Ed Holmes is the Senior Research Fellow for Economics and Social Policy at the think-tank Policy Exchange.

Screen shot 2013-06-23 at 16.28.54On Thursday, the Government will release new
information about the success of its flagship welfare-to-work policy for the
long-term unemployed: the Work Programme. It will be hoping for much better
headlines than the first round of statistics released last November, which
suggested that the programme was not only not working but actually ‘worse than doing nothing’.

This was partly built on a misreading of the statistics – all those enrolled in
the programme even for a single day who could not possibly have obtained and
kept a job for six months were seen as ‘failures’- and partly on the fact that the
deliberately stretching targets the programme was set in 2010 have not been
adjusted for what has been a slower economic recovery than then thought. While
still too early to judge the success of the whole programme, it is very likely
that Thursday’s announcement will show improvement – and, most likely, a considerable

There are,
however, two related problems on the horizon. The first is that the providers
who are ‘paid-by-results’ to get claimants into sustained employment and keep
them there may simply not have sufficiently large financial incentives to
get the hardest-to-help unemployed back to work. Quite understandably, busy managers and personal
advisers have to give greater priority to those claimants
on their books most likely to help them meet their own targets, and give less
priority to those they simply do not have the time or resources for.

While this
is effective in delivering the best outcome for the highest number of
claimants, ultimately it means the Work Programme may not be able to provide
effective support for the most vulnerable. This threatens the mutual contract
between the state and the individual – with the individual expected to do all
they can to get back to work, and the state expected to provide appropriate
support that individuals need to realise that goal.

The second
problem is that, even under the rosiest estimates of performance, only around
half the more than three million claimants who will enrol in the programme are
expected to be helped into sustainable work. The rest will be returned to
Jobcentre Plus, where previous experience of such schemes suggests they will be
left with little or no support. In an ideal world, we would target financial
incentives more effectively so that this does not happen.

In our previous
reports, Policy Exchange have suggested that the
best way to do this would be to provide such support from the start of an
unemployment claim – rather than waiting for up to a year in Jobcentre Plus,
based around each claimant's barriers to work rather than the main benefit they
are claiming. But this approach will take time to implement. The question thus
arises: what can be done in the short-term within limited budgets to ensure that we
are doing all we can to assist the very hardest to help unemployed back to

Policy Exchange’s
new report, out today, tries to provide some answers. For the very hardest to
help claimants, identified either at the Jobcentre, through referral from the
Work Programme or after leaving it, we believe a new form of employment
support, Route2Work, should be built. Since these claimants are very
unlikely to enter employment unassisted, and will thus would continue to claim
benefits, it is possible to calculate how much they would cost the taxpayer in
the absence of additional support (unlike the majority of claimants who may
have entered work in any case).

By transferring this money to Route2Work
– along with the liability for any benefits the claimant receives from the new
Universal Credit system – we can give upfront funding to providers without
additional cost to the taxpayer. This will ensure that charities, social enterprises
and other smaller providers are not ‘squeezed out’ of provision, and provide a
financially viable way for them to provide wrap-around support for the most
vulnerable claimants – often a critical part of their mission. We also examine
how to leverage in additional funds from European, local and central government
schemes to finance additional incentives for intermediate outcomes which move
a claimant closer towards the labour market, or tackle specific barriers.

The Work
Programme is an excellent scheme, and a big step forward from previous
programmes where providers were rewarded simply for having ‘bums on seats’ or
getting people into work for only a short time. It is suitable for the great
majority of the unemployed. But for those few claimants furthest from the
labour market, it makes sense to see what alternatives can be found.