The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:
"The Department has not succeeded in incentivising Work Programme providers to support harder-to-help claimants into work. Almost 90% of Employment and Support Allowance claimants on the Work Programme have not moved into jobs.
Evidence shows that differential payments have not stopped contractors from focusing on easier-to-help individuals and parking harder-to-help claimants, often those with a range of disabilities including mental health challenges.
Data from Work Programme providers shows that they are, on average, spending less than half what they originally promised on these harder to help groups.
It is a scandal that some of those in greatest need of support are not getting the help they need to get them back to work and are instead being parked by providers because their case is deemed just too hard.
The Department must do more to encourage providers to work with harder-to-help groups by tackling poorly performing prime contractors and sharing information on what works.
It should also collect and publish information from each provider on how much they are spending on different payment groups.
We are also concerned about how the Department’s sanctions regime is operating. Sanctions can cause significant financial hardship to individuals, and it is not clear whether the sanctions regime actually works in encouraging people on the Work Programme to engage with the support offered by providers.
Feedback from some constituents suggests that the number of sanctions has been increasing and that some providers have been recommending sanctions more than others. The Department confirmed that Seetec has referred more claimants for sanction than other providers.
The Department should monitor whether providers are making the right sanction referrals to the Department and that they are not causing unfair hardship. It should publish the number of sanctions by provider.
The Department has designed the contracts with providers in a way which exposes the taxpayer financially.
Underperforming providers may still be able to claim bonus payments for 2014-15 because of the flawed performance measure whereby the fewer clients referred to a provider, the better their performance looks. This may include Newcastle College Group whose contract has been terminated.
The Department must make every attempt to claw back the estimated £11 million of inappropriate payments.
After a slow start, performance of the Work Programme is improving, but there is still a long way to go before it is working effectively for all."
Margaret Hodge was speaking as the Committee published its 21st Report of this Session which, on the basis of evidence from Robert Devereux, Permanent Secretary, Department for Work and Pensions, Matt Thurstan, Senior Responsible Officer for the Work Programme, DWP and Mike Driver, Finance Director General, DWP, examined the Work Programme.
Purpose of the programme
The Department for Work and Pensions (the Department) is responsible for the Work Programme, which aims to help people who have been out of work for long periods to find and keep jobs. Specifically the Work Programme aims to increase employment, reduce the time that people spend on benefit, and to improve support for the hardest to help – those participants whose barriers to employment are, relatively, greater than others on the programme. The Department assigns people to one of nine payment groups depending on characteristics such as age and the benefit each person is claiming.
The Department pays prime contractors to provide support to people to get them into long term employment using a payment by results approach. The amount the Department pays a prime contractor depends on its success in getting people into sustained work and the payment group of the individual. The Department has 40 contracts with 18 prime contractors. Either two or three prime contractors operate in 18 different geographic areas across England, Scotland, and Wales. Prime contractors may subcontract some or all of the support they provide.
Referrals continue to March 2016
The Department will stop referring people to the Work Programme in March 2016, although payments to prime contractors will continue until March 2020. Between June 2011 and March 2016, the Department expects to refer 2.1 million people to the Work Programme and forecasts total payments to prime contractors of £2.8 billion.
In this report we set out recommendations in five areas, following evidence we took from the Department on the basis of a report by the Comptroller and Auditor General. We will take further evidence from the Department in early 2015 to assess progress.
Conclusions and Recommendations
After a slow start, performance is improving
Performance for people who have completed the full two years on the Work Programme has been similar to previous welfare-to-work schemes. Cohorts of participants aged 25 and over claiming Jobseeker’s Allowance who have completed the Work Programme have achieved job outcomes in 27% of cases, compared to performance for a group with similar characteristics under Flexible New Deal of 26%. After a slow start, recent performance has improved, with 32% of the most recent cohort of this group to complete the Work Programme achieving job outcomes.
