REPORT BY THE COMPTROLLER AND AUDITOR GENERAL HC 832 SESSION 2012-13 13 DECEMBER 2012 A commentary for the Committee of Public Accounts on the Work Programme outcome statistics Our vision is to help the nation spend wisely. We apply the unique perspective of public audit to help Parliament and government drive lasting improvement in public services. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 860 staff. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. 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A commentary for the Committee of Public Accounts on the Work Programme outcome statistics Report by the Comptroller and Auditor General Ordered by the House of Commons to be printed 13 December 2012 This report has been prepared under Section 6 of the National Audit Act 1983 for presentation to the House of Commons in accordance with Section 9 of the Act Amyas Morse Comptroller and Auditor General National Audit Office 12 December 2012 HC 832 London: The Stationery Office £8.75 This note provides the Committee with a commentary on the Department’s statistics for Work Programme outcomes and makes reference where appropriate to other published material. © National Audit Office 2012 The text of this document may be reproduced free of charge in any format or medium providing that it is reproduced accurately and not in a misleading context. The material must be acknowledged as National Audit Office copyright and the document title specified. Where third party material has been identified, permission from the respective copyright holder must be sought. Links to external websites were valid at the time of publication of this report. The National Audit Office is not responsible for the future validity of the links. Printed in the UK for the Stationery Office Limited on behalf of the Controller of Her Majesty’s Stationery Office 2530539 12/12 PRCS Contents Introduction 4 Key points 4 Background on the Work Programme 5 Performance to 31 July 2012 6 Performance against contractual standards set for the period to March 2012 11 Reasons that outcomes are lower than expected 12 The Department’s actions in the light of performance 13 Other data that indicates performance 13 Future data releases 15 The National Audit Office study team Appendix One – Background on the consisted of: Work Programme 16 Terry Caulfield and Andrew Tuffin, under the direction of David Clarke. This report can be found on the National Audit Office website at www.nao.org.uk/work-programme-2012 For further information about the National Audit Office please contact: National Audit Office Press Office 157–197 Buckingham Palace Road Victoria London SW1W 9SP Tel: 020 7798 7400 Enquiries: www.nao.org.uk/contactus Website: www.nao.org.uk Twitter: @NAOorguk 4 A commentary for the Committee of Public Accounts on the Work Programme outcome statistics Introduction 1 On 27 November 2012, the Department for Work and Pensions (the Department) published the first set of data on the employment outcomes achieved by the Work Programme (the Programme). The data showed, for the period June 2011 to July 2012, the number of people recorded as having moved off benefits and into sustained employment. 2 The Department also published an analysis of the benefit status of Programme participants, a booklet entitled The Work Programme: the first year and a number of background materials. On the same day the trade body for the welfare to work industry, the Employment Related Services Association (ERSA), issued a media pack that included information on job starts and other data that they had collected from their members or had calculated from published material. 3 This note provides the Committee with a commentary on the Department’s statistics and makes reference where appropriate to other published material. In order to provide the Committee with a timely note on performance we have not validated the outcome data published by the Department. We will, as a separate exercise, review the adequacy of the Department’s systems for collecting data. 4 The note is structured as follows: • key points; • background information on the Programme; • an explanation of the Programme’s performance to 31 July 2012 (the period covered in the data released); • an explanation of the Programme’s performance to 31 March 2012 (the period covered by the contractual performance target); • an explanation as to why performance was below expectations; • the Department’s actions in the light of performance; • an overview of other data related to Programme performance; and • the Department’s plans for future data releases. Key points 5 The key points in this commentary are set out below: • Outcomes to 31 July were less than a third of the level expected at the outset and have built up more slowly than the assumptions by the Department indicated. • No providers met the minimum performance levels set in their contracts and there is considerable variation of performance. A commentary for the Committee of Public Accounts on the Work Programme outcome statistics 5 • There are a number of reasons for the lower than expected level of outcomes, including that early expectations were probably set too high, reported performance is understated and that some providers need to improve performance. Providers have pointed to harsher than expected economic conditions but the Department do not consider that economic conditions by themselves are sufficient to merit a change in the underlying assumptions about the Programme over its whole life. • The Department has issued warnings to providers that their performance must improve and is considering further actions it might take to improve, for example, improving access to skills support for the Programme’s participants. • While outcomes are significantly lower than anticipated, it is too early to conclude that the Programme will not meet its objectives. The Department’s own data indicates that Programme participants are spending time off benefit (a precursor to a job outcome being achieved) and (unvalidated) data of increasing job starts indicates that performance will increase. It is not possible to say definitively yet whether these increases will be sufficient to meet the early expectations of Programme performance. • When the Department released the first set of outcome data on 27 November 2012, it announced that outcome statistics would be released on a six-monthly cycle. The next scheduled release of the official statistics is 28 May 2013. The Department, following the release of the first set of statistics, intends to review the frequency and scope of publication. Background on the Work Programme 6 A description of the basic features of the Programme is at Appendix One. The Programme, launched in June 2011, is designed to help the long-term unemployed, or those at risk of becoming so, into work. Participants can be supported by the Programme for up to two years. The Programme’s objectives are to increase employment compared with previous schemes, decrease the time spent on benefit, increase the time in employment for those coming off benefits, and narrow the performance gap between easier and harder to help claimants. The Department contracts out delivery of the Programme to providers in the private and third sectors (Figure 6 of Appendix One) 7 The Programme accepted its first participants in June 2011. The Department estimates that the Programme will cost between £3 billion and £5 billion over five years, and that it could help 3.3 million people. 6 A commentary for the Committee of Public Accounts on the Work Programme outcome statistics 8 Providers are paid an ‘attachment fee’ of between £400 to £600 for each participant from nine different groups, which reduces each year of the contract and is zero in the Programme’s fourth and fifth years (Figure 7 of Appendix One to this commentary sets out the groups and the payment arrangements). Providers receive an outcome fee (£1,000 to £3,5001 ) for every participant that they place into sustained employment, defined as lasting either three months or six months depending on the participant category. The provider receives an additional sustainment payment of £170 to £370 per four weeks if a participant stays in work longer. Up until 31 July 2012, the Programme had cost £378 million, of which £329 million was attachment fees, £36 million outcome payments, and £13 million sustainment payments. Performance to 31 July 2012 9 Job outcomes are building up more slowly than the Department’s planning assumptions indicated. In the year to 31 July 2012, the providers for the Programme achieved 31,240 outcomes (people off benefits and in sustained employment), or 3.6 per cent of those who had been referred to providers by Jobcentre Plus. The Department has not published targets against which to assess progress by 31 July 2012 but we have assessed progress against two measures. • The equivalent of the Department’s minimum performance level for job outcomes. The Department sets minimum performance levels in all contracts at 31 March each year and has the discretion to apply contractual sanctions for performance below those levels. We have used the Department’s methodology to estimate the standard had it been set for 31 July 2012. This gives a figure of 9.7 per cent.