Discussion - should Jobcentre Plus be outsourced?
The Social Market Foundation launched a report today recommending the replacement of the current welfare to work system with a much simpler structure, where contracts cover all welfare to work delivery in an area (including Jobcentre Plus services), and are paid only on results. The press release follows:
In a new Social Market Foundation report launched on Friday 10th July, the think tank says that the Government's efforts to get people off benefits and into long term work are failing. It argues that the solution is not more piecemeal schemes but a radical overhaul of the structure of welfare-to-work provision. The think tank says that all the existing schemes, including the work of Job Centre Plus, should be contracted out to private, third sector or state organisations. Contractors would be paid strictly by results, with a greater financial reward for finding and keeping in work the most difficult to help clients. Employment advisers would be given the freedom to identify what will work for an individual jobseeker, rather than having to fit them into a one size fits all employment package.
The project focuses on how government can best focus its efforts on ensuring that the work it funds, aimed at getting people off benefits and into work for the long term, succeeds. Administrative data on Jobseeker's Allowance suggests that two out of five claimants who find work are back on JSA within six months - trapped in a vicious cycle of low pay, no pay. In other words the claimant count masks a huge amount of churn involving millions of repeat claimants each year. While the existing system recognises that once an individual has been out of work for a year they will need extra help if they are to get back into long term work, it has no way of identifying those millions stuck in revolving door employment, despite the fact that these people clearly have unmet support needs.
The authors propose a system that can find and help people early on in their benefit claim, rather than waiting until it is too late.
The report's recommendations include:
- Replace the many different employment support programmes provided by Jobcentre Plus, Pathways to Work, Flexible New Deal and others, with a single contracted-out support system for all jobseekers, from the first day of their claim.
- Providers must be paid by results for getting people into sustained employment.
- Providers should be incentivised to find work for the hardest to help by receiving increasing payments for placing a larger proportion of jobseekers into work and thus enabling them to reach the hardest to help.
- Information on the proportion of the last two years a person has been unemployed should be made available to identify and help those stuck in revolving door employment.
- Outcome payments should be made for providers whose clients remain in employment for more than one year.
Commenting on the report, SMF Director Ian Mulheirn said,
"Two out of every five claimants helped to find work are back claiming Jobseeker's Allowance within six months. There is clearly something very wrong with the system as it currently stands. revolving door employment fails the taxpayer who pays for the schemes and the benefits, but it also fails the individuals as the ‘low pay - no pay' cycle has hugely detrimental effects on their future employment chances, income, health and families."
The full report can now be downloaded here (.pdf)
Read the Financial Times coverage of the report here.
When Labour first came in and Frank Field was asked to think the unthinkable, many assumed that jobcentres could face privatisation. However, it's widely seen as political dynamite, with potentially huge opposition from civil servants, their unions, and the public. The thought of putting private companies in charge of giving government funds to society's most vulnerable people, and incentivising them to stop paying those funds, has been enough to leave this kind of wholesale privatisation / outsourcing off the agenda ever since. Neither Labour nor the Conservatives are currently suggesting that Jobcentre Plus doesn't have a role to play in the benefits system, and there's no sign of that changing in the short term.
Leaving aside political issues for a second, what do you think of the idea?
Incidentally, the SMF's Anglo-Flexicurity II report from May proposes privatising unemployment insurance for middle and high income earners, to improve their income security if they become unemployed. While the idea has merit in the sense that standard JSA rates simply aren't enough for many people to find them remotely helpful, it's very close to the eventual goal of organisations like Unum.
What a genius idea - tackling unemmployment by putting thousands of jobcentre plus workers on the dole by contracting provision elsewhere! No, definitely not one of the best ideas I have heard this year, especially bearing in mind that payment by results initiatives such as Provider-led Pathways to Work has simply failed to achieve. There are a lot of things wrong with jobcentre plus that can be tackled by better management, having a better approach to the needs of their customers and by not forcing people into rubbish jobs in the first place - it is this that causes the revolving door, not the fact that the employment support is provided by the public sector. And if that wasn't a good enough reason to not privatise jobcentre plus, then we should consider the role the private sector has played in the recession, the atrocious services we now receive at the hands of train companies, BT, Utilities and any other privatised body. This country - its going to the dogs man.
The one bit of the report that carries my full support is the idea of paying far more for getting the hardest to help into sustainable jobs, and less for the less challenging clients. This will reduce the current tendancy for providers to 'cherry pick' and target their efforts towards those who need it least.
So the experience of contracting out a large chunk of JCP's work has been so successful that we should go the whole hog and privatise the rest! Wonderful. These ideologues are driven by their own myths and a wilful ignorance of reality. JCP still commands some respect because it is accountable, an arm of government, staffed by people who are not profit-driven. I sincerely hope that no government would be stupid enough to fall for this.
The basic problem with payment by results in this case is that the results you get are in large part determined by an independent variable over which you have no control - the state of the wider economy. So coming out of a recession many of your clients might succeed in getting and staying in jobs. But going into a slump the clients will be struggling - however good the contractor.
