More economic gloom as the Work Programme enters a critical phase

We covered some gloomy economic news yesterday, but the latest news from Greece sounds a little more “promising” as some reporters have called it – the political parties that favour the bailout are gaining in the opinion polls. So maybe Greece will stay in the Euro – good news! Well... perhaps not.

The austerity needed is – in my personal view – unachievable while it is imposed by an external agency on the Greek nation. Tax revenues are collapsing, and if the pro-bailout parties win, we'll see civil unrest by the end of 2012. So don't get too optimistic if the election goes in that apparently positive direction in a couple of weeks time.

Talking of tax revenues, there were a couple of worrying numbers from the UK recently that didn’t get too much media coverage. The public spending figures for April were worse than expected, (once the on-off effect of transferring Post Office pension liability was stripped out) with higher spend and lower tax revenues. That could obviously be bad news for achieving any deficit reduction in 2012/13.

… the public sector borrowed far more than expected at £11.5bn for the month. Howard Archer, chief UK economist at IHS Global Insight, said: “It is not the start to fiscal year 2012/13 that George Osborne would have been looking for.”

A key element in terms of controlling public sector costs will be the reforms to the benefit system. And there have been rumblings recently in terms of how the flagship Work Programme is going. The letting of these contracts was a procurement triumph; but a number of providers to the Department of Work & Pensions have withdrawn from the scheme which aims to get unemployed folk into work. It’s not the Prime Contractors pulling out, to be fair, but a number of subcontractors (some of them third sector / charities). That's in part because the volume of benefit claimants they expected isn't coming through the system.

Now that might be good news for the taxpayer, you may think. But not necessarily; there appear to be some process issues, and we do know that there are a huge number of claimants challenging decisions to disallow their disability-related claims. And there have been reports of the Minister commissioning a review into the Programme, as it isn’t getting enough long-term sick and disabled people into work.

And that’s the crunch – just how successful are the providers being in terms of getting unemployed people into jobs? We won't know that till the first figures are published in the autumn.

While the financial risk was transferred very successfully to these providers – so the taxpayer won't be subsidising them if they fail to find people jobs – the taxpayer will of course still be paying the unemployed their benefits if that is the case. So we can't transfer risk entirely, which is the case in most outsourcing of public sector responsibilities.

And, coming full circle here, if the Work Programme providers can't hit their targets in terms of placing people, that will be a sign of economic weakness, in part caused by continuing travails in the rest of Europe. This weakness will inevitably both increase welfare costs,  and reduce tax revenue.

I can't help thinking that, if the early results from the Work Programme had been good, we'd have been hearing Minsters shouting about them by now. So I will predict now that they'll be disappointing; and, unless further cost cutting measures are taken, the UK’s 2012/13 deficit will be comfortably above the current plan. But then, I think I’m basically a pessimist by nature.

And if that does come to pass, we may see focus coming back onto the contribution that procurement is making, or could make, to public sector cost savings.

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Voices (4)

  1. James:

    I recall in the 60s the unemployed would go to the local unemployment office, the person at the desk would go through a number of cards and arrange several interviews for jobs. Somehow, the lazy civil servants managed to outsource any responsibility beyond checking checklists, perhaps reviewing C.V.s and following up on people to find out who has found a job that they can include on a monthly report and lie that they somehow helped to find. These lazy people need to get back to calling around, setting up a system, whereby they know the employers, vacancies and can help the unemployed. Not just focus on ducking any real work in the search for justifying their own jobs. I have dealt with these people, and they are scivvers.

  2. James:

    I dont understand why we havent taken to the streets in huge numbers. We have thieving politicians (how many were really prosecuted for stealing expenses, and they are still at it), service people dying in wars as the price for Bliar to get rich in the USA, pensioner poverty is widespread, working poor, high taxes, high numbers of unemployed, failing NHS, immigration way beyond control, rising violent crime, school standards falling and the list goes on. The politicians, the bankers, many business leaders have well and truly screwed the country over, but they will follow Bliar and Thatcher to the USA or somewhere. They will vote with their feet, not live in the mess they helped create.

  3. bitter and twisted:

    nah, theyd make more money taxing tin foil.

  4. Rob:

    Peter, if it all hits the fan, they can simply cause a national panic towards the end of the financial year – as they did in the previous financial year (how timely…) – to encourage millions of citizens to over-stock on petrol when it wasn’t necessary – to add a few extra billion to the coffers. Needless to say, we pay more fuel duty/tax than any country in the EU.

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