Freud Report 2007 – in quotes

This is, hopefully, a fairly useful summary of the key points of the 2007 Freud Report in quote form. I've kept them in this format as the report is actually very clear in itself, and doesn't really need too much picking apart in the way that some others do. I would definitely recommend reading it in full if you have the time/interest.

Chapter 3 'Contracting support for the hard to help'

The Government has made good progress with addressing the issue of unemployment. Around two thirds of people leave unemployment within three months, 80% within 6 months and 95% leave within a year.

Significant progress has been made with reducing long-term unemployment. The biggest challenge now is to support those people who are facing multiple disadvantage and long term benefit dependency. This can only happen effectively if the system treats people’s individual needs, rather than classifying them by benefit type or other characteristics.

[Commment: This is a particularly interesting part of Freud's report, and not only argues for a more tailored approach to welfare to work delivery, but also for the amalgamation of benefit-related programmes. This has been seen in recent years through the consolidation of New Deal schemes, and eventually the same with Work Choice bringing together Work Preparation, WORKSTEP, and Job Introduction Scheme.]

In my view there are good reasons for taking this involvement of the private and voluntary sectors further in the delivery of welfare to work.

On the increased involvement of the private/voluntary sector

• Outcome focused contracts, properly managed, mean that the Government can pay by results, so that contractors rather than the Department bear a greater share of the risk.
• Competition for contracts through bidding processes enables the Government to obtain better value for money, as well as driving up the quality of the service offered to the public.
• With proper information sharing, a diversity of providers will engender innovation, leading to better results.
• The use of more than one provider means that the claimant can be offered a choice.

Dealing with high volume is what Jobcentre Plus is good at. Moving towards a system of flexible, forward-looking, outcome-focused provision for people with more disadvantage would provide the opportunity to make effective use of the qualities that the public, private and voluntary sectors have to offer.

When the Government came to power it immediately implemented the New Deal for unemployed people, to tackle a legacy of claimant long-term unemployment.

In a tight fiscal environment there is a strong argument for refocusing New Deal support to those who are furthest from the labour market, and rolling this up alongside the support that is offered to other disadvantaged groups, whilst maintaining success in preventing long-term unemployment.

Problems with New Deal contracts

The Department currently has a complex patchwork of public, private and voluntary sector provision across the country. Jobcentre Plus has more than 900 suppliers of welfare to work provision.

Contracts follow a variety of different models, according to the area and the group of people that they are designed to support.

Several problems have been identified with this approach. One is that the contracting structures too often specify process rather than outcome, which limits the value that private and voluntary sector providers can add.

Another is that the contracts have ceiling values in expenditure, which means that providers cannot be rewarded for over achievement.

Contracts are not only small scale, but are let according to benefit groups so that it is difficult to set up adequate systems to handle sub-groups with specific barriers.

The system has a multiplicity of requirements and start and finish dates for each contract. A common complaint among providers is that the length of the contracts – at a typical two years with an option to extend for a further year – is far too short to set up the systems and recoup the investment necessary to provide outstanding performance. This is also a barrier to new entrants to the market.

There are also complaints that the monitoring process looks more at compliance than on
performance.

With appropriate political support, it should be possible for the community as a whole to take up the target set out in Part 2 of this report – reducing by at least two fifths those trapped at the bottom of society – as a core social objective. There will therefore need to be strong relationships at local, sub-regional and regional levels between providers and employers as this programme develops.

The evidence suggests that single provider zones do rather better than multiple providers – certainly in terms of starts and more marginally in terms of sustainability.

Learning from Employment Zone and the Australian model

Given the outcome-focused nature of Employment Zone contracts, it is also possible to assess those interventions that private sector providers consider the most valuable. Employment Zone providers emphasise a work-first approach, holistic one-to-one support that considers personal barriers to work as well as employmentrelated barriers, flexibility in provision, regular contact, and job-matching. In short, providers deliver something that combines the most important elements of the JSA regime with what works from New Deals.

