ESF Phase 2 - nothing for A4e

The announcement of the successful bidders for ESF phase 2 has been made. (For some background on the European Social Fund see this website.)

Now, when the PQQ stage shortlist was announced, A4e had succeeded in 8 of the 12 areas in making the shortlist. But they haven't won a single contract. The biggest winner is Seetec, with 4 areas. Ingeus and Intraining each have 2, and ESG, Reed and Working Links have one each (Cornwall is still to be decided).

Interesting.

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.

Public v. Private

An interesting discussion has broken out after a recent post. A proponent of private enterprise is defending it against what s/he sees as the waste and inefficiency of the public sector. This is a huge area of debate, and I am neither an economist nor a politician; but it's worth setting out my beliefs on the subject, and later (possibly) relating the history of welfare-to-work as an illustration. There are, of course, many books on the subject which will reinforce whichever stance you take.

It is ironic that much of "nationalised" industry in the 20th century was forced on governments by the failure of private industries; coal-mining, railways and steel all came into public ownership that way. The NHS was the result of the failure of the private sector to provide universal cover. At the level of local government, council housing was necessary because the private sector couldn't house people adequately. In case we thought that nationalisation had had its day, we now own many of the banks because private enterprise failed.

Socialists take the view that most industries and undertakings should be publicly owned. That ideology gave way to the view that a mixed economy works best. But the pull to the right has been inexorable (the banks notwithstanding), and the prevailing orthodoxy is that markets provide the best mechanism for all industries and services. Profit is the best motivator. Public servants will always be underworked, overpaid and uncreative. The only actual evidence ever produced for this assertion is the catastrophic failure of the economies of communist countries, which has no relevance to modern, mixed economies.

Political parties took to promising to "reduce the size of the state". In practice, this means sacking civil servants and contracting out the services they delivered. At local government level, councils were, for example, forced to sell off housing and prevented from building more. They were forced to "deregulate" local transport, often resulting in a worse service. When the need for new services arose, it could often make sense to employ private companies to deliver them; "back-office" functions, heavily dependant on IT, could reasonably be contracted out. But often privatisation has been the result of government or local councils being unable to justify employing more people themselves. For instance, when government came up with the idea of direct payments for social care local councils had a choice; they could set up their own departments to deal with this, as most did; or they could find themselves bound by staff-cutting policies and fall back on private companies.

The only "market" in the delivery of public services is the competition between private companies to provide exactly what is required at the lowest possible price. It means that front-line civil servants, usually on very low wages but with job security, are replaced by even lower-paid people on short-term contracts. No entrepreneurship or creativity is involved, and hitting targets takes precedence over shaping an effective service. Large companies elbow out smaller ones, and a handful - Capita, Serco, A4e - come to dominate. Public monopolies rapidly give way to private monopolies.

That's where I stand. If you disagree, please give evidence.

The A4e Bank

A4e's aspirations to run a bank for poor people have been mentioned before. But it's a reality!

Back in January this year Mark Lovell described it on his blog as seeing "the potential for A4e to develop a relevant offer". A4e's bank is called Capitec Uk Ltd, and derives its name from a South African bank, Capitec. Lovell says that Capitec "helped us shape our thoughts and ideas on banking for people in poverty" but it is not clear whether there are closer links.

By the time that Lovell was writing about this, A4e's bank had already secured a grant of £1m from the Regional Industrial Development Board in Yorkshire, as we see from the minutes of Yorkshire Forward's board.

Yet the company is now dormant. What happened?

Two Memoranda

Two memoranda submitted by A4e to the Work and Pensions Select Committee make interesting reading.

One, EP 07, is the formal response to the inquiry into "the management and administration of contracted employment programmes." It's a long document, responding to the cases of fraudulently claimed job outcomes in Hull. A4e says that it has introduced a procedure whereby 50% of all claims are routinely checked by an independent team which phones the employer to verify that the client is working there, and can check with the Jobcentre that the client is off benefit. Para 3.11 states "A4e encourages whistleblowing as it serves as another important mechanism for identifying fraud. A4e has strengthened its whistleblowing procedures to encourage other staff members to disclose concerns about malpractice. A4e also believe that an independent body acting as an Ombudsman for the industry may be an effective way of regaining a sense of openness and accountability in the industry. As more responsibility for delivering the government's targets for employment is vested in the industry, the market needs to respond by placing an increased emphasis on transparency and accountability." The new admin systems for FND make fraud harder. All sensible stuff.

