Auditing the future

24 January 2012

Today's National Audit Office report on the Government's Work Programme has provoked a furious response from Chris Grayling, MP. Is his fury justifiable?

Today, the National Audit Office (NAO) published a report assessing the value for money of the Government’s new Work Programme. The programme, which pays private and voluntary sector providers for getting the long-term unemployed back into work, was rolled out across the country in June 2011, just a year after the Coalition Government took office.

The NAO was impressed by the swiftness of the programme’s implementation and the way in which the department had learned from its previous experience of commissioning employment services. But the Audit Office is worried – and has laid a number of charges at the door of Department of Work and Pensions ministers and civil servants.

The first few read like classic change management difficulties of the type that the NAO would usually report on: no alternative policies were considered; IT systems were not fully ready for implementation; the department has been forced to pay off providers who were delivering existing contracts, even when these same providers will continue to provide services under the new arrangements.

But it’s the Audit Office’s foray into the realm of prediction that has really upset ministers. As the DWP’s minister of State Chris Grayling put it, “I’m really disappointed that the NAO is producing a report which is partially based on guesswork when it’s private companies and not taxpayers who are carrying the risks.”

This response is presumably related to the following NAO critique: “assumptions about the feasibility of the Programme might be over-optimistic. The NAO’s analysis suggests that 26 per cent of the largest group of job seekers in the Programme will get jobs, compared to the Department’s estimate of 40 per cent… It is possible that one or more contractors will get into serious financial difficulty during the term of the contracts.”

So is the minister right to criticise this forward-looking approach? In a sense, one can sympathise. Life as a minister is difficult enough without being criticised for things that could go wrong. But the NAO clearly feels that it has a role in highlighting risks to help departments to deliver value for money in future. And, as the contract has already been written, perhaps the NAO would argue that it is legitimate for them to comment on whether risks have been sufficiently identified and mitigations put in place?

Whether or not it is a role for the NAO, it seems clear that someone should be keeping an eye on whether the market for getting people back to work will deliver value for money, provide continuity of service to the jobless, and continue to allow fair competition. For, while many of the difficulties surrounding the collapse of Southern Cross care homes have been overcome for now, we know that public service markets don’t always run smoothly – as demonstrated by the fact that the Office of Fair Trading has recently provisionally asked the Competition Commission to investigate the private healthcare market, suspecting anti-competitive practices. Here, we can be more critical of Grayling’s comments – for his assertion that “private companies and not taxpayers… are carrying the risks” in the Work Programme is too simplistic. If providers decide that they’re not getting paid enough to bother putting lots of effort into getting the hardest to employ back to work then it is taxpayers who will foot the bill by funding their benefits payments; and if all providers decide that they don’t like the current contract terms and decide to leave the market, then the taxpayer will need to fund the replacement service (and possibly some transition costs). This is not a reason not to use public service markets and payment by results mechanisms if they can deliver benefits – but to ignore that these risks need to be managed is foolhardy.

This creates an urgent question. If Chris Grayling doesn’t think it’s the NAO’s role to assess such risks, and the NAO isn’t sure that the department is doing enough to mitigate them, then who should be performing this role? Have we found a new job for the NAO, should risk assessment be left to departments to manage, or is there a case for an ‘employment services’ regulator, given that Monitor is being asked to take on a similar function as part of the NHS commissioning reforms?

In any case, if the government does not want to give the NAO reason to look askance at its new delivery model, it needs to be able to give public assurance that it has done due diligence before setting off. A proper assessment, based on the 7 policy fundamentals we set out in Making Policy Better, would achieve that – and allow the department to prove that it had properly considered alternatives and risks.

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