up of smaller organisations with the expertise to address a broader range of issues experienced by the long-term unemployed than earlier programmes, incentivised by the differential payment model. The main strength of this structure from a public policy perspective is that financial risk is transferred from the Department to primes. As the focus is on payment for outcomes, primes are theoretically incentivised to construct efficient and effective supply chains.
78.However, witnesses believed that the model had excluded some very effective organisations from the national welfare-to-work market. Many were concerned that the size of the contracts had barred “good, medium-sized charities” from delivering at prime level. Nesta noted that smaller organisations are often more effective and tend to be more innovative. Others reported a lack of referrals to specialist subcontractors with the expertise to support people with more complex needs.
79.Official evaluations have drawn attention to this issue, but there is a lack of quantitative evidence. Official Work Programme statistics on referrals and job outcomes are reported at prime level only. Furthermore, subcontractors are currently restricted from publishing their own referral and outcome data by DWP, and often by contractual arrangements with their primes. We visited Papworth Trust, a medium-sized pan-disability charity which is a Work Programme subcontractor in two CPAs. Papworth told us that a “wealth of useful data” exists, and that restrictions on reporting of statistics were “one of the biggest frustrations” in the Work Programme. Vicky McDermott, Papworth’s Chief Executive, emphasised that the restrictions meant that the best-performing providers below prime level could not be identified, which inhibited the sharing of best practice.
80.Our predecessor Committee recommended that this issue be addressed, in the interests of greater transparency in the procurement of public services; to aid understanding of which providers were most effective; and to facilitate learning across the market. DWP’s response in 2013 was that it would be “impractical” to publish referral and outcome data below prime level; it pointed out that over 800 organisations had been named as part of primes’ supply chains.
81.In the interests of transparency in contracted public services, and to facilitate sharing of learning and best practice, we recommend that DWP does not impose, and restricts prime contractors from imposing, restrictions on subcontractors publishing their own Work Programme Plus referral and job outcome data.
82.A number of experts were concerned that the welfare-to-work market currently lacked the conditions required for genuine innovation. This was partly a consequence of the large prime contractor model (it was thought that smaller organisations were more likely to innovate) and PBR (the financial risks of failed innovations were too great). Nesta, the innovation charity, and Inclusion called for a small percentage of DWP’s welfare-to-work budget to be allocated to testing innovative approaches to helping groups of long-term unemployed people who have been poorly served to date.
83.Dan Jones argued that investment in innovation in welfare-to-work was analogous to research and development spending in the wider economy. Total R&D spending in the UK economy in 2013 (the latest period for which official UK data are available) represented 1.67% of GDP. In many developed economies it is considerably higher, for example 2.79% in the United States and 2.92% in Germany in 2012. If the UK level of R&D spending were replicated in welfare-to-work innovation, it would suggest a fund of around £32 million over four years. If the German level were replicated, the fund might be around £55 million.
84.Nesta and Inclusion both called for the establishment of a dedicated labour market “What Works Centre”. The What Works network is a Cabinet Office initiative which aims to “improve the way government and other organisations create, share and use […] high quality evidence for decision-making.” It was conceived as a range social policy equivalents to healthcare’s NICE. There are seven independent research organisations in the network, ranging across health, social care and wellbeing; education; crime reduction; early years intervention; local economic growth; and ageing. Nesta told us that the lack of a labour market equivalent was “startling”.
85.Dr David Halpern, the Cabinet Office’s National What Works Adviser, told us that the aim of the “What Works approach” was to provide robust evidence to help government departments and other agencies to choose between a confusing array of policy options; he could see no obvious reason why a What Works Centre would not function well in relation to labour market policy. We also received evidence from Professor Henry Overman, Director of the What Works Centre for Local Economic Growth. His view was that there is “already a good body of evidence to develop guidance about what works” in labour market policy. As he saw it, the imperatives were to “review the evidence, draw out the lessons for policymakers, and disseminate best practice.” He believed that these tasks could “fit neatly into an expanded remit for the What Works Centre for Local Economic Growth”, perhaps working collaboratively with established labour market research organisations, such as Inclusion.
87.DWP deserves credit for implementing a programme which, in general, produces results at least as good as previous programmes for a greatly reduced cost per participant. It has also established a stable GB-wide welfare-to-work infrastructure and brought about efficiencies in DWP’s procurement and contract-management. It is vital that the Government continues to encourage, facilitate and invest in new and more effective approaches; it must not be forgotten that, notwithstanding the relative successes, nearly 70% of Work Programme participants are still not achieving the desired outcome of sustained employment. We owe it to the 70% to do much better. We intend to keep a watching brief on DWP’s efforts to support this group and we may return to this issue later in this Parliament.
67 Public and Commercial Services Union ()
68 Big Society Capital ()
69 Local Government Association ()
70 Industrial Communities Alliance (); Nottingham City Council (); London Councils ()
71 The current Cities and Local Government Bill contains provisions to devolve “wide-ranging powers” to combined authorities in large cities with elected mayors
73 [Mat Ainsworth]
74 [Theresa Grant]
76 See Work and Pensions Committee, Fourth Report of Session 2010–12, , HC 218, paras 31–44
77 See, for example, Big Society Capital (); Nesta (); NCVO ()
78 [Dan Jones]
79 NCVO (); joint submission from mental health organisations (); Scope ()
80 DWP, , December 2014
81 GOV.UK, ’, accessed 5 October 2015
82 Work and Pensions Committee, First Report of Session 2013–14, , HC 162, para 161
83 Work and Pensions Committee, Second Special Report of Session 2013–14, , HC 627
85 ONS, , 2013, March 2015
86 The World Bank, ’, accessed 7 October 2015
87 Inclusion has estimated that DWP paid £1.89 billion to providers from the start of the Work Programme in June 2011 up to March 2015.
88 GOV.UK, , accessed 5 October 2015. NICE was established in 1999 to “reduce variation in the availability and quality of NHS treatments and care”, see NICE, , accessed 5 October 2015
91 What Works Centre for Local Economic Growth ()