There are potential gains from contesting services, bringing in innovation with a different skill set, and from the potential to engage with groups who have traditionally been beyond the support of the welfare state.

In the Australian example, the entire job brokerage function and the task of re-integrating individuals into the job market are put out to tender to private and voluntary sector providers (the Job Network), while referrals to those services and the payment of benefits is fulfilled by Centrelink in the public sector. In the Netherlands only re-integration is tendered, with payments and job brokerage remaining a function of the public “gateway”.

[In Australia] providers receive higher payments for placing the most disadvantaged, but it may be that these payments are nonetheless not high enough to incentivise providers to deliver the service required to every participant, leaving some “parked” as too difficult to help.

An optimal model for the UK would:

• improve employment outcomes for (potential or actual) long-term benefit
  recipients, including improvements in job retention and progression;
• maintain the current strong performance in tackling long-term unemployment;
  and
• optimise the overall cost, including the benefit cost or saving and the contracting
  cost, of achieving positive outcomes for different client groups.

The existing UK model has proven effective in supporting the majority of the unemployed into work quickly and cost-effectively. Indeed, the one-stop shop approach is likely to be far more efficient in handling standard procedures and relatively straight-forward claimants than a two-tier system.

Bringing them into the labour market represents a major social transformation. It will require a variety of individualised techniques by specialised private and voluntary groups.

My proposal, therefore, is to rationalise the contracts that the Department currently lets to form a single service for all client groups. These contracts will be rewarded on sustained outcomes, and the funding model will recognise that some groups will be more expensive to help than others.

Contracting support for the hard to help

Some people on JSA could move to contracted support earlier than 12 months. For example, those who claim repeatedly could do so at, say, three months. There may also be an argument for young people to move sooner, in order to avoid the scarring effects they suffer from long-term unemployment early in their lives.

How it would work

Jobcentre Plus would then provide all or most services in the first stage of a claim. The service during this stage would be standardised with a clear focus on job search.

The private and voluntary sector would, then, compete for long-term contracts to provide support to  disadvantaged people, with payments based on successful individual outcomes over an extended period. Correctly contracted on outputbased criteria, providers will be incentivised to experiment and innovate to find effective solutions.

Providers would have flexibility to deliver individually tailored back to work support based on what their clients need. They would provide transparent measures of performance, which would feed back into the Department’s funding model.

Benefit recipients seem to value the mentoring process that can be provided by a well-trained and sympathetic personal adviser above all else. In effect, the system proposed here would establish such relationships over an extended period – from pre-work into in-work. Benefit recipients would agree individual workplans with their personal adviser.

The contracts would reward providers for supporting individuals into work and then for perhaps a further three years. To do this, they would work with employers, supporting individuals in the workplace as required, and tracking them over this period to see what progress they are making in the workplace.

The alignment of jobs with realistic aspirations is more likely to happen under a three year sustainability regime. Providers would be given a direct financial interest in ensuring that people were positioned in appropriate jobs compared with the position under the shorter targets currently in use.

Contract logistics

The contracts should be staggered, so that providers are always under pressure to perform... the Department will need to develop ways of ensuring that they are not over-reliant on a monopoly provider. The Department will need to develop monitoring capability similar to the successful Star Rating system developed in Australia.

2 possible types of contract

1. Prime Contractors

One large contract is let through competitive tender. The prime contractor
arranges all the sub-contractors necessary to handle the particular needs of different
groups within the region. [This contractor would work with public bodies and voluntary sector. Encourages collabortation]

[Strengths - private companies will take care of the financial side of things, and the large scale of the enterprises will help develop the potential for innovation].

The priority will be to ensure that the prime contracting model develops in a way that is responsive to local conditions, offers choice and competition, and is efficient and robust in a highly complex environment.

2. Contracting Round

Bids for different sub-groups, or for smaller geographical units, are made by specialist private sector and voluntary organisations. These would be harmonised by sophisticated contract specialists within the Department who would oversee the performance of these operators over the period of the contract.

