David Cameron, A4e and subcontracted policy

27 February 2012

It has taken some time, but the media has now worked out that the government’s
back-to-work reforms are a story which just keeps on giving. Under the Work Programme, vast amounts of taxpayers’ money will find its way into the pockets of the people running the new
system. When these contracts were given out last year, it all seemed a little too technical to make into a headline story. But a castle and an £8 million bonus changed all that. Now, the
story of Emma Harrison and A4e is in danger of taking on the status of fable for the Cameron government. This weekend the "">Observer and the "">Independent on Sunday both had a pop and shadow Work and Pensions secretary Liam Byrne has
begun to ask some probing questions.

I should declare an interest here. My charity, New Deal of the Mind, has a contract with the welfare-to-work giant. Last week all organisations on the A4e supply chain were warned to refer all
media enquiries to the company’s press office. Finally, everyone seems to have woken up to what it will mean if this storm of negative publicity begins to undermine the operation of the Work
Programme itself and its ability to help the millions of people out there who need it.


Within government, there is a pattern developing here. The Cameron way is to devolve as much decision-making as he can and subcontract the writing of policy. Despite the ‘heir-of-Blair’
narrative, in this he is very different from the centralising control-freakery of New Labour. In Health, this instinct to devolve has landed Cameron in serious trouble. Could the same happen in the
welfare-to-work arena, where, in a sense, there has been a double devolution? The Prime Minister devolved responsibility for welfare reform to Iain Duncan Smith, who, in turn, subcontracted the job
of remodelling welfare-to-work to Lord Freud and Chris Grayling. In an ideal world this is exactly how government should work (and there is much right-wing utopianism in the Cameron government).

But there are two fundamental flaws at the heart of the Work Programme reforms. The first is that this was a scheme designed during a time of economic growth for a world where there was a
relatively ready supply of jobs. For the prime providers to deliver in a time of economic contraction will be extremely difficult without pumping further incentives such as the Youth Contract job
subsidies into the system. And the second flaw is the bolt-on rhetoric of the Big Society, which is supposed to be part of the Work Programme pledge. There is very little evidence as yet that the
prime contractors are passing on work to charities. But, to be fair, the system devised by Lord Freud was never really designed to deliver for the third sector.

The figures speak for themselves. Under the previous back-to-work scheme, the Future Jobs Fund, New Deal of the Mind helped more than 800 people into six-month placements and 70 per cent went into
jobs or education as a result — a massive saving to the benefits bill. Under the Work Programme, we have been removed from the process altogether.

So what happens now? What is the government doing to reassure small organisations in A4e’s supply chain that this mess will be sorted out? David Cameron needs to get a personal grip because
his political credibility is at stake here, as are the lives of the millions of people out there who are desperate to get back to work.

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  • rndtechnologies786

    Nice thought.

  • Mike

    Jeez – As a private individual, I don’t question the right of a business to fully exploit the value of a contract but, as a tax-payer, it seems that these contracts are, at best, unwisely structured (perhaps front-loaded)or, at worst, mispriced ie the profit extracted appears excessive against current productivity.

  • Jeez

    Mike – The performance highlighted in the select comitte was incorrect. I think you’ll find that A4e performed at or above the industry average in the contracts delivered for the previous government. If they did well financially, its because of the structure of the contracts. You can argue that they should have had contracts pulled for operating under the contracted expectation, but then so should every other provider, supply chains included. I think its too simplistic to suggest payments were too much based on their performance. Its what the contracts provided. Whats any provider going to do? Refuse payment based on performance? As a private organisation any owner is entitled to take a dividend within the organisations governance regardless of the source of income. It concerns me that interfering in this is grossly anti market and anti enterprise.

  • Mike

    Jeez – I understand that and it should be better reported. Nevertheless, it is said that A4e only earns from government contracts and its boss took home 8.6 million in dividends. How does that happen for a company that is not, apparently, doing very well?

  • Jeez

    Mike – They aren’t making so much money. Suggest you ditch the urban myths. it may be 150m but thats over 7 years and is the contract value, not the garranteed payment – its up to the companies to “earn it”, and they can only do that if they perform by hitting some frankly stretching targets.
    Thats why they are called outcome based contracts…. no performance, no money, no contract. Just like the real world…..

  • DavidDP

    “Your fraudulent mandate “

    Do you have evidence of illegal activity at the election? Please share.

  • Mike

    Hi Jeez Can you explain how these companies are making so much money (a contract worth “£150 million”) when a recent report shows that the Prime Contractors collectively are failing to meet their targets?

  • Jeez

    Durak, Then you will be fully aware that the only way to make money on the work programme is by performing. Low performance means making a loss which is the ultimate protection for the taxpayer. Supply chains must perform regardless of size and all services must be customer focused in order for the contracts to perform.
    We could rely soley on the civil service departments to do it..
    Whats your alternative solution?

  • Durak

    Jeez. I also am fairly conversant with the minutia behind much of the contractual issues relating to the DWP contracts. They were not pretty then, and they certainly aren’t pretty now.

  • Hugh

    There are hundreds of CEO’s of government suppliers living in big pads paid by the the tax payer. But then they are running large companies and one would hope delivering some value which means they get paid. This is business as usual. What’s the difference with A4E? Havent they successfully placed millions in work to earn the rewards?

  • Mike

    I do not understand why the private sector seems to make so much money out of these contracts! EITHER the system inherited from the public sector is hugely inefficient (possibly) and A4e et al simply charge a lot for efficiency gains OR they make money out of reducing the quality and/or quantity of the services provided (likely). Does anyone know? Outsourcing only works if it provides cheaper labour (usually offshore), corrects a lack of expertise or takes over duties not central to the function of the outsourcer (thereby allowing staff to, profitably, concentrate on core activities). None of the above seems to apply to the Prime Contractors, so what is the magic formula?

  • Mac

    Under the Coalition’s Back To Work scheme everyone makes money except those who do the work. This is a brilliant way to defraud the taxpayer.

  • Michael Sweeney

    A more fundamental flaw is serious reform of a benefits system that mitigates against taking up work. Many authorities advise people against taking work due a reduction/loss of their housing benefits for example.

  • Jeez!

    @ Durak and sylva. Your language, tone and your judgement of this situation is both unhelpful and ill-informed. If you have this limited understanding of this story I suggest you stop posting, read up and then comment properly. And stop being whinging poms.

  • Sylva

    From Andy Coulson to Emma Harrison we now know this unelected Cameron Government is just a fraud.

    A Prime Minister with no sense of judgement. Your fraudulent mandate expires in 2015 and you will be forgotten.

  • Durak

    The ship is sinking, and not gracefully.

    Providers such as A4e are proving a real embarrassment to the government.

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