NAO report: The introduction of the Work Programme

24 January 2012

The Department for Work and Pensions has introduced the Work Programme quickly, in just over a year, and this has had benefits, but the speed with which it was launched has also increased risks, according to the National Audit Office.

The Department and providers have made assumptions about how many people the Programme will get back into work but there is a significant risk that they are over-optimistic.

The Programme, which replaces virtually all of the existing 'welfare to work' schemes, has a number of innovative design features that address weaknesses in previous schemes. Providers are paid primarily for the results they achieve in supporting people into employment so what the provider earns is tied to performance. Providers will receive higher rewards for supporting harder to help claimant groups into work and are paid partly out of the benefit savings they help to generate. There is more potential for competition between providers.

However, assumptions about the feasibility of the Programme might be over-optimistic. The NAO's analysis suggests that 26 per cent of the largest group of job seekers in the Programme will get jobs, compared to the Department's estimate of 40 per cent. Some contractors in areas of high unemployment may struggle to meet nationally set targets. It is possible that one or more contractors will get into serious financial difficulty during the term of the contracts. Today's report also points out that no alternatives to the Programme were considered as part of the business case, nor was it piloted to test assumptions.

It has so far cost £63 million to terminate existing welfare to work contracts, including contracts with ten providers that went on to win contracts for the Programme. Two former contractors have not yet agreed settlements.

The IT project to support the Programme was not fully functional when the Programme was launched. A consequence is that the Department will not be able, until March 2012 at the earliest, to carry out automatic checks to confirm that people who find work have stopped claiming benefits. The Department needs to ensure that improvements to the IT system are delivered on schedule. In the meantime, there is an increased risk of fraud and error going undetected.

Fewer clients than expected are being referred onto the Programme as part of the 'harder-to-help' category. Some have been found to be 'fit for work' and switched into other categories and it is taking the Department longer to process assessments and appeals. As a result, some sub-contractors are frustrated at the speed with which clients have been referred to them.

Amyas Morse, head of the National Audit Office, said today:

“The Department for Work and Pensions has made a significant effort to learn the lessons of previous welfare to work programmes. It is too early to judge the success of the Work Programme, which will depend on whether the Department can get more people into work than previous programmes.

“The Department has set providers stretching performance targets and it needs to ensure that they do not cut corners to stay in profit, such as targeting easy to reach people, reducing service levels or treating sub-contractors unfairly.”

Notes:

In June 2011, the Work Programme replaced virtually all 'welfare to work' programmes run by the Department for Work and Pensions in England, Scotland and Wales. It offers support to unemployed people who have been claiming Jobseeker's Allowance or Employment and Support Allowance to help them get and to keep jobs. The Programme is delivered through contractors. There are 18 contractors with 40 separate contracts

The first jobseekers joined the Work Programme in June 2011. The Department estimates that it will cost between £3 billion and £5 billion over the next five years and could help 3.3 million people.

The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 880 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

Http://www.dodsmonitoring.com/downloads/misc_files/WorkProgrammereport.pdf

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