[This would] give the State more scope for setting or influencing the shape of the services on offer.

However, in practice it is simply not feasible to envisage the kind of financial market support to allow the smaller and particularly non-commercial organisations to be able to take the financial risk implied.

Choice

[Claimants haven't always been aware of their choice of local providers & different services available. Freud thinks this should be tackled by fND]

While choice for clients would inevitably be limited by the sole contract model, an element could be built into the system by allowing clients to switch within the group of subcontractors, where appropriate. Taking this further, the Department could require prime contractors to provide a choice of sub-contractors to individual claimants. This might be a compromise, ensuring choice without the downsides mentioned above.

Chapter 6 - Benefit reform

Six objectives for the benefit system for those out of work:

• To provide a safety net for people who are out of work temporarily, and a decent minimum income for those who cannot work.
• To show a clear link between what the State expects of the individual and what the individual is entitled to in return.
• To support a return to work for those who can, in particular by:
  – Ensuring that people are not trapped on benefits;
  – Incentivising and easing the transition to work.
• To be accessible by the individual – so that they can easily find out what they are entitled to and get the right amount at the right time, without needless duplication or hand-offs
• To be efficient – making the best use of the time of the people who run it and be straightforward enough that computer systems support it properly.
• To be affordable and sustainable for the long-term.

The level of complexity of the current system now carries significant penalties. 169 questions are needed to gather information in a straightforward lone parent claim for Income Support. The average time to become established with the right rate is currently running at between 12 and 16 working days, and for more complicated cases it can be much longer.

Options for reform

This report has considered three broad options for a “single system” of working age benefits:

• as now, different benefits and benefit levels to reflect different circumstances, based on one common rate (the Income Support personal allowance);
• a single benefit with a single rate;
• a single system with two rates – a basic rate and a long-term rate.

Chapter 7 - The reformed role of Jobcentre Plus

Jobcentre Plus would retain a critically important central role in the delivery of
employment, benefit and broader welfare services in the proposed model. It would
have a range of responsibilities, some of which are new (in bold below) and others
current:

• Helping claimants to navigate the welfare system as a whole and keeping track of them as they do so.
• Setting out and enforcing a client’s rights and responsibilities.
• Job-broking services for the first period (up to a year) that someone is required to look for work.
• Referral of clients to providers for tailored employment support.
• Maintaining information on claimants’ progress through the contracted system.
• Building a detailed database on each client handed over to the contracted provider to inform the contracting model.
• The payment of benefits, including the imposition of sanctions.
• The management of a national vacancy service to help disadvantaged people find suitable jobs.
• The continuing provision of a high quality service to employers to help them fill their job vacancies.

For the newly unemployed, this would leave largely in place arrangements that have proved to be efficient and effective in recent years.

A facilitator of delivery, and support for the industry

The customer’s overall welfare needs, throughout the claim. For the majority, the strong message surrounding any benefits interaction with Jobcentre Plus would be their responsibility to look for work. The integration of the ‘work first’ message into the delivery of benefit services has been a major factor in the success of the UK labour market. The Australian experience highlights the problems that can arise when this link is not made.

Jobcentre Plus would therefore work with providers to police the rights and responsibilities regime. Where an individual failed to comply with a reasonable request from their provider, they would be referred to Jobcentre Plus for a discussion of their reasons. Jobcentre Plus would impose benefit sanctions where appropriate. In most cases a temporary suspension of benefit would be enough to get the claimant to re-engage, at which point the missed benefit would be paid back in full.

The focus of Jobcentre Plus contact after, the point at which claimants move to contracted support would be on responsibilities linked to benefit receipt and the identification and handling of any broader client needs.

"Jobcentre Plus would continue to “own” the customer"

Alternatively, Jobcentre Plus could continue to enforce jobsearch responsibilities and deliver any prescribed interventions, leaving providers free to focus on the tailored, intensive support they judge to be needed to get the best results for each individual. Importantly, Jobcentre Plus would continue to “own” the customer in the sense of knowing where they were in the system at any given time.

