The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:
"The speed with which the Work Programme was introduced was commendable. But the quick introduction threw up risks that have to be addressed.
Major projects of this nature need to be thoroughly planned. In this case, the Programme was not piloted, the design and development phases overlapped and the business case was devised after the decision to go ahead was taken. The Programme was launched before the IT system designed to support it was operational. At the time of the launch, the IT system could not carry out automated checks on whether the people the prime contractors said they had placed in employment had actually stopped claiming benefits.
The Department believes that paying contractors according to results will transfer some of the financial risk to the prime contractors. But achieving value for money will depend on more than whether the contractors meet their contractual targets.
We need to be assured that significantly more people are in work than if the Programme had not existed and that wider social benefits are being delivered in practice.
The Department must also be alive to the impact the difficult economic conditions may have on the Work Programme, and demonstrate that in the face of changes in the number of referrals it can still hold prime contractors to the delivery promises they made.
Fees will be paid by the Department to contractors based on outcomes and regardless of the service individuals receive. Such an arrangement might tempt contractors to pass over those who are hardest to help into employment and cherry pick those who need little support. Contractors should be required to set standards of service for all participants.
Recent press reports have pointed to the possibility of fraud in welfare to work providers, especially A4e. The NAO is shortly going to publish the results of its investigation and we expect the Department to urgently publish the results of its own investigation."
Margaret Hodge was speaking as the Committee published its 85th Report of the Session 2010-12 which, on the basis of evidence from the Department for Work and Pensions, examined the introduction of the Work Programme.
The Work Programme replaced virtually all welfare to work programmes run by the Department for Work and Pensions (the Department). Having only started in June 2011 this is an early opportunity for us to look at the Programme and how it has been implemented. The Work Programme is designed to help long-term unemployed people into sustainable employment. Over the next five years, the Department expects the Programme to help up to 3.3 million people at a cost of £3 billion to £5 billion. The Department has contracted with 18 prime contractors to deliver the Programme across England, Scotland and Wales. Each of the prime contractors has their own subcontractors.
The Department has done well to introduce the Work Programme in 12 months. The Work Programme has new features which give providers longer to work with individuals and greater flexibility about how they help people into work. Prime contractors receive the majority of their payments once a participant has stayed in a job for a set period of time, with the length of time varying according to claimant group.
The Department believes that the payment by results contracts have transferred the financial risk of the Work Programme to the providers. Although some financial risks have been transferred, the test of whether the Programme is achieving value for money will be broader than this and there are new risks associated with the changes from previous programmes. Among other things, the Department and prime contractors will need to show that more people are in work as a result of the Programme than would have been if it had not existed and that the wider social benefits which underpin the cost benefit analysis are delivered in practice. The Department needs to be alive to the impact the difficult economic environment may have on the Work Programme.
The Work Programme is based in large part on payment by results. The Department is less concerned with defining how clients should be treated and the services they should receive and is measuring success on sustained job outcomes. The Department must seek assurances on a range of issues. For example, that sub-contractors, especially charities, are treated fairly, that they were not misled into accepting inappropriate contracts, and that they receive the number of cases and funding that they were promised. The Department also needs assurances that harder-to-help claimants are not parked and ignored. And to ensure proper value for money, the Department should require assurances that the provider added real value in placing people into work and has a clear understanding of how many individuals would have found jobs by themselves.
The Department currently relies on contractors to set minimum standards of service. However, the Department has no measurable indicators against which the quality of service all participants receive can be judged.
Reliable data on performance will not be available until autumn 2012, some 15 months after the Work Programme started. The Department must assure itself and us that no improper payment is made to contractors before the effective monitoring systems are in place. It is important that this data shows clearly the performance of individual contractors. We expect the Department to use this data when evaluating the performance of prime contractors and how they manage their subcontractors.
The Department is currently developing its plans to implement Universal Credit in autumn 2013 which could lead to major changes to the Work Programme's claimant groups and payment regime. Any changes the Department makes must address our concerns regarding the quality of service for all participants and the value for money for taxpayers.
There has been significant media coverage recently of investigations into alleged fraud in welfare to work schemes. Whilst allegations relate in the main to previous schemes, they point to an area of significant risk and the Comptroller and Auditor General is carrying out further work on this and will report in May.