The government's Work Programme is now up and running around the country, getting Britain's long-term unemployed back into work. Many commentators have highlighted the labour market's critical importance to the programme. While they are right to do so, it is not the only potential pitfall to stand in the way of its success; its centralised and top-down approach has been one of the most overlooked challenges in its path.
The entire programme is based on a national payment model and commissioned from the heart of Whitehall. Yet chronic worklessness and unemployment is, by and large, a local phenomenon, and a local social problem. As Robin Wales, the mayor of Newham, argues, the government is trying to solve a local problem nationally. For the Work Programme to be a true and lasting success, there must be a fundamental devolution in power and responsibilities to local authorities.
The Work Programme is its payment-by-results model, where providers only get paid for the successful outcomes they deliver. To guard against providers "creaming" off the most promising unemployed people and "parking" hard-to-reach benefit claimants, the programme offers different payments for each client group.
Yet there is only one single financial model that applies uniformly across the nation. No distinction is made between regions or even nations within the UK. This completely fails to recognise the differing traits and needs of local labour markets, and, crucially, the costs involved in supporting people into work. There are also stark differences locally too: according to the Work Foundation, the programme risks failure in the most deprived economic areas due to weak labour demand and providers still focusing on the most profitable client groups.
If local authorities are given the responsibility to manage the Work Programme in their respective areas, they will be able to tailor a payment model that better reflects the local labour market. This would help strengthen incentives for supporting the hard-to-reach and most costly individuals, further offsetting the risks.
The one-size-fits-all approach is a risk because it shackles the entire country to a single payment structure that remains largely untested. If local authorities had the freedom to design their own payment schemes, they could tailor it to their areas and experiment with alternatives. The payment-by-results model is a worthy one, but there must be alternatives.
The Work Programme will also showcase the so-called "AME/DEL switch". This is a model of financing which makes available funding now from expected savings in future. But why limit this approach to benefit payments? Local authorities are responsible for funding an array of related social services, many of which would dramatically diminish in costs with successful outcomes. If they were pioneering and running their own Work Programmes, they would have a template for other potential opportunities using that very model.
Private sector dominance of Work Programme contracts is also another big concern. Private firms hold 88% of all prime contracts, with only two lead voluntary sector organisations. In total there are 18 prime contracts across the country. Many voluntary and third-sector organisations have expressed their frustrations over dealings at the sub-contractor level, where again they feel they have been sidelined. Private sector involvement in the Work Programme is not a bad thing – it can bring a real competitiveness and can drive innovation – but market share needs to be balanced fairly. There should be no sector monopolies.
One of the biggest causes of anger among voluntary groups is the feeling they have been priced out of the deal. This is all part of the competitive tendering process. Other groups found the prices on offer from DWP in supporting these groups were simply too low to make it financially viable. Yet, as the London Voluntary Services Council has highlighted, the most successful employment programmes, are "voluntary" in nature. This is because smaller interventions work better than larger ones and exploit local knowledge and links to local labour markets. A good deal for the non-profit sector is vital for the Work Programme's success.
Local authorities are much better placed to commission successful welfare-to-work services. At the moment, the entire Work Programme is commissioned from Whitehall. But surely, with their past experience in commissioning and running their own employment programmes, local authorities are best placed to assume this responsibility? They also understand their local economies better than anyone else. A devolved commissioning structure would better reflect the needs and traits of local labour markets.
A locally delivered Work Programme would prove more democratic. Of course employment minister Chris Grayling has ultimate responsibility and authority, but he is just one man. Freeing the programme from his central command and empowering local authorities to take charge would bring it closer to the people it aims to help, and make it more directly accountable to them.
I am a big supporter of the Work Programme. I can see its potential, yet it will only fully achieve this if it goes local. The government has missed its first opportunity. Will it be bold enough to think again?
Rayhan Haque is a policy assistant at Inclusion and writes in a personal capacity
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