Incentives

"It's not about maximising profits," said A4e's Mark Lovell, in that strange little piece on the BBC news. That's not a statement that any of the big players - Serco, Capita and G4S, as shown on "Britain's Secret Fat Cats" - would dream of making. It would be ludicrous. They are companies with shareholders, and maximising profits is their entire raison d'etre. They might express the intention to improve people's lives in the context of bidding for contracts; they could hardly do otherwise. But that is incidental. It's a business. And the government obviously acknowledges that. Grayling talked recently about providers being able to make "shedloads" of money. And now Freud has spelled out the scale of those payments. Providers will get between £4,000 and £14,000 for each client who secures work. The higher amounts are for outcomes for people who have been out of work for longest and are regarded as "hardest to help" - and who stay in work for two years. Freud is explicit that it's these incentives which will make the Work Programme successful. The profit motive rules.

So is A4e any different from its competitors?

One obvious point of difference is in the amount of publicity the firms seek. In the case of Serco et al that's nil. They don't need it, and don't get it. That's why their dominance has crept up on people. But for A4e, or at least for its boss, publicity is an essential strategy. There are a few signs, however, that this hunger for the limelight may be counter-productive. The words, "Anybody but A4e" have been uttered by people in local councils.

Emma on The Daily Politics

A4e's Emma Harrison popped up today as the guest on The Daily Politics. Weirdly, she was asked her opinion of George Bush's memoirs. But then the programme focussed on the housing benefit changes. There were contributions from the House of commons from Caroline Flint and Simon Hughes, then David Freud, minister for welfare reform, was introduced, sitting on the sofa next to Emma. He said that he expects rents to go down and no significant increase in homelessness. Harrison said that the changes had to come, that benefits had been too generous, meaning people couldn't afford to take jobs. But she worries, she said, that vulnerable people will panic at this. Freud said that there's a lot of misunderstanding about it.

Anita Anand, the interviewer, said that the new Work Programme would mean a lot more business for Harrison's company. There was a short film report from an A4e office in Brixton, showing decent facilities, but mostly low-wage jobs on offer. The office was said to secure 50 jobs a month, but many of these were short-term. Figures were quoted for A4e's income, which I didn't manage to write down. The reporter pointed to other areas of A4e's business, pushing how much the company stands to gain. Andrew Neil then asked Harrison what she provides that the state can't. She said that she would like to get people earlier than at present; she can tell when people are going to become long-term unemployed. Jack Dromey, the Labour MP, took Freud's place. He forecast that unemployment would rise to over 3 million. He said that he doesn't doubt that A4e does some good work, but he doesn't want to see big companies getting more work out of this. Harrison retorted that they use the voluntary organisations. A4e can find jobs for anyone who "fully engages" with them; they can find the "hidden jobs" that never get advertised.

I'm not sure what this programme achieved, beyond again presenting Emma Harrison as the face of welfare-to-work and avoiding the hard questions.

The transition

We reported last week Freud's reassurance to the FND providers "that all providers currently performing well will take a full place in the new programme and as long as they worked hard, they had no need to worry." That came after Emma Harrison's apparent assumption that A4e would have contracts. On Wednesday a written answer in the House of Lords shed a little more light on the situation. Lord Kirkwood of Kirkhope (who was, as Archie Kirkwood, a Lib Dem MP), asked "what is their [the government's] estimate of the legal costs of cancelling last year's phase 1 contracts with employment providers to deliver phase 1 of the Flexible New Deal." (See theyworkforyou.com). The answer from Lord Freud was, "We have embarked on some very productive meetings with FND1 providers on how between us we best manage the transition from Flexible New Deal to the new work programme. It is too early to provide an estimate of the likely costs of making this transition and indeed some of this will depend on whether existing FND1 providers are successful in bidding for the work programme." What that means is that the ideal scenario from the DWP's point of view is that the current providers bid for the new contracts and are acceptable, so that there is a cost-free transition. If any of them decide not to bid they will be entitled to compensation for the premature ending of the FND contracts. And that gives the "primes" like A4e a lever to extract concessions in the WP contracts, and little hope to any new providers who want to come in.

But according to Ben Brogan in the Telegraph the DWP is giving cause for concern. "Iain Duncan Smith is admired for his commitment to reform and the passion he brings to the issue. But the jury is out on whether he has the skills necessary to translate ideas into action, let alone deliver them at the helm of a complex bureaucracy. The ideas are great, but the detail is a killer. Some speculate that Chris Grayling was put in there to provide the executive oversight, after he made a success of the DWP brief in Opposition. But civil servants report that Lord Freud is roaming beyond his area and wonder whether he might turn out to be the Frank Field of the outfit if his frustrations with IDS begin to be felt. To cap it all Mr Field is being given a role to involve himself in welfare issues and the department fears that like some unmanned drone, he will keep circling above the battlefield, launching occasional deadly strikes." So nothing is certain. and it's still a case of "wait and see".

Round-up of the week

It's been an interesting week. After Sunday's TV appearance by Emma Harrison we had to wait for statements from ministers Chris Grayling and David Freud to find out what she meant by her "whole families" claim and her assumption that A4e would be delivering the new contracts. On Thursday Freud spoke at the Queen's Speech Forum (reported on the Indus Delta site) and "reassured the audience that all providers currently performing well will take a full place in the new programme and as long as they worked hard, they had no need to worry." He also promised that "providers will have the freedom to carry out their work – with no meddling from government." The latter statement raises the spectre of unaccountable private companies whose clients have no right of appeal to their Jobcentre or MP, because government must foot the bill but not "meddle". No wonder Emma was happy.

