The government’s chief welfare to work adviser, David Freud, said recently: “I worked out that it is economically rational to spend up to £62,000 on getting the average person on incapacity benefit into worksomebody will see a gap in the market and make their fortune.”
And with the involvement of private sector firms in Pathways to Work schemes, operational nationwide from April 2008, it seems that Freud’s prophecy may well come true.
Pathways to Work is the name of the monitoring, support and advice that the DWP has commissioned for people who are claiming incapacity benefit and income support because they are unfit for work. It involves monthly interviews, health advice, access to a £40 a week “return to work credit” and overall a fairly intensive regime aimed at helping people into work. This is in advance of the introduction of the employment and support allowance for those groups of claimants from October 2008.
Several organisations will be delivering the Pathways to Work package – such as Remploy in The Marches; the Shaw Trust in many parts of the south east of England and Working Links in the Midlands, north and south west.
An Australian multinational group Ingeus through a subsidiary company, WorkDirections UK, won six out of 15 contracts worth more than £85m, to become one of the biggest providers of Pathways to Work. WorkDirections attitude to safeguarding the employment and pension rights of transferred DWP staff are somewhat unclear, although other bidders for the contract (mostly from the charity or voluntary sector) factored in those costs.
William Smith, chief executive of Ingeus Europe, described the charities who had lost out as “whingers”. “Frankly it’s their own fault,” he said. “They should have bloody read the questions and answers documents.”
This rather aggressive approach from the predominantly private sector companies that won the Pathways to Work contracts has concerned many voluntary sector organisations, who believed that they would be in a good position to win the contracts to deliver Pathways to Work.
The Association of Chief Executives of Voluntary Organisations (Acevo) even launched an independent inquiry into the fact that the DWP awarded the bulk of its £250m Pathways to Work contracts to private companies.
Stephen Bubb, Acevo’s chief executive, says: “The government says it wants the third sector to play a bigger role in delivering public services, yet this debacle has shown there are serious obstacles to this becoming a reality.”
This is not to denigrate the Pathways to Work idea. The House of Commons public accounts committee points out that, in the pilot areas, there has been some early success for the Pathways to Work scheme. A DWP evaluation found that the number of participants who found work within 11 months was 9.3% higher than for incapacity benefits claimants who did not participate in the scheme. However, the scheme was not a success for people with mental illness, who are one of the largest (and growing) groups of incapacity benefit claimants.
Using Freud’s calculation that the state could pay £62,000 for each of the two million plus people on incapacity benefit they put into work, it would amount to anything up to £120bn going from public funds and into the private sector in the space of three years.
As incapacity benefit costs the country £12bn a year, and claimants who move into low-paid work may still qualify for working tax credit and housing and council tax benefit, Freud’s sums do not appear to add up. All of which is rather worrying for someone with a background in merchant banking. But it certainly explains why he believes private sector firms can make their fortune from this kind of contract.
Social workers and advisers who are working with claimants going through the Pathways to Work programme need to be aware of the “payment by results” world that their client is entering. Employment is a valuable and viable target for many of the people we work with and of course, genuine help to move people nearer to finding work must be welcomed. But the work has to be suitable for the person and the person has to be suitable for work – in a contract-driven environment, those facts may get overlooked in the drive for results.
Gary Vaux is head of money advice, Hertfordshire Council and writes a regular welfare rights column for Community CareThis article appears in the 13 March issue under the headline “Private gain, public cost”