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Archive for July, 2010

This morning Rt Hon Iain Duncan Smith launched the consultation paper ‘21st Century Welfare’

He explained that “this is not a question of whether or can we reform it but it should be about what we reform”

“This is a real opportunity to reform our antiquated welfare system”

IDS has taken his lead from Beverage’s principles to get rid of

  1. WANT,
  2. DISEASE,
  3. IGNORANCE,
  4. SQUALOR and
  5. IDLENESS

The options for consultation on reforming the welfare system are:

  • A universal Credit (page 19)
  • Disregards and Tapers (page 21)
  • A single unified Taper (page 22)
  • Single Working Age Benefit (page 24)
  • The Mirrless Model (page 25)
  • Single benefit/negative income tax model (page 25)

The consultation begins on 30th July 2010 and runs until 1st October 2010.  benefit.reform@dwp.gsi.gov.uk

Read the Full details

Read the Command Paper here

Read the Quick Summary here

………………………………

Yes Minister will be presenting its comments and detailed musings from inside this mornings announcement.

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We welcome this inquiry!

The Coalition Government has a huge challenge.

The poor will suffer much more if we rely too heavily on using the welfare budget as one of the main leverages for cutting the deficit.

I am sure you have heard it before….. but the analogy of the swimming pool is appropriate and goes like this

…… You have a swimming pool with a ladder ascending out of it.

There are three people on the ladder, one on the top rung, the other in the middle and the last person is at the lowest point  just above water level.

In the interest of fairness and equality each person is told that they need to share the pain and will need to go down 1 rung to make room.

After stepping down one rung, the person at the bottom begins to drown because his 1 rung was the only thing that kept him above water.

The changes to Housing Benefit will quite literally be a matter of life and death for some individuals and families.

I think that we all agree that something needs to be done; lets hope that this inquiry will effectively sift the evidence and arrive at conclusions that are fair and equitable, that protects not only the most vulnerable but the needy and those on the Margins.

PEACE

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Newsletter 29th July. Challenge to DWP Framework, Invitation from IDS, Kennedy Scott celebrates, Accelerator Funding Model and unit costs

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The sector has been myopic and has erroneously focused on a single element of the Payment by Results regime.

The Document; The Work Programme Framework makes two very important observations……

  • “the price paid for job outcomes should not exceed the benefit savings that have been generated”. See IB, JSA  savings for 1 year divide by 12 x by 13 or 26 weeks =: thats more like it!! ( I know its crude but does it work?

On page 4, paragraph 5 of The Work Programme funding model says;

  • Whether contracts within the Work Programme are  “….exclusively or heavily outcome-based….”  This is of material importance

Exclusively or heavily outcome-based implies the potential for there to be a myriad of interconnected outcomes.

Can I draw your attention to the suggested payment structure presented by David Freud in Chapter 4 of Reducing dependency, increasing opportunity: options for the future of welfare to work 2007
A potential payment structure
Once a provider has successfully supported a move into employment they
would receive separate payments for:

  1. The initial move off benefit
  2. Continuous, or near continuous employment for 13, 26, 52, 104 and 156 weeks
  3. Personal pay progression, possibly reflected in a lower requirement for tax credits
  4. Improvements in the person’s qualifications
  5. Bonus payments linked to targeted outcomes across all client groups
  6. Bonus payments for specific outcomes linked to wider Departmental objectives (such as the Child Poverty target)

Payments would also need to be weighted to reflect the complexity of needs of claimants so that the hardest to help would yield the greatest payments for successful outcomes. This would ensure that the incentives exist to extend the opportunity of support to everyone within the system.

……………………………………………….

So there we have it…  we need to embrace ALL the potential In-work outcomes …… so lets get to it.

.. here’s the link to chapter 4…. “>

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Today Yes Minister spoke exclusively to the author of yesterday’s controversial response to DWP’s consultation: A Benson

“It makes no sense if everyone is pretending that capital can be raised and that the payment model is workable , it simply is not. I noticed that despite everyone moaning and groaning few people have bothered to respond, I suspect this is because they are all worried about causing waves as all are heavily dependent on DWP contracts and do not want to be blacklisted. This is the main problem with the industry at the moment and this is why we cannot lobby collectively or speak with one voice”

“I have been researching the possible contraventions of UK and EU public sector procurement regulations and legislation…”

READ THE FULL CONTRIBUTION TO THE CONSULTATION;

Author: ABenson
Comment:
I agree with most of the comments above, my ears are still ringing with the laughter of some associates in the banking sector when it was suggested that capital can be raised to support Welfare to work providers. No bank or venture capitalist would touch businesses or organisations in the sector with a bargepole for reasons which are clear and have been so articulately enunciated by previous commentators not least of all when financial forecasts are impossible to prepare in the current climate, there are simply too many uncertainties. If the Govt itself is not prepared to take the risk by providing upfront payments why would an investor?
If we want providers to be able to access capital then DWP must be able to provide guarantees’ upon which business plans and projections can be drawn up and there must be some effort made to ensure that contracts are worth more than the paper they are written on and a commitment from the Govt not to arbitrarily terminate contracts which would provide some assurances from any would-be investors if any can be found.
In addition, the legality of the qualification criteria for the framework should be questioned; as  it may, as currently constituted, be non compliant with EU and UK non-discriminatory regulations on public sector procurement. Public sector procurement must comply with all applicable EU and UK procurement legislation, in particular the principle of non-discrimination, and apply the rules to all potential tenderers in a fair and transparent manner.

