Welfare to work "fat cats" thrive whilst many face redundancy

I am getting a bit sick of the “fat cats” in the welfare to work sector taking huge salaries whilst so many of their frontline staff face redundancy as a result of recent bidding announcements for Work programme. Take the case of Emma Harrison, the head of A4e.

The woman appointed by David Cameron to help troubled families get off benefits and into work has a joint income with her husband estimated at more than £1.4m after building a business empire based on lucrative "welfare to work" contracts with government.

A4e's latest accounts show that Harrison, who lives with her husband in Thornbridge Hall, a 12th-century stately home in the heart of the Peak District, has an 85.5% shareholding in the Sheffield-based company. She receives a salary of £365,000 a year. On top of this, last year she and her husband received an additional £462,000 from A4e for the company's use of her home for conferences and administrative work. From what I hear this ‘administrative’ work includes inviting staff members over to her place for a cuppa. I guess this is to show the oiks how the rich live. After all, one really must keep the working class in their place.

Her husband received an additional £626,856 for the lease of another property to A4e. Nice for some – I guess money breeds money.

Last December Cameron offered Harrison a role championing government efforts to help troubled families get back on their feet. "Emma and others will be helping to pioneer a new way of doing things: less bureaucratic, less impersonal, more human, more effective," the prime minister said. "Above all, treating the whole family as a unit, not just a collection of individuals.

What does Emma know about hardship, other than the fact she was born in Jaywick, now recorded as being the most deprived town in the UK? I’ll bet Emma didn’t see too much if it when she was growing up.. Indeed, she openly admits that as a child she moved to Sheffield and lived in a ‘big’ house. From details of her life, I doubt she ever experienced hardship, or living off welfare benefits.

Today she heads up a company reputedly worth £100 million.

All this at a time when A4e have placed all their staff on redundancy notice, though admittedly a proportion of them will be re-employed (albeit on lower salaries) as a result of the company winning in five areas in the UK.

It emerged last week another major player in the welfare to work industry, Serco, which has won two more contracts, had awarded its top executives bumper pay packets. Chris Hyman, Serco's chief executive, enjoyed an 18% rise to £1.86m, while Andrew Jennings, the finance director, received an increase of 7% to £948,295. The company's diverse range of contracts includes running several prisons, London's bicycle hire scheme and the Docklands Light Railway.

Serco have yet to publicise the extent of any redundancies within their organisation, but logically it is unlikely they will be able to maintain the same level of staffing. Large sections of the country were served by Serco employees and with the ending of Flexible New Deal on 1st June we can anticipate many of them will be consigned to the dole queues.

Working Links, one of the successful contractors of the new work programme, is from today sending redundancy letters to almost 600 of its 2,000 workforce, with the threat that more could follow if staff numbers for the new contracts are lower than existing levels. Meanwhile, their managing director, Breege Burke enjoys a handsome salary of over £220, 000 a year

The news about the Harrisons, Burke, Hyman and Jennings’ ' income will fuel a growing row over the extent to which the private sector is set to benefit increasingly from Citizen Dave, the people’s toff’s determination to widen its role in the provision of public services.

In a recently published report for the government, Will Hutton called for a fair pay code to be extended into the public services industry. He also called for details on justification of an executive's annual salary to be published and for more employees to become involved in companies' remuneration committees. The report, which is being considered at the highest levels of government, said remuneration "must be brought back into the context of the pay of the rest of the workforce through the disclosure of the ratio of top to median pay".

It seems the “fat cats” in the sector never read that part of the report.

Union leaders have described the salaries earned by private entrepreneurs whose businesses were taking on government contracts as "obscene". They said private firms were queuing up to reap massive rewards from plans to open up the National Health Service to "any willing provider".

Once again, it’s another example of how Citizen Dave looks after the rich whilst the rest of us scrabble around for any spare pickings as pushes us day by day to become an “alright for some” society.

Further reflections on the Work programme

The much anticipated outcome of the Work Programme competition has now been revealed. 18 different Framework providers have been rewarded with contracts. Ingeus UK have been named as preferred bidder in 7 Contract Package Areas, with A4e winning 5, and Seetec, Avanta and Working Links winning 3 contracts each. The voluntary sector was represented on the preferred bidder’s list by CDG and Rehab Jobfit. The earlier suggestion that FND providers might do well in their existing territories didn’t hold true. More importantly, Grayling’s assertion last month that every bidder would have a bite of the cherry proved to be unfounded. In other words, he lied. Three FND contractors (Remploy, The Wise Group, and Skills Training UK) were not named as preferred bidders, whilst several other primes missed out in areas where they are currently delivering FND, but picked up wins in other parts of the country. Framework bidders who were not named as preferred bidders included Atos Origin, BBWR, Eaga, PeopleServe, and Shaw Trust. As successful bidders and their subcontractors try to digest the result, attention will inevitably turn to the ramifications these results presents, the working capital requirements, and how long term return on investment might be achieved in practice. One can only speculate how Ingeus will finance their activity in 7CPAs!! Dean James, Chief Executive of Ingeus UK, said: “Ingeus is committed to successful delivery of this critical programme, to help transform people’s lives through lasting employment and to make a positive impact on society and the economy.” Andrew Dutton, Chief Executive of A4e, said: “The results today build on our strong track record of partnership working: more than 52% of our existing welfare to work supply chain partners and 68% of our total proposed Work Programme supply chain are public or third sector organisations, many of them small and specialised. A4e is delighted this news allows us to build on these important relationships to deliver our core purpose – improving people’s lives.” Michelle Manson, Managing Director at BEST, said: “I am absolutely thrilled that BEST has secured a Work Programme contract in West Yorkshire, as one of the smallest providers on the Framework we are particularly pleased with the outcome!” Kirsty McHugh, Chief Executive of ERSA, said: “ERSA welcomes the government’s early announcement of the successful Work Programme bidders and congratulates all those who have been successful in their bids. This is the culmination of a rapid and demanding procurement process, which has tested the mettle of private and voluntary sector providers alike.” What none of them will answer is how many redundancies we can anticipate within the sector as Primes prepare for delivery of the new programme on 1st June, 2011.

