Problems with private sector delivery of employment services
The Public Accounts Committee Report on Support to incapacity benefits claimants through Pathways to Work is going to be very useful for all sceptics about contracting-out employment programmes to the private sector.
‘Pathways to Work’ is a programme designed to help disabled people into employment. When it was designed the TUC welcomed the offer of specialist rehabilitation and health care and the extra money for people moving into employment. But when the programme was rolled out we were very critical because of the decision to involve the private sector in delivery.
It looks as though we were absolutely right to be concerned. The report’s key conclusion is that private sector organisations delivering Pathways to Work didn’t just under perform against the standard that was expected of them, they did significantly worse than Jobcentre Plus providers, though the gap has improved a little recently.
Key quotes include:
Private providers have seriously underperformed against their contracts and their success rates worse than Jobcentre Plus even though private contractors work in easier areas with fewer incapacity claimants and higher demand for labour. Contractors have universally failed by considerable margins to meet their contractual targets for helping claimants who are required to go through Pathways. (Note that this failure was universal.) The report makes a point that suggests problems with the large contractors model being favoured for the new Work Programme: we have concerns that effective small private and voluntary organizations working in local communities are being asked to take an unfair share of the risk by prime contractors. The Committee recommends that DWP should ensure good value for money by making good use of Jobcentre Plus resources and maintaining a sustainable balance between public, private and voluntary providers to allow proper competition and a good basis for comparing performance.
None of this should come as a surprise. As we have pointed out before, the DWP is – contrary to lazy stereotypes – quite an efficient Department. Previous experience of contracting-out and privatisation has been that, where the public sector is allowed to compete on an equal footing, it can match private sector performance – or better it.
Lord Freud, when he was working for the Labour government, noted that the cost of each sustained job was much the same for contracted-out 25+ Employment Zones (£5,110) as it was in the JCP delivered New Deal 25+ (£5,130).
The Action Teams for Jobs programme, part delivered by Jobcentre Plus, part delivered by the private and voluntary sector, saw much superior JCP performance. The independent evaluation found:
The 25 PSL teams as a whole only met 78 per cent of their job entry targets in year one of Phase 3 of Action Teams, compared to the 40 Jobcentre Plus teams, as a whole, who achieved 140 per cent of their job entry targets. PSL teams, as a whole, achieved 69 per cent of their outcomes from non-JSA customers, compared to Jobcentre Plus teams, as a whole, who achieved 76 per cent (again, exceeding the target of 70 per cent). PSL teams, as a whole, moved into work proportionately more clients who had only been out of work for a short time than Jobcentre Plus teams. They were also proportionately more likely to work with clients with just one of the target disadvantages than Jobcentre Plus teams, as a whole, were.
It is significant that a Select Committee with 8 Conservative members, 5 Labour and 1 Liberal Democrat came to this conclusion. Yes, it is true that Margaret Hodge, the Chair, is a Labour member, but when she was the Minister for Employment she was actually an enthusiast for contracting-out. Bringing in the private sector is one of those policy trends where the continuity between the old ministers and the new is far more noticeable than the change – both are wrong.