The government’s Work Programme is now up and running around the country, getting Britain’s long-term unemployed and workless back into work. Many have highlighted the labour market’s critical importance to the programme. While they are right to do so, it is not the only potential pitfall to stand in the way of the Work Programme’s success. Its centralised and top-down approach has been one of the most overlooked characteristics and challenges that face it.

The entire programme is based on a national payment model and commissioned from the heart of Whitehall. Yet, chronic worklessness and unemployment is by and large a local phenomenon and social distress. As Sir Robin Wales, the mayor of Newham, argues, the government is trying to solve a local problem nationally. For the Work Programme to be a true and lasting success, there has to be a fundamental devolution and shift in commissioning power and responsibilities to local authorities.

One of the main features of the programme is its payment-by-results model, where providers only get paid for the successful job outcomes they deliver. To guard against providers ‘creaming’ and ‘parking’ hard to reach and difficult claimants, the programme offers differential payments for each client group.

However, there is only a single financial model that applies uniformly across the nation. No distinction is made between regions or nationally between Scotland, Wales or England. This completely fails to recognise the differing traits and needs of local labour markets, and crucially the costs involved in supporting people into work. There are also stark differences locally too. According to the Work Foundation, the programme risks failure in the most deprived economic areas due to weak labour demand and providers focusing on the most profitable client groups.

If local authorities are given the responsibility of managing the Work Programme in their respective areas, they will be able to tailor a payment model that better reflects the local labour market. This would help strengthen incentives for supporting the hardest to reach and most costly individuals, thereby further offsetting the risks of ‘creaming’ and ‘parking’.

The one–size-fits all approach is also a risk as it shackles the entire country to a single payment structure that is largely untested. If local authorities had the freedom to design their own payment models, not only would they be able to tailor it to their areas, but they could experiment with potential alternatives. Don’t get me wrong, the payment-by-results model is a worthy one. But there are different variations to it.

The last government were set to pilot this year the Personalised Employment Programme, a single integrated programme getting claimants back into work. But instead of offering differential payments, it was to operate a ‘financial escalator’ model. This would have seen providers securing higher payments as they got more of their allocated cohort into work, thus incentivising them to work through their entire batch.

The Work Programme will also showcase the AME/DEL switch. This is a model of financing which makes available funding now from expected savings in future (this idea can be traced back to the last government). But why limit this approach to merely benefit payments? Local authorities are responsible for funding an array of related social services, many of which would dramatically diminish in costs with successful outcomes. If they were pioneering and running their own Work Programmes, they would have a template for other potential opportunities utilising the AME/DEL model.

Private sector dominance of Work Programme contracts is also another big concern. Private firms hold 88 per cent of all prime contracts, with only two lead voluntary sector organisations. In total there are 18 primes across the country. Many voluntary and third sector organisations have also expressed their frustrations at the subcontractor level, where again they feel they have been sidelined. Private sector involvement in the Work Programme is not a bad thing. They bring a real competitiveness and can drive innovation. However, market share needs to be balanced fairly. There should be no sector monopolies.

One of the biggest causes of anger among voluntary groups is the feeling they have been priced out (all organisations involved in the programme have to submit bids containing their prices, with many coming below DWP asking prices). This is all part of the competitive tendering process. Other groups found the prices on offer from DWP in supporting these groups were simply too low in making it financially viable.

Yet, as the London Voluntary Services Council has highlighted, the most successful employment programmes, are ‘voluntary’ in nature. This is because smaller interventions work better than larger ones and exploit local knowledge and links to local labour markets. A good deal for the non-profit sector is vital for the Work Programme’s success.

The size of the contracts is an issue too. With prime contracts running into the millions of pounds, only those with the financial clout to assume such risk and, importantly, foot the capital, stood a chance. Locally delivered Work Programmes would offer smaller contracts and allow councils to determine successful bid criteria, ensuring the full costs and needs of supporting the most disadvantaged were met.

Crucially, local authorities are much better placed to commission welfare-to-work services. At the moment, the entire Work Programme is commissioned from Whitehall. But surely, with their past experience in commissioning and running their own employment programmes, local authorities are best placed to assume this responsibility? They also understand their local economies better than anyone else. A devolved commissioning structure would better reflect the needs and traits of local labour markets.

Councils along with other organisations from the public and private sector also direct economic and regeneration activities in their respective areas, ie through Local Enterprise Partnerships. Additionally, they are a key procurement agency. Integrating these demand-side forces more intimately with the supply-side reforms of employment programmes would improve job outcomes.

Finally, a locally delivered Work Programme would be more democratic. Yes, Chris Grayling, the employment minister, has ultimate responsibility and authority. But he is just one man. Freeing the programme from his central command and empowering local authorities to take charge would bring the programme closer to people and more directly accountable to them.

I am a big supporter of the Work Programme, as I can see its potential. However, this will only be fully achieved if it goes local. The government missed their opportunity. But will they be bold enough to think again? We shall see. Don’t count on it though.

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Rayhan Haque works at Inclusion. This article represents his personal opinion.

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Photo: Elias Schwerdtfeger