Cash crisis looms for welfare to work providers

Social enterprises delivering welfare to work will be facing a cash crisis in the spring as the three-month gap between current contracts ending and the Work Programme starting comes into effect.

Evidence came out in a Work and Pensions Committee hearing this morning that some organisations were already giving staff 90 days notice in case the organisation was unable to survive the gap between March and June this year.

Rob Murdoch, executive director of A4E, who was speaking to the Work Programme enquiry as chair of the Employment Related Services Association (ERSA), said: ‘Some organisations are already issuing letters to staff to give notice.’

‘My big concern about the transition period in terms of organisations being starved of funding is they are then not fit for purpose when the Work Programme starts,’ said Murdoch.

ERSA CEO Kirsty McHugh called the gap a ‘huge problem’ and head of fundraising at the Prince’s Trust Caroline Taunt told the group of MPs ‘small organisations don’t have the cash flow to sustain services’.

Work and Pensions Committee chair Anne Begg said: ‘There is obviously an issue about this transition and the committee recognises the urgency of that.’

The transition issue could be just one of the many possible problems facing social enterprises as the Work Programme contracts come into effect.

Taunt said: ‘There is a term that is emerging in the bid process of the voluntary sector being “bid candy” – that prime contractors are involving the voluntary sector just to make bids look good.

‘These have to be genuine partnerships rather than the voluntary sector being there for show.’

Several speakers raised serious questions about whether the extra money allocated in the contracts to certain job seeker groups, for example those coming off incapacity benefit, was enough to cover the costs of providing services to those with the greatest barriers to employment.

McHugh, whose organisation represents large private contractors and small voluntary sector providers, told Social Enterprise the best answer she could give to this question was ‘maybe’.

She said there should be an ‘ongoing review’ mechanism built into the contracts with organisations forced to disclose how many people they were getting into work and where they were failing.

Benefit before need

Another fundamental concern brought out this morning was that people on the Work Programme are graded according to what sort of benefit they are on – not according to their needs.

In this way all young people on Job Seekers Allowance (JSA) are considered to be among the easiest to get into work, but this masks differences within that group.

Head of Employment Links for Community Links Jonny Boux said: ‘There is a very strong idea that the differential payments [for different job seekers] should be based on needs not just categories of benefits.

‘[If not] there is a real danger that certain groups which we support at Community Links will suffer,’ said Boux.

CEO of social enterprise The Wise Group Laurie Russell said: ‘We need to be looking at the needs of the individual not necessarily the benefit payment they’ve been previously on.’

CEO of St. Loye’s Foundation Christopher Knee also warned payment by results meant there was a danger of Work Programme providers ‘helping those easier to get into jobs to the detriment of those harder to help within the same group’.