FND phase 2 released, may be cancelled by Conservatives

The PQQ for FND phase 2 was released today, with an announcement by new Work and Pensions minister Yvette Cooper at the CESI Welfare to Work conference. Later on at the conference, however, it became rather less clear whether this FND2 round would even lead to a contract award. Theresa May and David Freud, representing the Conservative front bench, although not speaking with one voice, made it clear that the current FND model was not what the Conservatives would choose.

Quick index
What Theresa May said
What David Freud said
Press coverage
FND 2 specs - which regions, what's different?

Theresa May - 'We don’t want contracts to be dominated by large providers'

Theresa May, Yvette's shadow counterpart in the Conservatives, was also speaking at the conference. In the Q&A following her own presentation, she stated that if Flexible New Deal isn't awarded by the time of the election (next May at the latest), and the Conservatives get in, then they will let contracts on the basis of their own proposals rather than the existing Labour government ones. The Conservative changes to FND include:

  • Starting FND at 6 months rather than 12. It's not immediately clear whether the adviser-led stages of FND would be abolished, or moved back to day 1 of claim
  • A stronger emphasis on paying for job outcomes
  • Payment on 52 week sustainment
  • More, smaller contracts.
  • Countrywide DEL-AME (it's not clear if this would be implemented immediately in FND)
  • Possibly some kind of differential payments to reward getting more disadvantaged customers into work (it's not clear if this would be implemented immediately in FND)

Theresa also stated that existing FND contracts would gradually be transferred to the Conservative model. In response to further questions on whether the current FND procurement would be cancelled by the Conservatives, she said that they would be able to confirm the Conservative position by the autumn, once they had a better idea of the FND2 timetable.

David Freud - 'Bluntly? Bleeding heart emotions are a complete waste of time'

David Freud's fireside chat with Dave Simmonds was the last session of the conference, and it was the view of more than a few delegates that he really hadn't picked up on the significance of Theresa's comments the previous day. He'd read the speech, but evidently wasn't aware of what happened in the Q&A, and spent much of the discussion trying to show that current Conservative party thinking and the original Freud report findings were entirely compatible. This led to some interesting interpretations of Theresa May's statements.

The points to emerge from the discussion included:

  • Why David Freud defected from Labour to the Conservatives
    A somewhat convoluted explanation which boiled down to 'because I think they'll win the next election'
  • How Freud's six big providers model fits with Theresa's 'don't want contracts to be dominated by large providers'
    David stuck by his long-term commitment to the vision of six large super-providers (compared to the big four supermarkets) delivering all welfare to work activity in large-scale contracts, with Theresa's commitment to smaller contracts being explained in terms of responding to the increased numbers during a recession, needing to build such a market slowly (20 years was mentioned), and giving British firms a chance to catch up with the large international ones
  • Wouldn't customers under a super-provider regime might find themselves disempowered and pressured in the same way as the big four supermarkets' suppliers?
    David highlighted the important of a regulatory regime developing alongside the market, and criticised the current contracting structure as haphazard, and without rigour, professionalism or control
  • Discussion of differential pricing
    David pointed out potential issues with the accelerator payment model, both in accurately defining the payment curve, and in the potential for providers to still knock out entire groups according to type of need. He took the (hypothetical) example of tranquilliser addicts, and argued that although it was ok to park individual people who were very difficult to help, accelerator model pricing could lead to all tranquilliser addicts being parked. He advocated investigation of a segmentation apprach, where claimants are categorised into severity of need or length of unemployment at the point of entry onto provision, with higher payments for harder-to-help people.
  • Did Theresa destabilise the FND marketplace with the planned recontracting of FND2 and changes to the FND model?
    David repeatedly committed the Conservatives to not ripping up any FND contracts, and not forcing contract changes on providers without their consent. He argued that the direction of travel was still the same, and that the Conservatives were committed to FND, AME-DEL, and the accelerator model
  • Backing for Theresa's comments on outcome payments
    David agreed that an 80:20 split was better than 60:40, and said that changing the split was a mistake
  • A denunciation of the target-setting approach to management and the complexity that results from it
    David argued instead for putting lots of work into the grind of getting the system set up well so that people receive the help they need as a natural consequence. He was also very pro benefit simplification – 'there's a 1500 page book to figure out what someone's entitled to'

Further coverage

Incidentally, the Freud discussion also highlighted the limitations of taking notes in longhand. I was so busy catching the basic meaning of responses that some apparently very indiscreet turns of phrase passed right over my head. Stuff about some current providers being rubbish and so on. There was at least one journalist in the room with a dictaphone, though, so there may be unfortunate further coverage coming up. I'll update this list as it does, and probably edit this article some more over the coming week.

Main points from FND2 specification

In the meantime, the major points of note about FND2 as it stands include:

  • Smaller areas than phase 1 due to increased numbers of JSA claimants
  • Co-commissioning will allow local bodies (City Strategies, Local Authorities, Multi-Area Agreements etc.) to pass funds through FND for additional services
  • Delivery from October 2010. I haven't found any indications on the rest of the timetable yet but will update the story when I do
  • An eventual target payment split of 20% service fee, 50% short job outcome, 30% sustained job outcome
  • Market share variance in customer choice areas - giving the better performer a higher proportion of available customers, similar to the Australian model described in the Star Ratings article a while back

The FND2 single provider areas will be:

  • Highlands, Islands, Clyde Coast and Grampian
  • Forth Valley, Fife and Tayside
  • Cumbria and Lancashire
  • Cheshire and Warrington
  • North and North East London (Barking and Dagenham, Havering, Redbridge only)

The FND2 dual provider areas will be:

  • Glasgow
  • Northumbria and Gateshead/South Tyne and Wear Valley
  • Halton and Merseyside
  • West Yorkshire
  • Essex/Bedfordshire and Hertfordshire
  • Dorset and Somerset/Gloucestershire, Wiltshire and Swindon/West of England
  • Olympic Host Boroughs and City of London
  • West London (Brent, Ealing, Hammersmith, Harrow, Hillingdon, Hounslow only)
  • South London (Bromley, Croydon, Kingston upon Thames, Lewisham, Merton, Richmond upon Thames, Sutton only)

This leaves only two areas of the country not covered by FND phases 1 or 2. The Personalised Employment Programme will use Barnet, Enfield and Haringey
Hampshire and the Isle of Wight, and Thames Valley (Berkshire, Buckinghamshire and Oxfordshire) as pilot areas for a provision that delivers across all benefit types.

The full FND phase 2 documentation is available here. The specification is 76 pages long, so you might need a mug of cocoa.