A Brief History of Welfare-to-Work

A recap of some history. The last Conservative government faced growing unemployment, particularly amongst young people, and the fact that employers would not train their own staff. They introduced various schemes - YOPS, YTS and so on - which encouraged the growth of numerous private training companies. Some of these companies were simply scams. Of the ones which were not scams (including A4e) few survived the end of the Tory government.

Labour introduced New Deal. This focussed first on young people, and offered a much more structured approach to training and support for the unemployed. It was followed by New Deal 25+. Private companies were central, naturally. New Deal was about genuine training, and private companies of various kinds - FE colleges, industry training bodies and specialist organisations - were best placed to deliver that training. But it was Jobcentre Plus which organised this and issued the contracts. By 2005 a budget was allocated to each JCP region and it was the JCP region which decided how to allocate the funding. Programmes ranged in length from 6 weeks to 52 weeks. The providers could interview prospective clients and take on only those who were willing and able to benefit from the course. Clients then undertook vocational courses such as NVQs while doing a real work placement. Providers were rigorously audited, and payment was on the basis of weeks on the programme, qualifications gained and job outcomes. There was a great deal of flexibility, with new courses such as Basic Skills being introduced, and scope for local schemes. For one quarter, Oct - Dec 2004, there were 34,410 starters on NDYP and 24,580 on ND 25+. In the following quarter the figures were 38,910 starters on NDYP and 22,630 on ND 25+.

But the then Secretary of State for Work and Pensions, David Blunkett, decided in 2005 that "new contracts for relevant and affordable provision should be put out to competitive tender, to come into effect from April 2006 onwards". What this meant was that private companies would organise New Deal region by region. Jobcentre staff could be sacked. One company that did particularly well in gaining these contracts was A4e.

The three years which followed showed just how bad an idea it was. The structure of the contracts was such that they were almost bound to fail. There was no filtering of prospective clients; everyone unemployed for the required period, regardless of whether there was any chance of them benefitting, was sent on a 13-week programme. There was scope for only minimal skills training. Clients were supposed to be put into work placements, but there were far too few genuine placements available, and many clients spent weeks working with voluntary organisations, or kicking their heels in the training centre. The system encouraged "creaming and parking"; the effort went into those clients who were most likely to get work, while those for whom a job was very unlikely were largely ignored. To win the contracts providers had promised job outcomes of 50%. This was always unattainable, and even before the unemployment rate started to climb the outcome rate averaged about half that. The definition of a job outcome (16 or more hours per week and expected to last for 13 weeks or more) was shown to unrealistic as available jobs became increasingly casual and part-time.

Back to the drawing board? Flexible New Deal is supposed to remedy the defects of the previous contracts. Clients will be offered training suitable to their needs, and not be required to sit in a training centre for weeks on end. The only attendance requirement is for 4 weeks of work placement. There is even an element of competition between providers. Clients have a choice between two providers in each area - hence A4e's roadshow to advertise their presence. And payments are dependent on outcomes to a much larger extent - 80% of the total - so the pressure to get clients into work is even greater.

Jobcentre Plus has been overwhelmed by the numbers of newly unemployed, and have had to take on more staff. But this is a temporary measure. On the basis of public-sector-bad, private-sector-good, JCP Support contracts are in place, with private companies offering the kind of support to claimants that they would once have expected from the Jobcentre itself.

The Conservatives promise an even smaller role for Jobcentre Plus. Their "Work Programme" will see the renegotiation of current contracts to convert them into a programme which more nearly expresses the ideas of David Freud. Private sector providers will only receive full payment if their clients stay in work for a full year. How many will want to bid for these contracts remains to be seen.

The ideology of the free market has prevailed over evidence and common sense.