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Welfare to work contractors have universally failed 'by considerable margin' to meet contractual targets
New Public Accounts Committee report on support to incapacity benefits claimants

13 September, 2010

Welfare to work contractors have universally failed 'by a considerable margin' to meet contractual targets, according to a new report by the Public Accounts Committee.

The report, 'Support to incapacity benefits claimants through Pathways to Work', states that -

'The target job rate agreed with contractors was to move, on average, more than one in three of the claimants required to participate in the programme (37%) into work over the life of contract. To date, on average, providers have found work for 12% of mandatory participants. Reed in Partnership Limited and A4E told us that while performance has improved over time, for mandatory participants they have achieved on average less than half what they promised in the contracts they signed with the Department. Against an average target of 36% of participants into work, A4E has to date found work for 15% of mandatory participants. Reed in Partnership has so far found only 9% of mandatory participants work against its target of 32%.'

Highlighting that 70% of payments to providers are linked to performance, with the remaining 30% paid monthly as a service fee, the report goes on to state that -

'As a consequence of poor performance, providers are not finding the contract profitable. Reed in Partnership reports that it has not made a profit on any of its Pathways contracts to date. From an investment of £3 million in Pathways contracts, it is currently £1 million out of pocket, with the actual cost of supporting mandatory participants into work estimated at two and half times the level assumed when it bid for the contract. Had they achieved their contracted target, Reed expected to make a return of about 10% on capital invested. Providers got their contracting model for Pathways wrong insofar as they priced their bid on the basis that they could deliver a high volume of job outcomes for only limited investment per participant.'

The report also states that contractors in provider-led Pathways areas have performed worse than Jobcentre Plus - despite, in general, operating in parts of the country with lower incapacity benefits numbers and unemployment levels, and relatively strong demand for labour - and, in relation to the fact that, in 2008/2009, £94 million (38% of Pathways expenditure) was spent on employment support that did not deliver additional jobs, recommends that -

'The Department should fundamentally review the nature and funding of its employment support for claimants of incapacity benefits. It should provide clear guidance to those involved in delivering the Work Programme on the type of support that is most likely to deliver additional jobs, drawing on robust evidence.'

Other key conclusions and recommendations made by the report include that -
    •    as employment and support allowance is extended to all existing claimants, there is a risk that some of those who are re-assessed and found fit to work will not receive the employment support they need -

'Early evidence shows that the new medical assessment, introduced with employment and support allowance, will deliver a significant reduction in the number of incapacity benefits claimants.The DWP should evaluate the accuracy of the new medical assessment robustly to evaluate that it is fit for purpose.'

    •    many existing incapacity benefit claimants will be found fit to work when they undergo the new medical assessment, and many will move onto jobseeker's allowance -

'The DWP has no information on claimants who are refused incapacity benefits; it should monitor them to know how many move onto jobseeker's allowance. The DWP has also not yet fully evaluated its capacity to support large numbers of people who transfer in this way.  It should undertake such an assessment and put in place the additional support required before the medical assessment is rolled out.'

The Public Accounts Committee report Support to incapacity benefits claimants through Pathways to Work is available from publications.parliament.uk