Work and Pensions Committee: Press Notice

5 March 2009: For Immediate Release 

Report Published - The Committee's Second Report of Session 2008-09:

“Committee welcomes the Flexible New Deal but calls for increased funding to cope with the economic downturn”

The Work and Pensions Select Committee today Thursday 5 March 2009 publishes its Second Report of Session 2008-09, entitled “DWP’s Commissioning Strategy and the Flexible New Deal” (HC 59).

The design and delivery of employment programmes are critical to the success of welfare reform. Flexible New Deal (FND) heralds a move towards greater flexibility in both of these areas through the use of longer contracts with private and voluntary sector providers to deliver employment support for the long-term unemployed.

The Committee endorses the principles of the FND model on the basis that longer contracts and outcome-based payments should create the flexibility and innovation that providers need to help as many people into work as possible. It notes that the case for taking such steps to improve the effectiveness of employment programmes is only strengthened by the onset of the recession.

However, the Committee is concerned that the current funding arrangements are inadequate. Given that DWP expects the number of claimants coming onto the programme when it starts in October 2009 to be up to 300 per cent higher than first predicted, unless the budget for the programme is proportionate to the increase in on-flows onto FND, there is significant risk of market failure, today’s report warns.

The Committee believes that the budget must be increased to reflect the predicted rise in claimants accessing the service and urges the Government to announce details of adjustments to the financial model as soon as possible.

Other changes to the benefits system mean that more lone parents and disabled people will be accessing Jobseeker’s Allowance and adding to concerns that the budget will not stretch to accommodate the additional customers the economic downturn is likely to generate.

Notwithstanding the changing economic conditions, the Committee heard during the course of its inquiry from a number of third sector organisations who expressed concern that the FND prime contractor model, led by larger private sector organisations, might “squeeze out” smaller, specialist providers. The Committee also noted the importance of ensuring that the customer voice is heard. To address both of these issues, the Report recommends the appointment of an Independent Ombudsman to monitor and review the services provided.

Chairman of the Committee, Terry Rooney MP, commented:

”As the labour market contracts it becomes even more important to ensure that those who have been unemployed for a long time receive the support they need to return to work. The Flexible New Deal has the potential to offer this, but the financial principles on which it is based must be viable

“Unless the budget for FND is increased, there is a real danger that providers will not be able to cope with the numbers of customers coming through their doors. The potential consequences of this for those customers who are most in need of expert support and their prospects of rejoining the labour market should give DWP real cause for concern.”