FLEXIBLE DEALS April 22, 2010

Rising ‘mass unemployment’ in western industrialised countries in the late 1990s was widely attributed in political and academic circles to ‘rigidities’ in work and wage patterns, as well as ‘too-high’ social contribution by the state. The ‘solution’ advocated by free market proponents, and picked up by New Labour almost more enthusiastically than neoliberals, was a more ‘flexible’ labour market, coupled with a flexible, employment-friendly benefits system.

Flexibilities

Arguments for flexible work patterns put forward by scholars and policy makers in the 1990s often focused on the ‘new social reality’ of the twentieth century: the increased mobility of people; the new family(s); more women working outside home and so on. Conclusions were often rhetorical: flexible work patterns allow a better work-life balance, reduce social exclusion, improve the employment prospects for the most disadvantaged and so on.

Economists were clearer about the real aims: to increase labour supply, in both quality and quantity, while reducing costs (health, pensions etc.). In a sense this was an alternative to ‘old’ solutions, such as migrant ‘guest workers’, to the labour demands of the unstoppable growth of capitalist economies; an alternative that would also avoid the social and political problems associated with immigration.

Seeking the ‘efficiency’ and ‘dynamism’ of the private sector, the main purpose of social welfare policy would now become a progressive liberalisation of welfare functions by contracting out public employment services. The amalgamation of jobs and benefits in one agency, Jobcentre Plus, was only the first step towards ‘closer links’ between the management of social welfare and the delivery of employment services, with the aim of facilitating a ‘quick return’ of the unemployed back to the labour market by increasing their ‘employability’, that is to say, inserting ‘job seekers’ into any available work opportunity that the market throws up. This would be achieved through turning benefit advice sessions into work-focused interviews; through mandatory, intensive job search, with claimants being forced to be ‘more flexible’ and ‘more realistic’ job goals imposed upon them; and turning training and capacity building into ‘work placement experience’. And wherever financial top-ups (extra money offered to claimants op top of their Job Seeker’s Allowance whilst on such programmes) and other incentives failed, increasingly tough sanctions would be used. To quote Gordon Brown, “In the old days, the problem may have been unemployment, but in the next decades, it will be employability. If in the old days, lack of jobs demanded priority action, in the new world, it is lack of skills. And that means that our whole approach to welfare must move on.”

Flexibility, thus, has come to mean the flexibility of government in policy implementation by working with, and through, private contractors; the flexibility of these private ‘partners’ to provide services in a way that increases ‘job outcomes’ (i.e. profits) and reduces costs; and the flexibility of employers to hire and fire. There is also the flexibility in funding these programmes - often sold in official rhetoric as ‘shared governance’ - in place of the old ‘rigid’ contracts.

As for the ‘job seekers’ themselves, the reception is more or less divided along class lines. Those from better-off backgrounds, who often turn out to become highly skilled professionals, may enjoy this flexibility as they are able to move between jobs more easily. For those from worse-off backgrounds, who often end up occupying low-paid, manual or unskilled jobs, this ‘flexibility’ often means insecurity and uncertainty. Finally, for the unemployed, or those who refuse to be employed, there is increasingly much less room for flexibility.

Deal or new deal?

As part of the current welfare reforms, a new benefits and employment system for people claiming Job Seekers Allowance (JSA) called Flexible New Deal (FND) is replacing existing New Deal programmes (Gateway to Work, New Deal for Young People, New Deal for 25 Plus, New Deal 50 Plus, New Deal for Self Employed and Employment Zones). There had already been several attempts to reform or restructure parts of the regime. For example, a Re-engineered New Deal 25 Plus was introduced in April 2001 with the aim of “improving [claimants’] prospects of finding a job and remaining in employment.” Customised, employer-led New Deal Gateway programmes were also piloted in the Department for Environment, Food and Rural Affairs (Defra), the former Department for Trade and Industry and the former Benefits Agency. The new system, however, introduces additional new measures that did not exist under the old one.

The changes were initially announced in the green paper In Work, Better off: Next Steps to Full Employment, published in July 2007. The white paper Raising Expectation and Increasing Support: Reforming Welfare for the Future, published in December 2008, reiterated the government’s intention to implement a “single, integrated, flexible programme for people claiming Jobseeker’s Allowance and for people claiming Employment and Support Allowance.” According to the plan, Flexible New Deal will be implemented in two phases across England, Wales and Scotland. Phase one, which started on 5th October 2009, covers 28 Jobcentre Plus districts. Phase two will implement the new system in the remaining 20 districts from April 2010, with new contracts starting from October 2010.

In January 2009, a major conference brought together the government, employers and private and voluntary sector ‘partners’ to set out the next steps in this agenda, promising “inspiring opportunities for prime contractor organisations from the private, public and third sectors to work together in partnership to deliver this new programme.”

