Do welfare cuts mean there is less funding for the Work Programme?
The poorest people in the UK are undoubtedly losers from last week’s CSR – those who depend on welfare payments will feel a drop in living standards as a result of the Chancellor’s cuts. But another group will also be affected – the private contractors the DWP is proposing to pay to deliver the Work Programme.
As the FT reported last month, the Department’s budget for the delivery of welfare to work programmes is likely to face massive cuts as a result of the CSR. The DWP’s answer is therefore to ask private providers to fund programmes themselves. While details of the payment model have not yet been published, it is likely that providers will be asked to self-finance nearly all of the up front costs of programmes, spurred on by the promise of receiving (in the future) a significant proportion of the benefit costs that would have been paid to claimants had they not moved into work.
But as benefits have been cut, the possible gains for providers have fallen significantly. In particular, the cut in contribution based ESA, which will now only be available to eligible claimants for one year, will lead to a massive drop in the ‘outcome based payment’ available to providers who support ESA-C claimants into jobs. What will this mean for the attractiveness of contracts in areas with high proportions of disabled people claiming benefits? What will it mean for the levels of support available to unemployed disabled people who do not qualify for income related benefits? Only time will tell.
This model for funding welfare to work services also raises another intriguing issue – which we won’t be able to solve until the Work Programme’s payments terms are published: has the Government double counted its welfare savings? If any ‘savings’ from lower unemployment are going directly to Work Programme providers can they really be considered to be reductions in Government expenditure? Watch this space.