The government will pay private and voluntary organisations by results to secure employment for the long-term unemployed, the work and pensions secretary Peter Hain announced yesterday.
The government believes the results-based payments will increase competition for contracts and encourage service providers to join the welfare-to-work market, which is valued at about £1bn a year.
The payment proposals will result in larger contracts through a smaller number of lead contractors, said Hain.
A points system will be put in place to evaluate contractors’ performance in securing long-term employment. If contractors are judged as performing poorly, contracts could be terminated or adjusted.
Hain said: “In the future the bulk of payments to contractors must be based on sustainable job outcomes. This will give a real incentive to help people into jobs that provide the greatest career prospects and the greatest chance to lift themselves and their children out of poverty.”
The mental health charity the Sainsbury Centre for Mental Health welcomed the government’s pledge to pay out for sustainable jobs.
Dr Bob Grove, employment programme director at the charity, said: “We hope contracts will also reward providers who use the proven system of Individual Placement and Support (IPS). If they do not use this proven technique, the government will miss the opportunity to include this important and significant group of people in its welfare reform programme.”
This proposal adds to David Freud’s recommendations in March, when he looked at the government’s welfare to work strategy, and the Department for Work and Pensions’ employment green paper, In Work, Better Off, published in July.