Competition effects from procurement can be both positive and negative. The public sector, by virtue of its overall demand in certain markets, may be in a position to protect and promote competition, for example by maintaining a competitive market structure through deliberately sourcing its requirements from a range of suppliers, by providing incentives to suppliers to invest and innovate, or by helping firms to overcome barriers to entry. It may, however, also restrict and distort competition, e.g. by adopting procurement practices that have the effect of restricting participation in public tenders and that might even discriminate against particular types of firms.  The current qualifying criteria for the framework as it now stands eliminates at least 90% of the market and could even be seen to promote collusion and create cartels, all these go against anti-competition laws.
The framework and the qualifying criteria will reduce competition e.g. by increasing the gap between large and small firms within a market, or by forcing some firms to leave the market altogether. A rule of thumb is that more bidders make for more intense competition, resulting in lower prices and better quality. Even though the incremental benefits from having more participants in a tender may become smaller as the number of bidders increases, in most circumstances adding bidders increases the level of competition. This suggests that any feature of public procurement processes that limits participation has a detrimental impact on competition, which, in turn could increase costs for the public purse.
I suggest that the whole premise of the framework and the work programme be reviewed in the light of its possible contravention of procurement legislation and the negative impact this would have on the market

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The aim of the coalition is a), to reduce the claimant count and b), to assist more people into work. The last quarter has seen a surprising but uncertain growth in the economy of 1.1%. The increase in this quarters employment figures is encouraging, but the impact of the deficit reduction plan as will be outlined in the forthcoming Comprehensive Spending Review (CSR) will result in significant job losses in the public sector. The impact of these job losses are likely to trickle down resulting in people who are furthest from the job market being displaced and moved further down the pecking order as competition for entry level jobs increase.

Added to this will be the reassessed IB claimants who are moved on to ESA and those deemed fit for work who will be moved onto JSA. The JSA count is set to expand hugely.

As a suggestion, maybe over the next 15 months the focus should be on an active programme of assisting large numbers of claimants into work. So, for example,

·    The Accelerator Funding Model should not be implemented on commencement of the Work Programme. If an accelerator model is to be used, it should be phased in over the economic cycle of 3 quarters,

·    In order to encourage investment into the sector the focus should be on getting quick wins – see our piece on the myriad of measurable outcomes.

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Has the sector missed the point about outcome payments?

The sector has been preoccupied and obsessing about unit costs of circa £1,500. One can fully understand this because as we know, the unit costs for FND1 & FND2 were very testing and the costings for PEP were totally unrealistic.

The first principle in any business is to understand and to know your costs: if the costs do not add up then you negotiate or walk away…..!!!

Lord Freud stated,

“the costs of helping individuals move into work need to be understood. Once the proposed regime is fully developed, both the State and the provider would then have a fuller knowledge of the expected cost of the support needed for an individual claimant”

Question 1, is “the proposed regime fully developed?”
Answer No it isn’t.

However, regardless of whether it has been fully developed or not the fact remains that the sector has not adequately, consistently and with a united voice clarified and advised on the ‘true’ cost of delivery; the position has been reactionary rather than proactive.

Every now and then however; it is useful to revert to source material and revisit initial thinking.

At the time of writing Reducing dependency, increasing opportunity: options for the future of welfare to work 2007 David Freud outlined that the fiscal gain of moving an average recipient off benefit and into work for a year resulted in a substantial gross saving to the exchequer. The initial cumulative costs would be in the region of;

  • £9,000 for Incapacity benefit claimants,
  • £8,100 Jobseeker’s Allowance,
  • £4,400 lone parents,

Freud acknowledged however that the real costs would in fact be a multiple of these figures.

So for Incapacity Benefit payments once a person has been on IB for a year, they are on average on benefit for eight years. Freud writes that a genuine transformation into long term work for an IB claimant is worth a net value of around £62,000, per person to the State.

Ok Floyd…. What are you saying…?

My first point is this…..

  • Whilst we do not know how long a former IB –ESA, JSA, or LP claimant stays in work, the cumulative figure is as reasonable a starting point from which to begin discussions as is the compound risk of a purely outcomes focused contract with no guaranteed flows.

My second point is this

  • The Document; The Work Programme Framework “…the price paid for job outcomes should not exceed the benefit savings that have been generated”.makes a very important observation…… See IB, JSA  savings for 1 year divide by 12 x by 13 or 26 weeks =£x,xxx : thats more like it!! ( I know its crude but could it work?

My Third point is this

  • The department should proportionately apply the cumulative net savings over a given period this will provide considerable room for DWP to be more malleable around unit costs so for example, in the first 2 quarters of contract DWP could ‘front-end load’ payments… Remember what Lord Freud said at the Alps Conference about getting the pricing RIGHT and UP –see our report).

o    The ‘front-end loading’ would have additional trigger and drawdown points.
Finally,

  • This approach would provide the scope for the department to be more expansive regarding sustainability,

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