New employment programmes could be reduced by up to 80% because of DWP administrative budget cuts
According to a report in the Financial Times today, the government could be facing a huge cut – estimated by some as up to 80 per cent– in participants in its welfare to work programme because many private providers signed up to the Work Programme Framework Agreement do not believe they can carry out effective employment programme provision without upfront payments to get the jobless and those on incapacity benefits into work.
The Financial Times has reported that as part of the upcoming spending review, the Treasury is seeking to make big savings – up to 25 per cent – in the Work and Pensions Department’s administrative budget.
In order to make headway with these savings, plans have been proposed by Lord Freud and Chris Grayling not to make any upfront payments to providers carrying out employment and back to work provision. Instead it has been suggested that providers should be paid entirely out of the benefit savings that are created as people move into work. This approach necessarily requires large-scale initial investment, which they majority of providers do not feel they will be able to raise in the current climate.
It is rumoured that the Treasury has been consulting via a CBI working group on whether there is any scope for providers to be paid only by results or whether a similar approach to the current programme needs to be adopted, in which providers are paid 30 per cent of the contract value upfront.
If contract values do need to be paid up front, this could result in welfare to work programmes being “drastically reduced” – possibly by up to 80 per cent – to balance out cuts to the Department’s administrative budget.
For further information visit the Financial Times website.
Source: Financial Times
Comments
'This approach necessarily requires large-scale initial investment, which they majority of providers do not feel they will be able to raise in the current climate'.
I got the impression that the large providers were very optimistic regarding the financial side, however, the article seems to state the opposite.
The true scale of the cuts will be revealed at the spending revue. I doubt if the DWP have the funds to pay 30% up front, as they did in the past.
I don't think there is any doubt about whether providers can get capital, it's mainly a question of the terms on which they get it at this stage given the newness of the approach. If lenders are after PE level returns because the data isn't there yet this could ed up being an expensive solutions and, as interest will be costed, this will reduce the funds sloshing around to really penatrate into the hardest groups. Once there is more data (i.e. on performance) then the AME/DEL experiment can get into full gear. There has to be a new approach adopted here - which is far more open and collaborative than before and where there is long-term commitment from all sides.
30% upfront is almost certainly a non starter (at least if taken from the admin DEL budget)