Government agencies have traditionally focused on delivering the services for which they are directly responsible with at most very limited consideration of, or support for, a person’s broader needs. This has started to change...but the pace of that change must increase dramatically. The public service of the future will put aside organisational boundaries to deliver services designed around the whole of their needs.

Sir David [Varney] outlines how the time and money of Government, citizens and businesses could be saved by examining the scope for integrating front-line service delivery.

As a major deliverer of services to millions of citizens, Jobcentre Plus has a vital part to play in the transformation of public services that Ministers and Sir David Varney envisage. They also have the only public facing Government network of offices across the entire country as well as sophisticated call centre and internet operations. Jobcentre Plus already has strong relationships with a myriad of partner organisations.

A large number of functions are currently spread through the system, making it hard to navigate. With responsibility for tailored employment support for the hard to help transferred to the private and voluntary sector, Jobcentre Plus should have the capacity to become the natural one-stop shop for a large number of standardised services for the mass market.

Jack of all trades

Jobcentre Plus could provide a one-stop base for relevant changes of circumstance, as proposed by Varney; consolidate the provision of benefit services, including working tax credits and housing benefit; sit at the heart of an integrated employment and skills service (Leitch); and further promote access to formal childcare (Harker).

In order to meet the ambition of the Leitch review that 95% of adults should have basic skills, the Government will need to go further than it does at the moment. There is an obvious role for Jobcentre Plus and their partners in identifying claimants who have basic skills needs as a barrier to employment.

Chapter 8 - Implementation

At a regional level, private and voluntary sector organisations could be drawn together to establish how they might best work together with a prime contractor to deliver all that the region needs in terms of labour market outcomes.

The funding model proposed in this report will require the Department to operate in a new way. It will have to gather extensive information on the characteristics of individuals and their likelihood of returning to work, in order to establish a proper pricing mechanism.

The system also relies on the private and voluntary sector being able to track people consistently for a period of three years, and the Department being able to verify this information.

The removal of eligibility to income support for lone parents with older children needs to be tied into the availability of childcare, and consulted on widely. I would also propose that this change is phased in, with the age of the youngest child reducing to twelve as soon as is practicable and gradually thereafter.

From start to end this process [of benefit reform] would probably take at least a decade.

Chapter 4 - Modelling outcome based contracting

A potential payment structure:

Once a provider has successfully supported a move into employment they would receive separate payments for:

• The initial move off benefit
• Continuous, or near continuous employment for 13, 26, 52, 104 and 156 weeks
• Personal pay progression, possibly reflected in a lower requirement for tax credits
• Improvements in the person’s qualifications
• Bonus payments linked to targeted outcomes across all client groups
• Bonus payments for specific outcomes linked to wider Departmental objectives (such as the Child Poverty target)

Payments would also need to be weighted to reflect the complexity of needs of claimants so that the hardest to help would yield the greatest payments for successful outcomes. This would ensure that the incentives exist to extend the opportunity of support to everyone within the system.

From the summary -

• Freud argues that that government needs to make sure that the "expertise that exists across the public, private, voluntary and community sectors is fully utilised in tackling the challenge of extending employment opportunity to all"
• In order to do so, the "Department should develop a funding approach which will allow it to direct spending towards [those], who have complex and demanding problems, in a more individualised way"
• This is, in part, because "Intensive intervention at the start of a claim, focused on assisted job search, is now established as the best way to help people to move back into sustainable employment"
• In terms of the increased involvement of welfare-to-work providers, Freud argues that "there are clear potential gains from contesting services, bringing in innovation with a different skill set, and from the potential to engage with groups who are often beyond the reach of the welfare state"
• A crucial recommendation of the report was that "once claimants have been supported by Jobcentre Plus for a period of time, back-to-work support should be delivered through outcome-based, contracted support"
• In practical terms, "these contracts would roll up the existing patchwork of public, private and voluntary provision and put in its place a flexible approach"