Policy Exchange 10/07/12

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Policy Exchange10/07/12

• Personalised welfare
• Rethinking jobcentre, Whitehall and support for
  the hardest to help

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What were going to cover

• Whats wrong with the welfare system?
• Where is it going?
• Whats missing?
• What welfare should look like by 2020

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Overview of where we are

• Welfare reform
• Universal Credit
• Benefit cuts (and more)
• Work Programme
• Its a good narrative but we dont think it will
  be enough

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Why not enough?

• 5.4 million adults and 1.9 million children live
  in workless households
• 900,000 in households where no-one has ever
  worked
• Universal Credit will move 300,000 workless
  households into work. Leaves 3.6 million workless
  households.

• So what more is needed?

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So where is the system failing

• What we ask of individuals
• Is an hour a day of jobsearch enough?

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Attitudes towards work

• DWP 11 claimants feel fully justified being on
  benefits and believe they have discovered that
  life without the added complication of work has
  much to recommend it.
• Another 9 felt that to work or claim benefits
  is simply a choice individuals should be free to
  make there is no right or wrong about it.
• A further 11 felt that job search is less
  urgent as they make the most of the benefits of
  not working.

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These facts and polling data mean Govt is
toughening up welfare stance

• Polling shows that
• Half think that jobseekers should spend in excess
  of 3 hours a day seeking work
• 80 think long term unemployed should be engaged
  in community work
• 51 people think that no benefits should be paid
  (at all!) unless you have paid in
• 70 think that jobseekers should be required to
  take work even if it pays less than benefits
• 20 thought sanction should be complete benefit
• 50 thought it should be substantial (50)

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But politics seems to be getting in the way of
good policy

• Coalition fine on conditionality (cf PMs speech)
• BUT
• Where has the contributory principle gone?
• Where has personalisation and segmentation gone?
• AND
• Sanctions reforms unlikely to be effective
• Govt has no ideas on in-work support and
  progression

This is where our work has been focussing
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Personalisation where are we now?

• The support and advice for unemployed general
  determined by length of benefit claim and type of
  benefits being claimed.
• This means some of those furthest from labour
  market have to wait up to a year to get the help
  they need. By this time disadvantages have
  deepened, motivation has been sapped and
  significant new barriers to work will have
  arisen.
• Is this Justified? Most effective means of
  eliminating deadweight?
• Or creator of deadweight entrenching barriers,
  wasting time, funding unproductive interventions?
• Our view Lack of personalisation leads to bad
  policy.

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Whats wrong with Jobcentre Plus?

• JCP is effective at processing large numbers of
  claimants quickly and cheaply.
• But is poor at identifying and targeting help at
  the most at risk or providing a personalised
  service.

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Example older workers

• Recent work shows that older workers face
  significant barriers when they find themselves
  out of work older workers are considerably less
  likely to find work again within 12 months and
  are affected by scars to their future workers
  much more, than younger workers unaffected.
• Visits to JCP and Providers shows same thing
  older unemployed a major problem.
• But majority of over 50s will not get any
  relevant support from JCP (they already have
  experience etc) and support from Work Programme
  does not kick in until 12months.
• In part a result of fact that nearly all of
  Government focus is on younger (under 25)
  unemployed. E.g. the Youth Contract. Is this
  justified?

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Focus on Youth Unemployment?
Older workers more likely to spend longer
unemployed
and to fall out of the labour market altogether
BUT also recognise that there are some young
people who have significant barriers so cannot
turn off policy for them.
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Whats the alternative?

• Targeting effective early interventions on
  barriers and disadvantages, not on age / broad
  categories.
• E.g. Youth Contract spread out across all ages
  but targeted at most disadvantaged.
• Requires gathering extensive information on the
  characteristics of individuals and their barriers
  to work.
• In the long-term establishing a proper pricing
  mechanism in future contracts.

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To what end?

• Shifting off-flow rates to the left through
  better incentives/segmentation

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So what do we need to do?

