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Jill Kirby

Jill Kirby: If the Work Programme is to work, the Government should be more realistic — and get cracking with supply-side reform!

Yesterday we learnt that the coalition's back-to-work programme has missed its own, rather modest, target. Fewer than 1 in 20 of the unemployed individuals put on the Work Programme in 2011 have taken up jobs lasting more than 6 months. The programme may be cheaper to administer than its predecessor, Labour's Future Jobs fund, but is it doing any good at all?

According to the Government's own analysis, the mere 3.5% of participants who got work lasting at least 6 months represents a smaller percentage than those who would have found work without any help. The Government's target for this stage of the scheme was to have a minimum of 5.5% of participants in lasting employment, a goal that the DWP was quite confident of fulfilling.

The programme has cost £435 million so far, and the government is struggling to argue that the money has been well spent. Welfare minister Mark Hoban says that participation in the scheme is getting thousands of long term and young unemployed into the habit of work, and that the double-dip recession, not anticipated at the time the scheme was devised, is largely to blame for the poor results. But this is all a far cry from the rhetoric of 2010, when the government seemed entirely confident that a payment-by-results approach would finally crack the problem of the long-term unemployed.

The release of this disappointing data comes at a difficult time for the coalition's welfare reform agenda. Despite all the talk of austerity and welfare cutbacks, the Office of National Statistics has just pointed out that benefit spending is still growing. Last month the cost of welfare was 7.7% higher than in October 2011. Since the start of this financial year, welfare spending has been almost 6% higher than in the previous year.

As George Osborne prepares for his Autumn Statement next Wednesday, it seems unlikely that he will repeat last year's decision to uprate benefit payments in line with 5%  inflation, a decision that explains a large chunk of the increased spend. A benefits freeze seems more probable, bringing payments more closely in line with average wages, which have seen a real-terms fall.

But a real fall in the cost of welfare will only happen if the government succeeds in getting more people into work and keeping them there and/or making real-time cuts in benefit payments. At the moment, the coalition's emphasis is on the first of these. The essence of Iain Duncan Smith's reforms is the argument that once it becomes clear that work pays more than a life on benefits, individual and families will break free of their dependence on the state, and welfare costs will shrink. In the short-term, he accepts that the cost of supporting people into work (whether through work programmes or wage top-ups, or both) may outrun the savings.

Yesterday's Work Programme figures are reminder that this approach will require patience, and in the meantime the government will have much reassuring to do. Critics are lining up on both sides: on the one hand to argue that the incentive payments being made to contractors are too low to make their work schemes viable; on the other, that the payments are being wasted because the individual being helped would have found work anyway.

The trade body for providers, the Employment Related Services Association, points out that it's still early days. Less than 18 months since the launch of the programme, they say it's unfair to try to judge long-term results. Welfare-to-work contractors were not expecting to break even yet, let alone make a profit. Getting someone with no recent experience of work into a settled job can take more than a couple of short-term placements; that doesn't mean it's impossible. Unsuccessful work providers will also be weeded out: Mark Hoban has threatened that scheme contractors who are not getting results will have their contracts cancelled. It's a threat he may not need to fulfil, as some providers are already giving up, unable to make a return on the time invested. Yesterday's figures showed big variations in the success rates of providers; as the poor performers drop out of the picture, overall results may improve.

But one of the biggest problems for the government yesterday was the extent to which it had raised expectations of success by talking up the potential of the scheme. That problem is not going to go away: the minimum performance level set by the DWP for welfare-to-work contractors rises from 5.5% in this first year to a much more demanding 27.5% in the second year, 33% in the third and 40% thereafter. These goals were based on forward projections for the cumulative total of those placed in work. It now seems that such projections are wildly unrealistic. Just as jobseekers have moved in and out of short-term jobs in the first year, so it remains a strong possibility that they will continue to fluctuate between short periods of work and stretches of unemployment in between. The danger here for employment support providers is that, far from being able to close the file on clients after settling them in work, the task will be never-ending. And for the government, results will continue to fall well below target.

The most positive outcome from the Work Programme so far, but one which the government is rather wary of trumpeting, is the fall in the number of benefit claimants. Although only 3.5% of participants found long term employment, a remarkable 25% stopped claiming Jobseeker's Allowance. The requirement to participate in a back-to-work scheme was enough to deter them from claiming. The government should not be embarrassed about this. After all, one of its objectives was to introduce an element of conditionality into welfare support, and end the “something for nothing” culture.

Before the next set of results come in, the Coalition would do well to downplay expectations. Ministers should point out that at the height of the last economic boom, the Labour government was importing workers rather than tackling home grown unemployment. Even the most dedicated work adviser will struggle to keep low-skilled, poorly educated jobseekers in steady employment, especially against competition from a migrant workforce, at a time of economic uncertainty.

But the Coalition should also be asking itself some hard questions about its failure to implement supply-side reform, through cutting taxes on jobs and reversing the tide of employment regulation. Otherwise the likelihood remains that Work Programme providers will simply cycle clients in and out of short term jobs for the foreseeable future.


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