ID live updates from Inclusion's Welfare to Work UK Convention 2010! Serco raises issues with cost of Work Programme
Serco today said that, while they would continue to work with the DWP and Treasury to come to a mutually agreeable solution, they would be prepared to pull out of bidding for the Work Programme if the model could not be made financially viable.
At a packed session at Inclusion’s Welfare to Work Convention, serco set out their financial scenario modelling for how the Work Programme might work. The key question from the audience was ‘how deep are providers’ pockets and how long can they hold their breath to under write the massive upfront costs?
In this morning’s plenary, Minister Chris Grayling signalled that the Government is negotiating with the major providers and that the Work Programme must be agreeable to both or it would fail.
The talk in the serco session was of the spectre of market failure if the financial model does not make financial sense for enough providers, especially the serious players like serco.
by Emily Crawford
Comments
Serco should put-up or shut-up...the days of the providers' "robbing" the Treasury are over - having seen Serco's annual report they are rich enough to undertake the new programme...alternatively...if they do not want to reserve their place at the table to grab a large slice of the taxpayer funded W2W cake there are no doubt others...probabaly from outside the UK...who would jump at the chance.
Furthermore, the DWP MUST demand strict proof from all of those interested that they have actually got a SIGNIFICANT number of people off benefits and into work BEFORE they are invited...this should be in addition to DEMANDING absolute proof that they have money in the bank first.
I doubt the the sector is short on funds for the Work Programme, due to the billions it received under New Labour.
@Fraudwatcher: Grabbing a large slice of the taxpayer funded W2W cake? Do you not understand the concept of AME funding? If WoPr is funded solely from the Annual Managed Expenditure, as seems likely, this will be at ZERO cost to the taxpayer & will actually benefit the economy!
The proportion of JSA/ESA savings not paid to the provider will go into the pot, along with housing benefit & council tax relief savings. The housing benefit relief alone will make for MASSIVE savings!
I fully understand the situation, I advocated this type of funding system years ago - was being sarcastic about Serco's apparent attitude/stance which flies in the face of their Stock Exchange Announcement of 26th February 2010 where they reported a £229.7 million operating profit on a revenue of £3.970 billion (available for download from serco)...seems they want their cake...and eat it... However...returning to the real world...where publicly bailed out/taxpayer owned banks do not lend...to anyone...there MAY need to be some taxpayer money - in the form of a loan - to kick-start the new programme...especially in the case of the smaller "specialist" providers in order to allow them to come to the table...note I say LOAN. The big players (who have milked the system under defunct New Labour [as per tony's point] and squandered their cash reserves) would not qualify. [edited]
Apparently Grayling is meeting city bankers next week to get them to invest in bidders, and definitely no "loan" from Government. Will be interesting to see if they are convinced. With no service fee payments flowing in from day one and possibly a years waite under Work Programme with sustained payments, are there better (more secure or lucrative) places to invest their money? Serco sound doubtful already and they seem to have the cash to do it, so what about the other providers.
Or was serco just trying to spook the competition? I saw some very scared faces leaving the room muttering about reassessing their plans to be primes. Certainly a couple of the other major potential primes were pretty convinced that serco was just trying to scare them off.
Less spooking the competition, more addressing niavety. Anyone who's done any real modelling of this has quickly recognised that you need huge amounts of cash, and a willingness to wait a long time for the return. I seriously question how many of the existing primes can maintain their position in the market - for me, most will drop down to tier 2 subcontractors.
Existing primes will vanish...as is intended...they failed to deliver!
Get used to it - payment by results...no results...no payment - full stop!
Can anyone give some expert advice?
I have friends who own a sizeable independant Recruitment Business. They would be new to the sector, and are considering undertaking the Local Work Clubs within the new Work Programme.
Would they note interest in the formal way with DWP, or would they approach the Primes as a potential subcontractor?
At this stage, we're waiting to see how work clubs pan out. Pre-election, the Conservatives were talking about them as very much a co-operative association, whereby a group of unemployed people come together and offer peer-to-peer support. Although it wasn't officially said, I got the feeling that they were looking for it to be a voluntary, unfunded group.
However, if it transpires that funding will be available, it will be procured through the Work Programme Framework. If that is the case, the best thing for your friends to do is to wait for the announcement in November of who the Framework providers are, and then approach them directly.
Hi
Thank you very much for your prompt reponse, appreciate it. I thought this might be the case, albeit for the harder to help groups, peer-to-peer support may require a little more structure and direction.
Thank you again, I will pass on your advice.