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Is the Work Programme in a mess? Apparently so. This week the Government announced that the original estimate of the number of unemployed people who are expected to use the scheme is to be halved, indicating that some welfare-to-work staff may shortly end up out of a job themselves due to a lack of clients to support. In response, the shadow work and pensions secretary Liam Byrne commented that the £3-5bn back-to-work scheme was now in an “almighty mess” with a government department unable to cope.

Such criticism of the Work Programme is nothing new. Earlier this year, one of the prime contractors A4e was forced onto the defensive after a leaked document sent into Channel 4 News showed that their success rate for getting people back into long term employment was only 3.5 per cent, somewhat lower than the 5.5 per cent bare minimum outlined in their DWP contract for year 1. This corresponds with other concerns raised by the National Audit Office who noted in a report released in January that DWP’s expected success rates for the scheme were “overly optimistic.” And now only very recently we see another Work Programme provider, G4S, embroiled in a huge furore after it was unable to recruit all the security guards it promised for the Olympic Games. This contract isn’t strictly Work Programme related, but the incident has added more weight to the claims that they are not capable of delivering significant government initiatives.

All of this begs the question of what went wrong with the Work Programme. This was touted as one of the key flagship schemes that would, alongside the Universal Credit, help radically transform the way in which welfare is delivered in the UK. By bringing in private providers to help get the long-term unemployed back into work, the theory was that it would open up competition and drive up performance. Likewise, the flexibility and space that the scheme gives providers to come up with new techniques for helping people into employment should have brought with it impressive new innovations. The design of the contracts was also supposedly thoroughly thought through. By paying providers at different ‘stages’ along a client’s employment journey, the idea is that they would be incentivised to continue supporting people long after they landed a job.

My impression is that the Work Programme is based on a fairly sound concept, but the tragedy is ultimately in its flawed delivery. This is not so much a story of the ineptitude or greed of private providers (although there are important concerns about how some mistreat civil society organisations and their clients). Rather it is about the failure on the part of DWP to design effective contracts that set parameters and objectives which providers can realistically work within.

One of the main problems with the contracts is that the profit margins for providers have been made incredibly tight. This has resulted from two factors: payments being too low and predicted success rates (proportion of clients who make it into long-term employment) being too high. In their report, the National Audit Office point out that the success rates envisaged by DWP are much too optimistic. For one section of WP clients the DWP figure is 40 per cent, while NAO’s more realistic estimate is 26 per cent. On the matter of payments, DWP reportedly encouraged providers to offer ‘discounts’ on their bids, equating to an average 6 per cent mark down.

Ian Mulheirn of the Social Market Foundation predicts that these inappropriate contract arrangements will leave providers facing a staggering potential loss of between 40 – 50 per cent on their contracts. One option for them will be to stomach this cost and accept the prospect of losing face (and possibly future contracts) with policymakers. The more worrying alternative is that they may choose to cut back on key frontline services for their clients, or permanently park the most vulnerable and disadvantaged who they perceive as being too hard work to warrant further expense.

But why were these contracts so badly fudged in the first place? From what I can see, it's in large part because the government rushed into the Work Programme with no initial pilot or extensive preparation. Granted, there were previous initiatives such as the Pathways to Work scheme which had similar designs and whose experiences they could draw upon. But the Work Programme is on a hugely different scale and so surely merited some prior testing. The NAO report highlights that similar programmes usually take 4 years to roll out – DWP only had 12 months to set up this national programme. Indeed, even the business case for the scheme is said to have been put together some time after the decision had been made to go ahead with the work.

It is only possible to conclude from all of this that the Government was far too eager to make a statement with its new flagship welfare programme. What deserved a period of considered testing and gradual refinement was inadvisably put to work across the country before it was even half-baked. At one year in, it is far too early to write off as large and as innovative a policy as the Work Programme, yet it's fair to say that in its current form the scheme does not bode well for providers, the government and certainly not the people out there searching for work. With 4 years remaining on providers' contracts, clearly something will have to give.

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