A future for the unemployed

Last week George Osborne cut £535m from the Department of Work and Pensions budget at a time when currently 2.51m (542,000 of these are classified as having been long-term unemployed) people are registered as unemployed and a further 8.16m people identified as inactive. Furthermore, Ian Duncan Smith has indicated that 2.6m people currently in receipt of Incapacity Benefit will be reassessed and those available for work will be transferred onto Jobseeker’s Allowance. He estimates that approximately 50% of these people will be added to the overall unemployment figures. Thus with 3 weeks of being in government the Con-Dems have managed to ensure we will have 12m people out of work, with possibly a further half a million to follow as the cuts start to take effect on public services.
Additionally, it is now known that 7.67m people are currently employed on a part-time basis, many of whom opt for this type of work because they are unable to secure full-time employment. The government, for its part, welcomes people taking this approach as it helps keep unemployment below 8% (Source: Office of Labour Market Statistics).
The Con-Dem approach to tackling unemployment remains vague and tomorrow, Chris Grayling, the Minister of State at DWP will meet with private training providers such as Serco (infamous for their running of Yarls Wood immigration detention centre) and A4e to outline how any new programme might work. We already know it is their intention to scrap all existing welfare to work programmes, such as Flexible New Deal, Future Jobs Fund, Pathways to Work and Flexible Routeways. We also know these will be replaced by the Tory flagship provision – Work Programme.
The only clear issue is that the funding arrangements for the new provision will differ substantially from all previously run contracts. According to plans already outlined, training providers will only be paid when someone has been in a sustainable job for 12 months. The existing mechanism allows for a training provider to claim a small service fee in order to cover costs and the balance paid once a person has been in employment for 3 or 6 months (depending on the contract). This will change under new measures and will be replaced by a mechanism where providers will generally only receive a payment when the ‘client’ has been in employment for a year – an approach that will clearly mean smaller providers and third sector organisations will be unable to bid for these lucrative contracts. The effect of this will be that local organisations who have an intimate knowledge of their area and the needs of the communities they serve will be substantially ‘disenfranchised’ because of Tory commitment to centralising services and their fascination with ‘big is beautiful’.
The government rationale for the Work Programme is that it will be cost effective to contract independent training providers to deliver this provision. However, the government seem to have failed to recognise a key flaw in their strategy. The total number of job vacancies for the period February – April, 2010 was 475,000, whilst the number of jobless people potentially seeking work for the same period was approximately 11m. Whichever way you look at it, the figures don’t add up. Understandably the Tories and their lap dogs, the Liberal Democrats, have been hesitant to suggest how training providers will be expected to create jobs.
In order to tackle unemployment in this country it is critical a number of key issues are addressed:
• First we need to create a substantial house building strategy to tackle the critical need for homes in the UK and address the high level of unemployment amongst those working in the ‘trowel trades’. This would include the creation of 1m new homes each year for 5 years and would be under the auspices of local authorities through social housing trusts and would offer employment to approximately 750,000 people.
• Introduce a series of programmes to tackle the high level of unemployment amongst young people – including restoring the Future Jobs Fund and introducing a significant apprenticeship programme in order to offer 250,000 new apprenticeships – automatically cutting youth unemployment by a third.
• Nationalisation the banking and finance industry in order that profits from these companies can be used to rebuild our industrial base. Further savings could be achieved by scrapping the Trident programme and reinvesting the money saved into local business initiatives.
• Renationalisation of the rail and postal system to protect existing jobs and rebuild our transport infrastructure. This would include a massive investment in improving our rail network
• Through the creation of worker-owned co-operatives and other common ownership programmes, establish a coherent industrial policy to support the establishment of a competitive and technologically advanced engineering industry in the UK. We were once one of the foremost industrial nations and this was allowed to slip into decline under Thatcher, Major and later by Blair.
• Develop ecologically friendly energy sources – wind farms, wave, solar etc. These new technologies would help establish many new jobs and add to the wealth of local communities.

This approach, whilst openly and unapologetically socialist in its emphasis, would tackle head on the issue of rising unemployment. Of course, critics would argue we can’t afford it right now because our national debt is so high, but in 1945 our debt was 216% of GDP compared to 51% today and a post-war Labour government initiated polices that by 1951 had created full employment.

If we could do it then – we can do it again!