The Department is confident that the upward trend in performance will continue. It estimates that, based on recent performance for participants aged 25 and over claiming Jobseeker’s Allowance, the performance for those cohorts yet to complete the Programme will be 38%. It described its methodology for arriving at this forecast as both "conservative" and a "robust estimate of the future".
If the Department achieves this level of performance for remaining cohorts, overall performance for this group at the end of the Work Programme is expected to be at least 34%—just above its own assessment of minimum performance (33%) but below its own original expectations (39%). We will have to monitor actual performance and make a judgement on this basis.
The Department has estimated that contractors have not claimed around 26,000 job outcomes in the period June 2011 to December 2013, which would increase performance by approximately 10%. The Department cannot, however, estimate the number of similar unclaimed job outcomes for previous welfare to work initiatives, so comparison of any enhanced total for job outcomes will be difficult.
The real value in any assessment of performance is an assessment of additionality—the number of people that would not have secured employment without the support received from welfare to work initiatives. We recognise that any assessment of additionality is difficult, but the Department has done this on previous programmes and should incorporate a measure of additionality as part of its assessment of the programme’s effectiveness.
Recommendations: The Department should, before we take further evidence in early 2015, update us on its view of progress and provide robust and certain data to enable both the National Audit Office and the Public Accounts Committee to make sound judgements on value for money. The Department should introduce, for the Work Programme and future contracted out welfare to work initiatives, control groups so that it can assess the additional impact of its welfare to work provision.
Supporting harder to help participants into work has been particularly difficult
The Department estimates that around 90% of people claiming benefits will move into a job within a year, with the remaining 10% moving on to the Work Programme. All participants on the Work Programme can therefore be considered hard to help. However, one of the Department’s aims for the Work Programme is to reduce the gap between performance for the most disadvantaged and other groups on the Work Programme whose barriers to employment are relatively low, and to reduce the amount of ‘parking’ of harder to-help participants.
The Department pays prime contractors more for getting harder to help participants in to work, to encourage them to work with everybody regardless of their barriers to and distance from employment. However, the Department’s own interim evaluation, in draft at the time of our evidence session, concludes that there is no clear relationship between payment groups and the nature of the support participants receive. The absence of such a relationship suggests differential payments have not been effective in preventing contractors from focusing on easier-to-help claimants and parking the harder-to-help clients, often those with a range of disabilities including mental health challenges.
Supporting harder to help participants into work has been particularly difficult. Only 11% of new Employment and Support Allowance claimants achieved job outcomes compared to the Department’s original (22%) and revised (13%) performance expectations. Therefore, almost 90% of Employment and Support Allowance claimants on the Work programme have not moved into employment.
The Department recognised that more needs to be done to encourage prime contractors to work with harder-to-help groups. It told us that it is concentrating its new performance management regime on the hardest to help, Employment and Support Allowance claimants. For example, it requires prime contractors which are performing poorly with the harder-to-help to produce plans to improve which focus specifically on these groups. The Department has also taken steps to improve the transparency of data around the performance of prime contractors both nationally and in the same area, and is supporting sharing of best practice on working with harder to help groups.
Recommendation: The Department should review the impact of differential payments to prime contractors on their support to participants with different barriers to finding employment. Before we take further evidence in early 2015, the Department should update us on performance in respect of harder-to-help groups, and its progress encouraging prime contractors to work with them.
The Department could do more to understand the effectiveness of different approaches to supporting participants into work
The Department recognises that it needs to improve its approach to monitoring the quality of service that participants on the Work Programme receive from contractors. It told us that it assesses prime contractors against the 212 minimum service standards they agreed when they signed their contracts with the Department. But the number of standards can work against their effectiveness, and only four out of 18 prime contractors have minimum service standards that differentiate between groups of participants.
The Department also now monitors performance against what it described as "generic service offers" —14 standardised quality measures to monitor each prime contractor’s service quality. However, the Department does not include whether the claimant is on JSA or ESA as part of its analysis of compliance with service standards, limiting its opportunity to identify cases where prime contractors had potentially parked participants. We were therefore encouraged to hear that the Department was refining its approach so that it focused more on participants claiming Employment and Support Allowance.
