Published:

Yesterday we learnt
that the coalition's
back-to-work programme
has missed its own, rather
modest, target. Fewer than
1 in 20 of
the unemployed individuals
put on the Work
Programme in 2011
have taken up jobs
lasting more than
6 months. The programme
may be cheaper to
administer than its
predecessor, Labour's Future Jobs
fund, but is it
doing any good at all?

According to the Government's own analysis,
the mere 3.5% of participants who
got work lasting at
least 6 months represents
a smaller percentage
than those who would
have found work without any
help. The Government's target for this stage of the scheme was to
have a minimum of 5.5% of participants in lasting employment, a goal that the
DWP was quite confident of fulfilling.

The programme
has cost £435 million
so far, and the government is
struggling to argue that
the money has been
well spent. Welfare minister
Mark Hoban says that
participation in the
scheme is getting thousands
of long term and
young unemployed into the
habit of work, and
that the double-dip
recession, not anticipated
at the time the
scheme was devised, is
largely to blame
for the poor results.
But this is all a
far cry from the
rhetoric of 2010,
when the government
seemed entirely confident that a
payment-by-results
approach would finally
crack the problem of
the long-term unemployed.


The release of
this disappointing data
comes at a difficult
time for the coalition's
welfare reform agenda.
Despite all the
talk of austerity
and welfare cutbacks,
the Office of National
Statistics has just
pointed out that
benefit spending is
still growing. Last month
the cost of welfare
was 7.7% higher than
in October 2011. Since
the start of this
financial year, welfare
spending has been
almost 6% higher than
in the previous year.

As George Osborne
prepares for his
Autumn Statement next Wednesday,
it seems unlikely that
he will repeat last
year's decision to uprate
benefit payments in
line with 5%  inflation, a
decision that explains
a large chunk of
the increased spend. A
benefits freeze seems
more probable, bringing payments
more closely in line
with average wages, which
have seen a real-terms
fall.

But a real
fall in the cost
of welfare will only
happen if the government succeeds in getting more
people into work and
keeping them there and/or
making real-time cuts in
benefit payments.
At the moment, the
coalition's emphasis is
on the first of
these. The essence of
Iain Duncan Smith's reforms
is the argument that
once it becomes clear
that work pays more
than a life on
benefits, individual
and families will break
free of their dependence
on the state, and
welfare costs will
shrink. In the
short-term, he accepts
that the cost of
supporting people into
work (whether through work
programmes or wage
top-ups, or both)
may outrun the savings.

Yesterday's Work Programme
figures are reminder
that this approach will
require patience,
and in the meantime
the government will have
much reassuring to do.
Critics are lining
up on both sides:
on the one hand
to argue that the
incentive payments being
made to contractors
are too low to
make their work schemes
viable; on the
other, that the payments
are being wasted because
the individual being helped
would have found work
anyway.

The trade body
for providers, the Employment
Related Services Association,
points out that it's still
early days. Less than
18 months since the
launch of the programme,
they say it's unfair to
try to judge long-term results. Welfare-to-work
contractors were not
expecting to break
even yet, let alone
make a profit. Getting
someone with no
recent experience of work
into a settled job
can take more than
a couple of short-term placements; that
doesn't mean it's
impossible. Unsuccessful
work providers will also be
weeded out: Mark Hoban
has threatened that scheme
contractors who are
not getting results will
have their contracts
cancelled. It's a
threat he may not
need to fulfil, as
some providers are already
giving up, unable to
make a return on
the time invested.
Yesterday's figures showed big variations in the success rates of
providers; as the poor performers drop out of the picture, overall results may
improve.

But one of the biggest problems for the government yesterday
was the extent to which it had raised expectations of success by talking up the
potential of the scheme. That problem is not going to go away: the minimum
performance level set by the DWP for welfare-to-work contractors rises from
5.5% in this first year to a much more demanding 27.5% in the second year, 33%
in the third and 40% thereafter. These goals were based on forward projections
for the cumulative total of those placed in work. It now seems that such
projections are wildly unrealistic. Just as jobseekers have moved in and out of
short-term jobs in the first year, so it remains a strong possibility that they
will continue to fluctuate between short periods of work and stretches of
unemployment in between. The danger here for employment support providers is
that, far from being able to close the file on clients after settling them in
work, the task will be never-ending. And for the government, results will
continue to fall well below target.

The most positive outcome from the Work Programme so far,
but one which the government is rather wary of trumpeting, is the fall in the
number of benefit claimants. Although only 3.5% of participants found long term
employment, a remarkable 25% stopped claiming Jobseeker's Allowance. The
requirement to participate in a back-to-work scheme was enough to deter them
from claiming. The government should not be embarrassed about this.
After all, one of its objectives was to introduce an element of conditionality
into welfare support, and end the “something for nothing” culture.

Before the next set of results come in,
the Coalition would do well to downplay expectations. Ministers should point out
that at the height of the last economic boom, the Labour government was
importing workers rather than tackling home grown unemployment. Even the most
dedicated work adviser will struggle to keep low-skilled, poorly educated
jobseekers in steady employment, especially against competition from a migrant
workforce, at a time of economic uncertainty.

But the Coalition should also be asking
itself some hard questions about its failure to implement supply-side reform,
through cutting taxes on jobs and reversing the tide of employment regulation.
Otherwise the likelihood remains that Work Programme providers will simply
cycle clients in and out of short term jobs for the foreseeable future.

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