Thursday 31 January 2013

Gaming the Work Programme

A Mark Hoban "meme" that has been doing the rounds on Facebook
The Tory employment Minister Mark Hoban has already taken a lot of criticism.  Before I get to mine I'll just run through a few highlighted by other people first.

There's the contrast between his obvious gaming of the Parliamentary expenses system to stuff the taxpayer with the cost of his home improvements and his berating of the unemployed for supposedly "gaming the system" to claim benefits that in reality provide a fortnightly living allowance of less than the cost of the chrome shower rack and silk cushions he expected the taxpayer to pay for.

There's the fact that he told Parliament that only 15% of appeals against Atos Work Capacity Assessments were successful, when the real figure is actually closer to 40%, and above 70% if the appellant is represented by someone with legal expertise. He also failed to acknowledge that the cost to the taxpayer of hearing all of these appeals now stands at £50 million, with no financial penalties against Atos for having miscategorised so many people as "fit for work" in the first place. In the same Parliamentary session he also failed to answer numerous questions and gave evasive or misleading answers to most of the rest. Mike Sivier did a pretty good demolition job on that particular performance, you can read that here.

Then there's the fact that many people have come across his policy of "delete and block" when it comes to people writing anything vaguely critical on his Facebook page. No matter how polite and carefully worded your criticism, Hoban wont reply, he'll simply delete your comment and block you from ever posting anything again. I must admit that this kind of blanket censorship winds me up more than it should. This is because I've tried as best I can to maintain a no-censorship policy on the Another Angry Voice Facebook page, which means I've left all kinds of vile personal abuse and outright lies about me undeleted, in order to allow the abusiveness and obvious inaccuracy of reactionary right-wing ranters' leavings to speak for itself.

Now onto my criticism, which relates to something that he said in an interview on the BBC documentary about the spectacularly expensive failure of the Tory flagship Work Programme. Here's what he said in defence of the 18 private sector providers that are signed up to administer the Work Programme:
"They know they are only going to make money if they get people into work"
Essentially he is saying that there is no need to worry because this is a "payments by result" business model, however the government's own figures show this to be a grotesque misrepresentation.

In the first full year of the Work Programme 877,880 people ("clients") were enrolled on it, yet only 31,240 (3.56%) of them were helped into full, or part time work. In fact not a single one of the 18 Work Programme contractors managed to meet the minimum target of finding work for 5.5% of them. Not only did all 18 of the contractors fail to meet the minimum target, the figure of 3.56% is significantly below the 5% figure expected if the unemployed were left to go through the old fortnightly routine of demonstrating to how they had been seeking work to staff at the Jobcentre. The government's own figures show that to date, the Work Programme has been worse than doing nothing at all!

The question of how much this dismal performance is going to cost is a difficult one because payments depend on how long the 31,240 clients that found work actually keep their jobs, the payment by results element. If they keep their job for 6 months, the Work Programme contractor gets a payment of between £1,200 and £3,500. If they keep their job for two years, they get a further payment of between £5,000 and £9,600.

Given that we know these payments, it is possible to calculate that the cost of these "success" payments for the 31,240 clients will range between £40 million and £213 million, with the upper figure only possible in the extreme case where every single person stays in their job for two full years. A reasonable estimate that has been adopted by the mainstream press is about £75 million.

What is known is the cost of "attachment fees" that are paid every time a person is enrolled on the Work Programme. These fees range between £400 and £600. The total amount spent on attachment fees in the first year was £326 million. (£10,400 spent on attachment fees for every person that actually went on to get a job).

It is easy to see that Hoban's statement is grotesquely misleading. These companies have ended up being paid far more in "attachment fees" than they will ever manage to get in results payments, even if everyone they have placed manages to keep their job for two full years.

These figures, and the shocking under-performance of every single Work Programme provider demonstrate that in fact it is possible for these companies to make millions at the taxpayers' expense, even if they hardly get anyone into work at all. In fact, the attachment fees represent a "payment before results" system that looks astonishingly easy to manipulate.

In fact, the only way that the Work Programme contractors have over-performed is that they have managed to sign up 9% more clients than expected. They have signed up more clients than expected and they have found work for significantly fewer clients than expected.

What this tells me is that the Work Programme contractors have figured out a way of "gaming the system". They expend as much effort as possible in signing people up to their schemes to collect the unearned £400 - £600 they get for simply submitting the paperwork and they expend as little effort as possible on finding work for hard-to-place clients such as the disabled, the uneducated or unskilled and those that are approaching retirement age. These suspicions are supported by the accusations that one contractor called Triage actually referred to the policy of neglecting difficult clients as "parking".

The statistics also back up this interpretation that "hard-to-place" clients are simply being parked. Of the 68,000 disabled clients put into the Work Programme, only 1,000 ended up in work, a success rate of just 1.47%.

Given that the majority of Work Programme contractors are profit driven private companies, it makes clear economic sense for them to sign up as many clients as possible in order to collect the easy money "attachment fees", rather than spending a great deal of time and effort finding work for people, in what, thanks to George Osborne's failing ideological austerity experiment, is a very difficult employment market. The reason for this is that even if the contractor pulls off a miracle and finds a job for one of their "hard-to-place" clients, there is significant risk that they will quit  (for deteriorating health reasons perhaps) or be fired in the first six month period, leaving the company with absolutely no profit to show for all of their efforts.

Returning to the "gaming the system" accusations from the collection of criticisms aimed at Mark Hoban I highlighted in the introduction: It turns out that the Work Programme that Hoban tries desperately to defend is a classic example of a poorly designed government contract which actually encourages contractors to "game the system" in order to minimise risks and maximise profits.

It is quite simply stunning to see Mark Hoban, a man who has a track record of making accusations of "gaming the system", make utterly misleading statements to the BBC to cover up the fact that there seems to be an awful lot of contractor "gaming the system" going on in the flagship Tory party Work Programme scheme that he has ministerial responsibility for.

The performance and financial figures used in this article can be found here and the payments regime is explained in more detail on the Panorama documentary.

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