Iain Duncan Smith’s flagship welfare-to-work programme poses “significant financial risks” and its success depends heavily on the economic recovery, an influential group of MPs has warned.
In a report on the government’s Work Programme, which is set to replace all existing welfare-to-work schemes from June, the work and pensions select committee warned the scheme posed “significant financial risks for the government and its service providers”.
Work Programme providers will be paid by their results in getting the unemployed back in to work. But under the programme providers are paid only a small upfront fee, with full payment coming when the provider gets a “client” into work and keeps them there for up to two years.
However the committee said the scheme creates a significant financial challenge for providers, which could lead to some unemployed “clients” receiving lower quality support.
It added that there could also be significant costs to the government in responding to service failures and recommended the government put contingency arrangements in place to ensure the continuity of provision for clients.
The report added the success or failure of the scheme “will depend to a large extent on the economic recovery and the availability of suitable job vacancies… and willingness [by] employers to take on those who may have been out of the labour market for some time”.
Dame Anne Begg, committee chair, said: “The financial stakes within the Work Programme are very high. Service providers, including many voluntary sector organisations, may find it challenging to remain financially viable under the payment model, and the government could face significant costs if delivery were to collapse in a particular region.”
The committee also warned there was a risk that providers of might focus their attention on jobseekers who are easier to place in work, at the expense of those who face greater challenges to finding jobs.
Ms Begg said: “We welcome the fact that the Work Programme will offer financial incentives to encourage service providers to support jobseekers who are harder to place in work.
“However, we remain concerned that these providers may still focus their efforts on the jobseekers who are easiest to help at the expense of those who face greater challenges, such as those with long-term health conditions.
Ms Begg added that participants in rural or remote areas or areas where job opportunities are few should not be neglected, and the Government should act to address any such disparities. “The programme does not address the risk that there may be discrepancies in the quality of service offered within different regions,” she said.