There is still no sign of the latest Channel 4 programme featuring Ms Harrison, although it is thought to be scheduled for this month. But, like any other public performer, she has the services of an agency to promote her interests. "McLean-Williams Management is a theatrical agency set up to provide a first class service for actors, actresses and creatives" says their website, and Emma Harrison is listed as a client under "presenters". (Mind you, her CV page doesn't seem to have been updated for a while.) What is next for Emma as a presenter, one wonders. The GMTV sofa, perhaps; they seem to be losing presenters at the moment.

Urgent questions

The basis of Emma Harrison's claim yesterday that A4e would be allowed to work with "whole families" appears in a speech to providers by David Freud:

"It will be designed to allow you, the people who work at the coalface, to run your own operations as you see fit and provide more personalised help where that works for the individual," he said, and went on, "If a jobseeker needs intensive support from day one and is referred to you, it will be up to you to decide what support they get. One programme also means you can tackle the collective issues of family members in a coherent way – rather than splitting them up into different programmes."

Harrison cited the IB claimant who is supported into getting a job and then goes home and is talked out of it.

This raises some urgent questions:

• What qualifications will A4e employees be required to have for this work?
• What constitutes a "family"? Is it only the dependants of the claimant, or does it include those who are not themselves on benefits? What about claimants who live with parents and / or siblings?
• If a family member declines to co-operate with A4e employees will the claimant be penalised?
• Will A4e employees be able to access personal information from professionals such as teachers, GPs and social workers?
• What rights to privacy will claimants have?
• Will claimants still have the right to appeal to Jobcentre Plus in the event of a dispute with A4e?

Emma Harrison called this a "massive breakthrough". It certainly has huge implications.

That meeting

Some news of the meeting between Chris Grayling (with David Freud, the designer of the Work Programme) and the New Deal providers, from the Carley Consult site. It looks like there will be a new tender process in the FND phase 2 areas, while in the phase 1 areas, where it's already operating, the existing contracts will be renegotiated. The government wants interim contracts to tide them over to the full roll-out next year. Each of the current providers will be able to put their views to the ministers in separate meetings.

One paragraph needs some decoding. "There was a strong preference shown for greater collaboration and partnership, with the inclusion of the third sector and smaller providers likely to be a minimum specification requirement, and effectively ending the notion of sole provider delivery models. The needs of an increasingly diverse customer group, with a growing emphasis on customers on health related benefits, underlined the drive to bring together a mixed economy of provider expertise. Indeed, the direction may see traditional prime provider rivals working on a true consortia basis for the first time." I don't see a great deal of difference between that and what exists at the moment; it just means that the prime contractors have to get more smaller organisations on board before they bid.

Apparently the ministers stressed their commitment to payment only for outcomes, and "some providers continue to seek reassurance that such a model will pay in practice".

Invest to Save

I really must monitor the DWP website more closely.

We mentioned the other day the report which advocated cutting out the private sector and funding local councils to do the welfare-to-work stuff. Just how far the government is from this approach is shown by a programme called Invest to Save. You can read the supplier information on the DWP site but a simpler explanation is: "ItS is in effect a new way of financing back to work support whereby Treasury will transfer funding for benefit payments to DWP for the 3 years of the contract (from March 2011). DWP will contract with providers to deliver back to work support. If a provider helps a customer to move into work the benefit savings will be used to pay the provider." It's due to start in 2011, in Glasgow, Greater Manchester, West Midlands, Norfolk and London, and providers, including A4e, are gearing up to put in their bids. All the electioneering rhetoric, on all sides, about giving power back to communities is clearly empty. As the DWP says, "The programme would utilise the funding arrangements outlined in David Freud's report 'Reducing Dependency, Increasing Opportunity' which was published in March 2007." Freud is now advising the Conservatives, because Labour wouldn't go far enough for his liking.

"Global leaders in public service reform"

"Global leaders in public service reform" - that's how A4e describe themselves on their website - and David Blunkett MP uses the term in his entry in the Register of Members' Interests . ["Adviser on business development to A4e Ltd; global public service reform. (£25,001–£30,000 per financial year) I occasionally travel overseas on behalf of the company."] And in numerous other places they call themselves experts in "welfare reform". It's that word "reform" that bugs me. I believe, perhaps naively, that it's governments which reform such things as public service and welfare benefits. Whoever implements the decisions, it's government which make the decisions. So what reforms have A4e been leading? It couldn't have been with the old New Deal contracts. They were run by Jobcentre Plus on a regional basis, and A4e was one of many providers that worked to JCP's direction. Was it in 2006 when Blunkett, then Secretary of State for Work and Pensions, privatised the organisation of New Deal, and A4e got a large number of regional contracts? Those contracts weren't exactly a roaring success - hardly any skills training, loads of resentful clients and half the expected job outcomes. So perhaps A4e led the reform which resulted in Flexible New Deal? Emma Harrison likes to say that she lobbied government to change the way the existing contracts worked. But FND seems to have been largely the work of David Freud, and the contracts were resisted by all the providers (some didn't even bid) because so much of the payment was dependent on sustainable job outcomes. It is doubtful whether A4e are leading the Conservatives' promised reforms, since these take David Freud's proposals in their entirety as their model. And the company no longer dominates this market in the UK.

But "Global leaders in public service reform" reflects a more expansive vision of A4e's activities, and a long list of contracts in education, advice, healthcare etc. in many countries. And perhaps the word "reform" reflects ambition rather than reality. Public service should be a matter for public servants, and any reforms should be designed and decided by elected representatives of the public.

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.