14.07.16
Levelling the playing field
Alexander Hitchcock, a researcher at the public services think tank Reform, discusses the challenges and opportunities facing the government’s Work and Health Programme.
A new prime minister committed to public service reform has walked into 10 Downing Street. As home secretary, Theresa May showed that she would push hard for changes to public services in the interests of citizens and taxpayers. Greater competition in public services will likely be part of the new agenda, including the important area of welfare-to-work.
This is a timely issue. The Department for Work and Pensions (DWP) has recently commenced a year-long competition for contracts to deliver its new Work and Health Programme. To help the long-term unemployed and disabled people into work, DWP aspires to create a “level playing field” amongst bidders to ensure high-quality competition for services.
Reform research published this week, however, argues that government has been unable to deliver this level playing field. To get the level of competition it desires, the government must act to identify and remedy legacy issues.
A critical barrier to entering previous programmes is contract size. The Work Programme, the Coalition government’s flagship welfare-to-work scheme, required winning bidders to have annual turnovers of £20m or more. At the time, charities felt that this eliminated them from delivering services they had provided in previous programmes. To incentivise medium-sized providers to enter the market, the government should limit Work and Health Programme contracts to £10m per annum.
Government should also be wary of pushing too hard on payment by results (PbR). The Work Programme moved to a 100% outcomes payment model during the life of the contract. Providers interviewed for Reform’s paper argued that this causes cash-flow issues for smaller organisations and, if replicated, could put them off bidding for the new programme. One interviewee put it simply: “You go to 100% PbR and the only companies that can compete are big ones that can use their cash [reserves].” Commissioners should address this by introducing an upfront fee for services of between 10 and 40% of contract value.
Other financial barriers should also be remedied. Parent-company guarantees have been used by government to provide financial security if providers go bust. Past use, however, has resulted in only the largest organisations being able to report the level of assets needed to secure such a guarantee. With no evidence that government has ever invoked a parent-company guarantee, officials should lower the levels of insurance needed to below one year’s contract value.
Perfecting competition does not require a revolution within government. And, Frank Field MP explains in his foreword to Reform’s paper, the prize is great: “The government should now take seriously the call for a levelling of the playing field in employment services, so it can begin making strides towards its goal of reaching full employment in our country.” Learning from past practice will be a big step towards helping vulnerable people into work.
Have you got a story to tell? Would you like to become a PSE columnist? If so, click here.