The 2015 Project: Tackling long-term unemployment – from despair to where?

Tony Wilson is Policy Director at the Centre for Economic and Social Inclusion. This blog is part of The 2015 Project – NCVO’s member consultation on the big issues in the lead up to the 2015 election.

The Government’s great hope for tackling long-term unemployment – the Work Programme – is at best stemming a rising tide and at worst not making a difference.

So what should we do about it?  And what role can or should the charity sector play?

First, the problem

It’s fair to say that the Work Programme has had a difficult time – with a rushed implementation, an initial flood of referrals and a particularly weak labour market in late 2011 all contributing to pretty poor performance in its first year.  Recent figures have shown strong improvement, with our analysis showing that on the latest data that programme is running ahead of the Government’s minimum expectations (at least for the long-term unemployed).  However our analysis also shows that the Work Programme is so far only performing in line with the most successful previous programmes.  It has not led to the step-change in performance that the Government, and the industry itself, had promised.

Having said this, the Work Programme is also the least generously funded programme for the long-term unemployed that we have seen in at least twenty years.  So it has managed to maintain broadly the same level of performance as previous programmes, with about half the funding.  We are spending less supporting the long-term unemployed now than at any time in the last twenty years – at a time when long-term unemployment is higher than it’s been in twenty years.

The role of the charity sector

Charities, social enterprises and not-for-profits have long played a role in efforts to tackle long-term unemployment – and in more recent years as contractors and grant-holders from government.   With the Work Programme, the sector has effectively been asked to find a niche as sub-contractors to larger “prime” contractors usually from the private sector.

What has happened since has been well documented, particularly by NCVO.  I would only add that the concerns raised by NCVO are well justified – in 2009, the “Third Sector Task Force” chaired by Tony Hawkhead and David Freud estimated that the third sector was delivering around one third of the welfare to work market.  Now, according to DWP Ministers, the share is likely to be one fifth at best.  So the charity sector has a declining share of what is in any case a shrinking funding pot.  The hard numbers, in any reading, are not good.

So what has gone wrong?  The answers could fill a book – but key problems have clearly been the limited funding, meaning there is less opportunity for specialist support; the very high levels of financial risk passed on to organisations not well placed to bear them; the rushed implementation; and linked to this, often limited support and protection for organisations expected to negotiate complex contracts on short notice.  As a result many organisations, simply, either couldn’t make a deal or signed a bad one.

However a key lesson is that charities also need to change the way that they work, and in particular to be more proactive in proving their worth. The Work Programme evaluation found that the charities and not-for-profits that were getting more work and were happier with their experience (and there were some) were those who were marketing themselves to the prime, raising awareness and able to demonstrate their value for money.

The future

Looking ahead, then, there are two key challenges – and the charity sector must be at the forefront of both.  First, we need action to address the crisis of long-term unemployment that exists now.  And secondly, we need to learn lessons for what comes after these Work Programme contracts (which means 2016).

On the first, there is a clear argument that investing more now will save us money in the future – through lower benefit bills and avoiding some of the social and economic costs that come from high structural unemployment.  Last year, the Department underspent by £225 million on its employment programmes as a result of Work Programme under-performance – the year before it underspent by £140 million.  In our view, some of that money should be reinvested now in tackling long-term unemployment.  This could be ring-fenced to local areas, and accessed jointly by Work Programme providers and local commissioners (for example City Deals where they exist, Local Authorities and Jobcentre Plus where they don’t).  Crucially, some of that money should be specifically used to fund specialist support for those with the most significant barriers to work.

On the second issue, the lessons for the future, we need to learn not just from the experiences of the Work Programme but also from other public service reforms – in health, criminal justice and the testing of “Community Budgets”.  In all of these areas, the charity sector is recognised as playing a central role in bringing expertise, reaching those furthest from support, and delivering results.  But in all cases there are similar challenges, as commissioning is increasingly marketised and professionalised: around access to finance, capacity, risk management and appetite, and having the right technical (contracting and financial) skills – all of the same issues identified in the 2009 Task Force.

The Government announced, at our Welfare to Work Convention, that it would be reviewing its commissioning strategy for employment services.  Watch out for the consultation in the autumn, and engage with it.  In our view, the Department needs to ensure that it sets out clearly how charities and the wider sector can play a full role in future delivery, and how they will be supported and where appropriate safeguarded.

There is a lot of good practice going on – in Justice with a new Code of Conduct and support to build capacity, in Northern Ireland and with the Merlin process for welfare to work.  But this isn’t always joined up – by Government or the sector.   There is an opportunity now to shape the future of employment support.  It is imperative that charities, and indeed all of us, take it.

For more information on NCVO’s election work see Election 2015: And so the election campaign begins…

We want to hear your ideas for the future – answer questions on the economy and jobs.

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