Westminster Blog

Mark Hoban, the employment minister, has just suffered a bit of a torrid press conference with the assorted ranks of the British press after the Department for Work and Pensions admitted its £5bn back-to-work scheme has fallen well short of its own targets.

The government’s figures show the scheme had found sustained employment (six months for most, three months for those most difficult to help) for just 2.3 per cent of people. The department had set a minimum performance level for itself of 5.5 per cent.

Why is it failing? There are many reasons, but here are the main ones:

1) The economy is worse than expected. The original assumptions built into the scheme were that the UK economy would be growing at 2 per cent. Of course, it is not, which means there are fewer jobs around to be had.

2) The targets were too high. As a way of getting the Treasury to cough up the cash needed for the scheme, the department for work and pensions set very aggressive targets for providers. This has been a concern right from the start of the scheme, as the FT’s former public policy editor, wrote last year.

3) The government is not paying enough. Although this might seem counter-intuitive given the scheme is costing £5bn, the amount being spent on each person going through the scheme is much less than previous similar schemes, such as Labour’s Flexible New Deal. That is especially the case because when the government tendered the scheme, it encouraged prospective contractors to bid less than what they were being offered (so-called “discounts”). Some executives have told us they believe that those companies that discounted heavily would simply not be able to afford to provide the support needed to find jobs for the most disadvantaged. This may be the case – but Hoban pointed out today that most of those discounts don’t actually kick in until next year, so this will be much less a factor than the first two points.

Meanwhile, the FT’s Kate Allen has done her own research into which providers are doing well and doing badly, and found that the bigger companies seem to be the ones thriving – perhaps because of economies of scale, but perhaps also because they often have more experience. The list is based on the amount of money the companies have received for every person they take on – it relates to success because the payments are performance-based:

We should remember when looking at these data that some providers are working with more difficult groups to reach, so will have lower success rates. However, when I checked with a couple of industry sources, they believed this represents a largely fair listing of how each company is faring.

Hoban has today written to the worst performing companies warning them they could lose their contracts if they continue to fail. Though he wouldn’t say which ones they are, this table should give us some idea.