So the incentives actually work in a perverse way. When everything is rosy contractors have a good chance of making a profit. But in a slump when their services are most needed they'd be deserting the sector in droves.
The state might then have to step back in - and perhaps find itself re-inventing the old-style state-run Jobcentre.
Good point Ian. I've been thinking about this for a while, partly in the context of price competition between providers. One way of managing payments for an entire 'round' of contracts would be to create a payment multiplier based on their overall performance and the wider economy. That is, if everyone performed poorly, then assume it's the economy that's at fault and split the same budget between everyone. The only problem I can see with the idea is that it would theoretically open the way to collusion - all providers underperforming en masse to reduce costs and raise profits.
To be fair the report itself actually calls for a mixed provider base of public private and third sector providers. Also, it doesn't call for a splitting of the benefits and employment sides to JC+. So neither of these points are consistent with a wholesale privatisation of JC+
Hi Dave,
Both fair points. It's interesting that the SMF press release clearly states a wish that 'all the existing schemes, including the work of Job Centre Plus, should be contracted out to private, third sector or state organisations.' The question is, which parts of the work of Jobcentre Plus? If it's talking about the personal adviser elements, then that necessitates a split between benefits and employment support. If it's talking about all JCP activities, then it really is wholesale contracting out.
Wholesale contracting out isn't quite the same as privatisation - a range of different organisations from all three sectors can be involved in delivery. However, putting all three sectors on a level playing field could easily result in something like the Australian experience, where the public sector delivery agency was almost entirely wiped out in the second round of contracting.
I can't find backup for that part of the press release in the actual report, bizarrely. It talks about the need to use an 'attachment indicator', to classify claimants on level of need, and the dangers of waiting for people to become long-term unemployed before helping them. Nothing on contracting out JCP services though. Maybe I need to read it more closely.
Daniel - on your point about the two functions of JC+ see page 25 para 1. On the point about public sector involvement the authors are pragmatic see page 117 para 1
Thanks for the references! I'd been looking without much success so far, will check later today.
OK, having read the recommended sections, but not read the rest of the report in depth, here's my interpretation:
Absolutely stupid idea. What's next? A4e Bank?
http://newdealscandal.wordpress.com/2009/07/16/a4e-bank-deposit-your-jobseekers-here/
The current situation regarding training for the unemployed is in a right mess, it has been twisted out of any form of common sense by the replacement of real training schemes for low quality ones. New Labour has wasted over £75 Billion on its dreadful and draconian New Deal scheme. If you are unfortunate enough to become unemployed you will soon find yourself having to spend up to five full days a week at one of the New Deal so called training providers, in reality they are nothing more than modern day interment camps, OK you get to go home at the end of the day but if you fall foul of these organisations many petty rules or don’t agree with every word of politically correct dogma your money gets stopped and your kids go hungry.
If that’s not bad enough, the real training at traditional place’s of adult learning have had budgets slashed and courses that are valued by employers have gone, that’s why you have to pay between £500/1000 for a short computer course that used to be free, and on the dole with only £60 per week means this is no longer an option for many.[cut]
The New Deal training providers only provide rudimentary training. [cut]
[Moderation - Totally off-topic. Please respond to the topic and arguments politely and with properly constructed arguments if you want to be taken seriously]
I hate to think what some of them must be like if they are like some of the reports (like above)....
I remember a long time ago (somewhere between 10 to 20 years ago, my memory sucks on exact timescales) I went on one a few of the old government ran training schemes - one was pretty good, and had a good outcome, and was enjoyable and mind stretching most of the time, another was far to strict, like being a child at school + the quality of the teaching was fairly basic, although it did have a decent outcome (which would have been a fantastic outcome if they had not turned out to be complete idiots who ruined my chance of a perfectly good career through their gross stupidity).
Another one was pretty good also, with a good outcome, although I disliked the mix of people (many fine, but some druggies etc - not a wise move to mix people of different capabilities and morals) and another was REALLY bad, too many people, not enough computers, got basically told to sit down and do what ever we wanted to do, and that was by the people in charge. A COMPLETE waste of time - I rapidly left that one - although I guess if I did that these days, I would have my benefits stopped.
If I am ever in a position whereby I am forced in the future onto a new deal or similar scheme, rest assured they will be secretly audio recorded, and video taped in high quality, and if the reports are true about how bad they are - then its their loss if I walk, as I would probably show the footage publicly - if they wanted to sue me, let them, after all - I would be skint, with not even benefits to live off.... But then again, they too would probably end up skint, if the press and youtube etc got hold of real footage of wrongdoings....
Hi ukbix, you've posted a lot of comments in the past few days, and I haven't had chance to read them all yet. Be aware that posting too much is a danger on this site, as I won't allow debate to be swamped by any one person or viewpoint.
Having said that, this comment is fine in that it shares actual experiences. It would be good if you could relate it more to the discussion topic though.
>> New Deal Scandal
A4e bank? Brilliant idea!
It'll be a lot more reliable than Lehman Brothers!!