Data prime contractors sent to the Department appears to show that they are, on average, spending less than half what they originally intended on harder to help groups. The difference might be explained by a number of factors. But we were surprised that the Department did not analyse how much prime contractors spend on harder to help groups, and therefore it did not know whether the amount was increasing or decreasing, despite helping harder-to-help groups being an aim of the programme.
Based on feedback from some constituents, we were also concerned about how the Department’s sanctions regime works in practice; in particular, that the number of sanctions was increasing and that some prime contractors were recommending sanctions more than others. The Department told us that an individual is not sanctioned when he or she does not find employment; and that it is the Department, based on recommendations and evidence from prime contractors, which decides whether to apply a sanction to an individual. The Department confirmed that Seetec has high numbers of sanction referrals compared to other providers. The Department also told us that it did not set quotas for the number of sanctions. It is not clear whether the sanctions regime is effective in encouraging people on the Work Programme to engage with the support offered by prime contractors.
Recommendations: The Department should collect information from each prime contractor on how much they are spending on different payment groups and relate this to the nature of support being provided and the outcomes achieved, to help identify cost effective approaches to support. The Department should publish, alongside its quarterly release of performance data, details of the number sanctions analysed by prime contractor. It should use the data to monitor whether providers are making appropriate sanction referrals to the Department.
The Department needs to tighten up its contract management
The Department has designed the contracts with providers in a way which exposes the Department financially. For instance, the way performance is measured means that the fewer clients are referred to a provider, their performance looks better. They then become entitled to additional incentive payments. Thus, for example, Newcastle College Group whose contract will be terminated in March 2015 on performance grounds may still be entitled to incentive payments because the measurements chosen by the Department distort real performance.
Because of the flawed performance measure the Department expects to make incentive payments—intended only to reward exceptional performance—to all 18 of the prime contractors for all 40 of the contracts. The Department estimates that it could end up paying prime contractors incentive payments totalling £31 million for 2014 15 and £61 million over the Work Programme’s life (compared to £6 million and £17 million respectively if it had a more appropriate performance measure). The Department confirmed that any incentive payment due to the Newcastle College Group, which is required to work within the terms of its contract up until March 2015, would be calculated on the basis of its performance during its notice period. The Department said that incentive payments were one aspect of its current renegotiation of contracts with prime contractors.
The Department has difficulty validating the 'sustainment payments', which are paid to prime contractors for every four weeks a participant is in employment over and above the job outcome period (of between 3 and 6 months depending on payment group). The Department has estimated that it paid £11 million to providers for sustainment payments that it is unlikely to be able to validate, an amount which it has declared as a loss in its 2013 14 annual accounts. The Department told us it has recovered more than £500,000 from one prime contractor, and that it hopes to recover all £11 million.
The Department has made around 30 changes to its contracts with prime contractors, which it estimates could save it £40 million over the life of the Work Programme. The Department is currently renegotiating its contracts with prime contractors, including its approach to dealing with the validation of sustainment payments. It is unlikely that it will be able to recover from contractors all the actual costs it has incurred to date as a consequence of its flawed performance measure.
Recommendations: The Department should write to us, as soon as it as certain, to confirm whether Newcastle College Group will or will not receive an incentive payment for 2014 15.
Before we take further evidence in early 2015, the Department should:
- update us on its progress in clawing back from prime contractors the estimated over payment of £11 million for invalid sustainment payments; and
- update us on its progress renegotiating its contracts with prime contractors, including a summary of the changes it has made to the contracts, the intended impact of the changes, and the cost of making the changes.
Recommendations in the Comptroller and Auditor General’s report
The Department accepted the recommendations detailed on pages 10-11 of the Comptroller and Auditor General’s report, and which we repeat in the annex.
Recommendation: The Department should, before we take further evidence in early 2015, update us on its progress against the recommendations in the Comptroller and Auditor General’s report.