The introduction of Flexible New Deal also laid the foundation for further reforms included in the current Welfare Reform Bill, in particular the proposals for a ‘work for your benefit’ initiative for people who have been unemployed for two years or more. To quote Gordon Brown again, “The New Deal was both a statement of our values and a key part of our economic strategy... Now, as we look ahead, we need a reformed New Deal to help us face the challenges of the next decades.”

No deal

At the heart of the new regime is a four-stage programme that increases claimants’ level of job search activity the longer they remain on benefits, culminating in referral to Flexible New Deal after a year, or six months for those identified at the start of their claim as being “in greater need of help to secure work.” Participation in FND lasts for up to 12 months but can be extended for a further six months. Of these, four weeks are allocated for mandatory ‘work-related activity’, which involves working 30 hours a week for any organisation, including a Flexible New Deal provider, that does not have to be related to the participant’s job goals at all as long as it providers some ‘work experience’. Providers are then almost free (flexible) in what they do for the remainder of the course, as long as they get their clients a job, which is when they get paid.

Under FND, service fees are calculated per contract value rather that the number of participants, as in New Deal. This has raised concerns that providers will cherry-pick clients and park older ones, who will be lined up for sanctioning to ease overcrowding. Furthermore, a large part of service fees is paid upfront, with monthly payments then decreasing progressively towards the end of the contract. Thus, it is not very difficult to predict that conditions and service quality will deteriorate as service fees decrease. The upfront service fee element is currently 20 percent but many providers are demanding this is raised to 50 percent.

The rest of the contract value (80 percent) is paid on participants’ results or outcome, i.e. when they leave the programme to a job. These so-called ‘job bonuses’ are larger than before and the six-week ‘tracking period’, during which bonuses can be claimed by providers, is over double the previous time. The bonuses are capped at one bonus per unique participant, which means that if someone got a job within the 12-month programme period but after the 13 or 26 weeks needed for the provider to prove they have found them a job or a sustainable job respectively, they are likely to be ‘parked’ as there is no money to be gained from them as the provider would have been paid already for that person for the whole year.

FND providers are also delegated certain Secretary of State powers and can sanction participants for various ‘offences’, up to six months for the first offence. This includes the refusal to attend an appointment, apply for or take up a job, leaving ‘training’ before it is completed and refusal to sign the action plan drawn up by the provider.

While FND may represent a better deal for the private contractors, who get larger and ‘more flexible’ contracts, and for the government, which is expecting 3,288,000 JSA claimants to ‘flow off’ benefits in the financial year 2009-10, it is definitely a worse deal for benefit claimants. In addition to the tougher measures mentioned above, claimants will remain on JSA for the majority of the programme’s duration, instead of receiving Training Allowance on top their JSA, as was the case with old New Deals. A Training Allowance will now only be payable when a participant takes part in a full-time activity, such as full time ‘work-related experience’.

The new dealers

In May 2009, the security and public service giant Serco Group announced it had been selected by the DWP as one of the preferred bidders for three Flexible New Deal prime contracts. The five-year contracts cover North and Middle Wales, the West Midlands and Greater Manchester, with an expected value of £100-125m for the first two and £200-250m for the latter. In a press release, Serco described the contracts it secured as “the first in a significant new market.” Further, similar-sized “opportunities” are expected to be announced in the next two years.

Flexible New Deal does not represent a totally new market for all contractors, however. The biggest FND contractor, A4e, had already been the largest employment services provider in the country under the old regime. Despite being under investigation for alleged fraud, the growing company was nonetheless awarded five prime contracts in five contract areas (Cambridgeshire, Suffolk and Norfolk; Central London; North and East Yorkshire; South Yorkshire and Derbyshire; and the Black Country). Other ‘established’ providers who were selected by the DWP as prime contractors included Working Links, with four contracts; Work Directions, with two contracts; Pertemps, Seetec and The Wise Group, with one contract each. The total number of current FND prime contractors is 14. The number of Phase One prime contracts, most of which were awarded in Spring 2009, is 24, in total worth more than £1bn over five years. By 2011, 200 contracts are expected to have been awarded, with a combined value of £4-5 billion.

Each of these prime contractors subcontract smaller, and often local, organisations from the public, private and third sectors to deliver the services. This not only adds another layer of bureaucracy but is also another step away from accountability. In its report in response to the government’s welfare reform proposals, the parliamentary Social Security Advisory Committee raised a number of concerns about the proposals, including that small-scale, specialist providers in the third sector may “lose out to big private-sector contractors.” These concerns were, however, ignored and the plans went ahead.

The DWP has commissioned an ‘independent’ research consortium, headed by the Policy Studies Institute, to evaluate the new benefits and employment regime, with the aim if determining the overall effectiveness of the reforms. The final report is expected to be out in late 2013 but it is doubtful that it will say anything different from previous government-commissioned assessments. After all, the PSI describes the “importance of the research” as follows: “The evaluation will test the extent to which [the new Jobseeker regime and Flexible New Deal] lead to additional employment outcomes for individuals in this client group and the cost effectiveness with which this is done.”

 
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