PWC has already pulled out so will the Work program really work?
The Government’s flagship Work Programme will fail in economically weak areas leaving thousands of hard-to-help jobseekers behind, the Work Foundation think tank has warned on the day of the scheme’s launch.
The warning is the latest in a long line of concerns over how effective the new welfare-to-work scheme will be to help get Britain’s unemployed off benefits and back to work.
Chris Grayling, the employment minister, is set to officially launch the programme today, claiming it will “transform” the lives of millions of people. He will argue the “ambitious” service represents good value for the taxpayer because it bases payments to contractors on results – awarding much of the money to providers only once they find the jobseeker sustainable employment.
Contractors are set to receive just 10pc of the contract’s cash upfront, compared to about 40pc under Labour’s previous Flexible New Deal scheme.
However, the Work Foundation warns it will be difficult for private contractors to obtain a profit in certain parts of Wales, Scotland and London, meaning providers will avoid hard-to-help groups in favour of “easier” returns on investment.
Neil Lee, the group’s senior economist, said: “As the Work Programme is based on payment by results, contractors carry the initial risk. There is therefore the danger that private contractors will focus on investing in places where they are more likely to get people into work to secure a return on investment.
“The financial risk may also be passed down to small, local voluntary sector organisations which could be knocked out of the market as a result.”
He added: “The Work Programme is based on a national payment structure and does not take into account local and regional variations in labour demand. Economic growth is faltering and parts of the country – still dealing with the fallout from the recession – are facing significant public sector job losses.”
Areas of the country where it could be difficult for the programme to be delivered profitably include Inverclyde, Merthyr Tydfil and Blaenau Gwent in South Wales, and Thanet in Kent, the report claimed.
London presents its own problems, including factors such as the cost of living, housing, childcare and “intense competition” for low-skilled jobs, Mr Lee said.
Elsewhere, the Centre for Economic and Social Inclusion (CESI) warned that in many cases, the Work Programme will not give welfare-to-work providers the information needed to support everyone into employment.
It said there are doubts over whether the scheme will be sensitive enough to the “complex needs of different customers”, because it will use a generic test to determine an individual’s capacity to work.
Specific issues stemming from harder-to-help groups such as lone parents, older workers or people with substance abuse issues will be overlooked, CESI said.
The Age and Employment Network (TAEN), which represents the over-50s, agreed the Work Programme is not tailored enough towards older workers.
Chris Ball, chief executive of TAEN, said: “Long term unemployment rates for the over-50s are the highest across all age groups, yet they are not recognised as one of the disadvantaged groups under the Work Programme.
“As a result, they are likely to have to wait for 12 months before they get specialist help and providers will not have the financial incentives to support them that they will have for groups who are recognised as disadvantaged.”
He said almost half of incapacity benefit claimants are over 50. Those who undergo a work capability assessment, and are considered fit for work, are likely to lack confidence or relevant experience in the workplace and may struggle in work, Mr Ball added. “They may resent the Work Programme and see as it as harsh and unsympathetic,” he said.
The doubts come as industry insiders expressed concern over how the contracts to deliver welfare-to-work services were awarded.
Earlier this week, The Daily Telegraph revealed PricewaterhouseCoopers is to pull out of the Work Programme after losing out on contracts and realising the scheme was commercially unviable.
Only one of the Government’s successful prime contractors, G4S, is completely new to the market, with many questioning whether it will be the “same old, same old” under a different name.
Today, the Government is to outline who the subcontractors will be, working under prime providers.