A scheme to help the long-term unemployed back to work has “serious flaws” that could cause contractors to back off, according to an independent think-tank.
The Department for Work and Pension’s (DWP) Flexible New Deal programme, to be trialled later this year, will open up contracts to private companies that specialise in getting the long-term unemployed into work.
But the Social Market Foundation (SMF) think-tank claimed that the way in which the contracts were being awarded would force firms to make unrealistically cheap bids for the work, causing programme delivery to “collapse”.
Ian Mulheirn, chief economist and author of the body’s report, The Flexible New Deal: Making It Work, said: “The current proposals represent a failure of market design, where contractor and government objectives don’t match. A better tendering process should be established.”
Other flaws identified included the ‘flat-fee’ payments to providers for each person they find a job, which the SMF claimed would effectively encourage firms to write-off the most needy jobseekers.
Stephen Timms, minister for employment and welfare reform, said the scheme would give providers freedom to offer the best personalised services for jobseekers. He added the government would review payment methods as the trials take place.
Welfare-to-work provider A4e secured jobs for 11,000 people in the UK last year, and claimed it could find work for up to 100,000 annually once the system was right. The firm defended the Flexible New Deal programme last week.
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