• Personalised and targeted support from day one
• Reform of Jobcentre Plus
• Reform of the Work Programme

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Personalised and targeted support from day one

• Greater data gathering from the claimant. At
  present, advisers at Job Centre Plus know little
  more than a claimants basic details (e.g. ATOS
  ex-IB data). Pool other resources (e.g. access to
  other govt. data (NHS, police, justice system,
  etc.)
•  A Jobseeker Classification Instrument (JSCI) to
  identify specific barriers to work so that
  support can be better targeted. This technique
  is used in Australia and is being piloted in the
  UK (badly through fortnightly jobsearch review
  pilots 6 questions v. 47).
• Greater use of profiling data. Information
  services, marketing and credit rating firms all
  gather large quantities of information on their
  In the same way, use of credit agency criteria,
  mortgage assessment tools and other data analysis
  techniques can be used to identify which clients
  are at most risk of long-term joblessness.
• Allow personal advisers more power to identify at
  risk claimants. The available evidence suggests
  that personal advisers are better able to assess
  a claimants likelihood of long term unemployment
  the more experienced they are and the more time
  they spend with the client.

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Reform Jobcentre Plus

• Changing personal advisers stakeholders.
  Advisers should see employers as their client
  group.
• This could involve splitting up help and
  hassle roles which are currently combined.
• Building on Adviser Flexibilities should include
  greater PRP/incentives.
• Reform of financial incentives, along the lines
  of private sector back-to-work advisers or
  recruitment consultants. Personal Advisers in
  JCP are paid on national salary scales and are
  evaluated by multiple, group-level targets that
  bear little relation to sustainable job outcomes.

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Longer term reforms

• Creating a smaller, one stop shop centre,
  CommunityLink. International evidence suggests
  single portal for employment service delivery is
  effective. This could also involve JCP becoming
  a one shop stop gateway for all benefits and
  support (DirectGov in person).
• For jobseekers initial (day one) assessment
  made and claimants who require support sent to
  private/ third sector providers.
• Explore alternative pricing models for future
  welfare provision will need to be explored. A
  possible model might look similar to that used in
  Employment Zones. Payment could be based on a
  segmentation tool, qualitative input from
  firewalled advisers (perhaps with a different
  company), and marketing, information and credit
  rating company data. The payment should be
  differentiated according to a prediction as to
  how long (from a non-interventionary base) that
  particular client would likely be on benefits.
•  

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What would this look like?
Existing journey
Proposed journey
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First steps

• As the ?rst step towards this new system, the
  government must announce its intention to move
  the provision of employment services completely
  to the private and third sector.
• In order for a smooth transition to the
  CommunityLink, the functioning of JCP is split
  into two distinct roles now
• Segmentation/claim management responsible for
  new claims and segmentation and day to day
  management of the conditionality regime. This
  part of JCP will look and act like the
  CommunityLink to be introduced later.
• Employment support The second part of JCP will
  be responsible for providing employment support
  for those people not yet eligible for the Work
  Programme.
• The importance of splitting JCP now is that each
  of these distinct segments will be able to build
  expertise and experience in delivering the
  services that they will be needed when the
  CommunityLink is introduced.
• Would also allow new models of public service
  provision to be employed before the creation of
  CommunityLink. For instance, mutualisation

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Reform of the Work Programme (our ongoing work)

• Reform needed for a number of reasons
• To tackle current problems
• To implement our personalised model
• Will tackle each in turn

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Current performance what people are saying

• With the best efforts the industry can possibly
  put into place were not going to get all of
  those Work Programme clients into work.
• Chris Grayling MP, Minister for Employment, 19th
  October 2011.
• Money available for the most vulnerable is
  insufficient and is compounded by deadweight.
• It's not about supporting 100 customers. It's
  about getting 50 of them into a job. The other 50
  are collateral damage. At the end of the day,
  they ministers don't care about that other 50.
  It's an outcome contract, not a service
  contract.
• There is no provision in the pricing and design
  of the Work Programme to allow for the additional
  barriers to work and costs to delivering services
  that exist in London as opposed to other areas of
  the UK.

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Tackling current problems whats wrong?

• Referrals are way off bid estimates.
• Labour market/growth projections were too rosy.

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Things to consider

• Do providers require special resolution regimes
  to ensure continuing employment services support
  in the event of provider failure? Do we need
  living wills or are the risks of moral hazard
  not materially relevant enough to warrant this?
• Job outcome payments are payable when someone
  leaves benefits so providers are not rewarded
  if a claimant enters part time work. Will this
  result in parking of those more likely to want
  part time jobs (ex-ESA or single mothers, for
  example)?
• What balance should be struck between a purely
  black box approach and provider-defined minimum
  performance standards?
• What to do with claimants the WP does not help?
• Can (and should) we extend contractual
  flexibility and scope for renegotiation in new
  contracts?
• The role of sub-contractors. Is it efficient to
  mandate their use? Are subcontractors simply
  seen as bid candy?

