What to expect from the Work and Health Programme?

Since it was launched in 2011, the Work Programme has elicited its fair share of criticism from the voluntary sector.

While it has achieved comparable results to previous welfare-to-work programmes for some jobseekers, it has largely failed those with more complex needs or barriers to employment. For many charities, it has provided an abject lesson in how not to outsource public services, particularly for vulnerable people.

Unsurprisingly, many have been hoping that the Work Programme’s successor, the Work and Health Programme, will take a different form.

What we know about the Work and Health Programme

The design of the Work and Health Programme has been emerging slowly, so many of the precise details remain unknown. What we do know is that it will primarily focus on people with disabilities and health conditions, and people out of work for two years plus.

It’s also going to be significantly smaller than the Work Programme. DWP has announced a minimum of £130m a year to fund the programme by 2020 – a stark contrast to the £2.8bn cost (PDF, 94KB) of the Work Programme between 2011 and 2016.

With the invitation to tender (ITT) for the Work and Health Programme expected in October this year, the window of opportunity for influencing its final design is fast disappearing. Perhaps with this in mind, the think tank Reform have today released a report commissioned by Big Society Capital calling on government to address some of the problems commonly associated with the Work Programme.

The need for a level playing field

The report rightly highlights that there is not a level playing field, nor enough diversity, in public service commissioning. It calls on government – central and local – to create an environment where new providers – including charities and social enterprises – are better able to bid for and secure contracts. Among its recommendations are:

• government should engage with suppliers throughout the procurement process
• contracts should be small enough to incentivise medium-sized providers to bid for prime contracts
• government should guarantee minimum referral volumes to allow a broader range of providers to bid
• commissioners should place a heavier emphasis on the quality of bid, with a quality weighting of around 70% recommended.

These are undoubtedly laudable goals, which echo long-standing recommendations made by NCVO around public procurement more generally.

That said, the report’s failure to tackle the elephant in the room – the inappropriateness of payment-by-results (PbR) in this type of public service delivery – is for us, a missed opportunity. Indeed, the report actually recommends its use for the Work and Health Programme:

Contracts should include a heavy payment-by-results weighting… within a defined ‘bid area’ of between 70% and 90%.

The problem with payment-by-results

Our primary concern is that it will replicate some of the problems of the previous Work Programme, where people with more complex needs were poorly served – we believe, in part, because the specialist voluntary organisations that could have supported them missed out on delivery opportunities.

As we’ve previously highlighted (PDF, 307KB), the level of financial risk and the amount of working capital needed for PbR is preventing voluntary sector organisations from bidding for contracts.

Payment in arrears and the risk of making a financial loss also have implications for the provider’s capacity to innovate and look for new ways of delivering services. And in terms of service effectiveness, PbR payment models often fail to provide sufficient incentives for working with people who require more complex, sustained or costly interventions (‘creaming and parking’). Indeed, we know that many specialist organisations ultimately received no or few referrals under the previous programme.

Others have raised more fundamental concerns about PbR. For example, as Kathy Evans and Toby Lowe recently highlighted in a guest blog post for NCVO, PbR relies on top-down targets which force providers to ignore the complex and messy lives of real people and fails to acknowledge that outcomes are often the product of a huge range of factors and interventions.

Even the well-respected National Audit Office (NAO) only recommends (PDF, 94KB) that PbR be used for services which are non-essential; where under-performance or failure can be tolerated; and where objectives can be translated into a defined set of measurable outcomes.

Will government learn from past mistakes?

So, we remain concerned that this approach may not be best suited to helping people with complex needs achieve ‘job outcomes’ or more importantly, sustainable fulfilling employment with progression opportunities.

In many charities’ experience, this more often requires a holistic assessment of people’s needs and strengths, tailored support, and recognition of incremental progress, such as acquiring volunteering experiences or new skills.

Now don’t get me wrong, this is a timely report from Reform with some well-thought out recommendations. It’s just a shame it misses a golden opportunity to highlight the weakness of PbR in welfare-to-work programmes and the barrier it represents for many voluntary organisations wanting to participate in public service delivery.

Hopefully government will see the light anyway, and seek to mitigate the negative effects of PbR when the Work and Health Programme becomes operational in 2017.