It is a dark time for the New Deal scheme, first introduced by Labour in 1998. Despite helping 1.7 million unemployed people into work by providing them with training and subsidised employment, the government has welcomed suggestions that it may no longer be “fit for purpose” and should become more of a “brand name” than a programme.
These recommendations were put forward by former investment banker David Freud in a review published last month into the future of welfare-to-work policies.
But the demolition work on the New Deal started well before Freud’s report.
The New Deal programme is administered by the Department for Work and Pensions (DWP), which awards contracts to third party organisations – many of them voluntary bodies or in the public sector – to provide training and counselling services to participants in the scheme.
The new contracts awarded by the DWP last summer required that 45 percent of New Deal participants found work within just six weeks of completing the programme – despite the fact that the average application for work within the DWP itself takes at least 13 weeks to process.
Previously the DWP set targets for New Deal providers according to the specific needs and capabilities of the claimant groups involved. Sometimes these were as low as 20 percent job entry, coupled with an “into-work window” of up to 16 weeks after leaving the programme.
Moving the goalposts in this fashion will have disastrous effects on the organisations that provide New Deal services, the people who work for them – and on the New Deal participants themselves.
Most training providers are now failing to meet their performance targets. There are 286 New Deal for Young People providers nationwide, but only 18 met their targets for the last quarter.
The unrealistic goal of immediate participation in the labour market is forcing New Deal providers to focus on “quick wins”.
This encourages them to push young people into low skilled, low paid jobs with little concern for long term sustainability.
The revolving door back to welfare begins to spin twice as fast.
Moreover, as providers fail and have vital contracts pulled by the DWP, the people who work for them face either mass redundancy or transfer from one provider to another.
The prospect of this being handled smoothly is highly unlikely. In truth, there’ll be chaos.
Now we have David Freud recommending a move away from the public sector altogether. He prefers to award New Deal contracts to the big private sharks, who will apparently provide “greater diversity and value for money” – or rather, self-interest and profit in the name of social inclusion.
Freud also calls for a system where funding for New Deal providers is purely “outcome based”.
This means providers will only be paid for those New Deal participants that enter the workplace and stay there. There will be no recognition of progression, or qualifications gained by participants in the scheme.
Moreover, this payment will be “backloaded” – paid after the event – by up to three years.
What local authority or voluntary organisation could possibly justify delivering any initiative without even the promise of start-up funding?
It seems that this welfare “revolution”, as work and pensions secretary John Hutton calls it, is being primed for big businesses.
Their operating costs will be trifling compared to their usual outgoings, and they will be able to cherry-pick those New Deal participants that are already close to the labour market.
The truly needy, in contrast, will be left behind.
Strangely, while Freud encourages greater private sector involvement in New Deal, he freely admits that there is no evidence that profit-making organisations perform any better than those in the public sector.
So, without any real need, New Labour has stitched up an election-winning policy by setting it up to fail. It wants to replace it with a fuzzy welfare void, which talks of “sustainability” but reeks of cost cutting and pulling the business vote.
And they’ve done it on the quiet – all they need is one Labour backben0cher or a member of the opposition to ask the right questions and the game’s up.
As for the money that’s saved, New Labour will no doubt divert it towards something more deserving – a reduction in corporation tax, perhaps, or how about the war?