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Problems on the horizon

• Two Moments of truth through UC in 2013 or
  2014 when the attachment fee disappears and job
  outcome discounts kick in.
• Should one or more providers fail due to major
  mispricing, it will be necessary to further
  develop the governments plan for transitional
  special resolution regimes to ensure services
  continue.
• This could lead to Work Programme 2.0 suddenly
  becoming a very current issue.
• The Prime Contractor shall comply with any
  proposed variation to the Contract.
• -Work Programme contract summary, clause 6.3.10.

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So what will (should) new contracts consider? (1)

• Adapting to UC
• Exploring alternatives to the 16 hours rule, e.g.
  additional hours worked to be phased in during
  the roll-out of Universal Credit.
• Rewarding the prevention repeaters and enabling
  progression.
• Helping hardest to help
•  Incentivise Primes to give back claimants that
  are parked.
• Whether an accelerator model of graduated
  payments (which increases payments to providers
  the more people that enter employment) could be
  effective in certain circumstances.
• Adapting to economic conditions
• Cyclical weighting (sustainability, limitation of
  systemic risk) and regional variations in the
  labour market (leading indicators of
  inter-regional geography, level of risk and local
  labour market conditions within each CPA. Cap
  and collar, placing a ceiling and floor on
  profits and losses for certain sub-CPAs?

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So what will (should) new contracts consider? (2)

• Ensuring best quality
• Explore ways to award contracts based on quality
  rather than price (EU procurement award on past
  performance/ranking system?)
• How the existing contracts should be renegotiated
  (perhaps on a win-win basis with providers
  getting an equivalent gain for any concession).
  
• The Merlin Standard, minimum performance
  standards, Mediation Service and DWP Code of
  Conduct sufficient? Independent regulator?
• Developing a Knowledge Transfer Network to share
  innovation and facilitate dissemination of best
  practice within the welfare-to-work Industry on
  the model developed in the Technology Strategy
  Board.
• Reform of the Prime/Sub model (direct market for
  referrals), entry path for Social Enterprises.
  This market would specifically be for any
  individual who it is deemed will be unlikely to
  be helped by the Work Programme.

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But

• Some claimants are never going to be economic
  under PBR. Parking is an inevitable consequence
  of sustainable outcome-based incentives.
• Involvement of social enterprises (higher risk to
  capital compensated by social returns) or
  charities (for those not economic) needs to be
  better framed/organised.
• Other desirable outcomes not paid for or
  provision duplicated.
• This is where our model of segmentation becomes
  powerful

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What would effective segmentation mean for
contracts? (2)

• Client group split by barrier to work
• Day 1 referral (less money for some, more for
  others).
• Explore alternative pricing models for
  hardest-to-help groups on a pilot basis. This
  should include the maintenance of upfront fees
  financing for certain services.
• But even within this system, it is likely that
  some groups will not be economically viable to
  help. Need a different model of provision. Maybe
  Social Enterprise Market?

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Entrypoints to the new Social Enterprise Market
for the hardest to help
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How might a Social Enterprise Market operate?

• Deploying European Social Fund money in this
  market (while defunding/cancelling projects which
  overlap/duplicate one another).
• It is imperative that the social enterprise route
  should not be seen as a soft option.
  Consequently, full conditionality should
  continued to be applied by CommunityLink. As
  within the Work Programme, the expectation should
  be that job search and labour market preparation
  should be a full-time activity for all claimants.
• While important for the group, it is not
  necessarily the case that this market will be
  limited to the hardest to help. Previous
  experience in other countries has indicated that
  an overemphasis on this group can lead to a lost
  middle.

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Summary

• Reform needed to
• Personalise employment support
• Make sure support given as early as possible
• Provide support to those groups currently
  unprofitable
• Improve functioning of Jobcentre Plus
• Recession-proof (and region-proof) existing
  contracts

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Our next stages of work

• Work Programme 2.0 (covered here and launched
  soon)
• Sanctions role of non-financial sanctions and
  how should work within Work Programme.
• In-work conditionality and support under
  Universal Credit
• Child poverty targets what is appropriate, what
  helps the most vulnerable?
• Contributory principle something for something,
  fairness in welfare. NI and Income Tax payers
  get something back when they fall on hard times.
• Social networks what people/points of contact
  influence peoples attitudes to work?
• Joining up welfare across Whitehall
• Broader public service reform