The second, CP 02, is on the subject of child poverty, submitted in May this year. It's a shorter document, summarised as:

§ A4e supports the Government's 2020 vision for eradicating child poverty;

§ A holistic approach should be adopted in the consideration of issues relating to children that considers educational and emotional, as well as economic, dimensions of child well-being;

§ The proposed 'building blocks' that make up the Government's 2020 vision should not be allowed to develop as silos since the issues they address are related;

§ The welfare-to-work and childcare agendas need to be more closely co-ordinated;

§ The system of benefits and tax credits should be less complex and easier to use;

§ Local government should take the lead on reducing child poverty, but fresh approaches to funding, commissioning and delivery are needed.

This sounds eminently reasonable. But in discussing "A Leadership Role for Local Authorities" A4e's ambition becomes clear. Para 17 says, "A4e believes that far-reaching improvements and efficiencies could be achieved by pooling existing pots of funding under a single overarching contract. Services aiming to reduce child poverty could be combined with worklessness and recession-beating initiatives to create a larger fund. Major national and international providers in the welfare to work and wider public service industry markets experienced in frontline delivery would then be able to compete for contracts and use their expertise for the benefit of local communities. Service and cost efficiencies could be more easily achieved. Combining projects would eliminate duplication and reduce the commissioning and contract management burden on the local authority." Guess who's best placed to deliver such contracts. Well, para 19 gives a clue, describing A4e's "Advice 4 Stoke service on behalf of Stoke-on-Trent City Council, which has been independently confirmed to have a substantial positive impact on reducing poverty."

Nothing seems to have come of this inquiry yet.

Private Eye's prediction

Private Eye magazine continues to take an interest in privatised welfare-to-work. In its current issue it's the failure of the recently defunct contracts that comes under fire. It has a rather odd, but illuminating, way of proving the point, saying, "Only 2 percent of firms involved in the Intensive Activity Period (IAP) scheme reached their target of 40 percent of entrants finding a job" and producing similar figures for BET, ETF and Gateway. And it points out that FND actually raises the target to 50%, "with pleas by the DWP select committee to ministers to lower targets ignored." Private Eye believes that "the failure of the Flexible New Deal is all but guaranteed". Well, the providers themselves probably believe that too - witness the negotiations that went on before the contracts were signed.

A4e is one of the providers who are putting a lot of effort into promoting FND as new, improved and generally brilliant. It does away with the worst aspect of the old contracts; the sitting about uselessly for 13 weeks. The only laid-down attendance requirement is for 4 weeks in a work placement. But anyone newly unemployed today will not be eligible for FND for a year (or 6 months in some cases). During that time s/he will have access to the growing number of schemes put in place by local councils and partnerships; schemes which don't receive national funding or make a profit for anyone, but which offer most of what FND offers, including relationships with local employers. It follows that anyone who is still unemployed after a year is likely to be among the "hard to help"; or there just aren't any jobs out there. The job targets for FND are "not just jobs, but jobs that pay and offer opportunities for progression, with an emphasis on sustaining and progressing in work to ensure all customers who need help to develop their skills have access to the relevant pre-employment and in-work training" (DWP website). A tall order. And providers get little income unless and until the jobs are secured and maintained for 13 weeks.

So Private Eye, and many other people, will probably be proved right. But let's applaud the efforts that A4e and others are putting into trying to make it work.

Thought leadership

We reported that A4e were sponsoring discussions at the party conferences. Private Eye picked out their appearance on the Labour Party's agenda (another firm, Avanta, was also involved) and were very scathing about the motives of such events. Now the Training Journal website has given both companies a chance to respond. I particularly like the phrase from A4e, “Thought leadership has long been an important activity for us."