Analysis: Subcontracts are the best hope for charities

Is the sector really benefiting from the Work Programme? John Plummer looks at what's in it for voluntary organisations

Kirsty McHugh
Kirsty McHugh

The claim by employment minister Chris Grayling that the new Work Programme represents a "massive boost for the big society" has been questioned by charities involved in the process so far.

Earlier this month, the Department for Work and Pensions named 18 preferred bidders for 40 prime contracts under the welfare-to-work programme. The voluntary sector was awarded two, the public sector one and the private sector 15.

The DWP announced that another 289 voluntary organisations would become subcontractors. Grayling later told parliament that the proportion of business likely to go to the voluntary sector was between 40 and 50 per cent.

But Kirsty McHugh, chief executive of the Employment Related Services Association, a trade association for the welfare-to-work industry, says full details of charity involvement won't emerge until shortly before the first five-year payment-by-results contracts begin in June. "The difficult conversations begin now," she says. "Some potential subcontractors that backed the wrong horses will now try to work with prime contractors that did come through."

However, a DWP spokeswoman says prime contractors could change subcontractors only if there was a "clear and justified" rationale for doing so.

McHugh also says it's no surprise that private companies such as A4E, Serco and G4S won nearly all of the prime contracts.

"Sector was not relevant; size was," she says. "The amount of financial risk providers are being asked to take on makes it difficult for charities. It was always set up for them to have more chance at subcontractor level."

Several new and established voluntary sector welfare providers failed to secure prime contracts.

A spokeswoman for the new third sector bidding consortium 3SC, which has 1,300 members but was rejected in November when the DWP drew up a framework of possible prime providers, says the sector needs "more enabling financial structures", such as the Big Society Bank, to finance bids. "Until that comes I don't think we stand much chance," she says.

Two voluntary organisations that fell at the final hurdle also expressed disappointment. Sally Burton, chief executive of the Shaw Trust, says: "We are seeking clarity on why our prime bids, which we firmly believe were good quality and designed around supporting people back into sustained employment, were not successful."

Laurie Russell, chief executive of the Wise Group, says it was "sorely disappointed" to have been overlooked: "This is a missed opportunity to develop the role of social enterprise, and the wider third sector, as major providers of welfare to work."

A spokesman for the Careers Development Group, one of the two successful voluntary sector bidders, says it aims to lead by example by ensuring 60 per cent of its supply chain consisted of charities.

"We see this as an opportunity to showcase the impact the third sector can make on getting people into work," he says.

But some small charities think the programme has ruined their chances of contributing to the welfare agenda. Anna Burke, managing director of Eco-Actif Services, which helps ex-offenders and substance mis-users in the London borough of Sutton, issued redundancy notices to all 14 staff last week.

It receives 80 per cent of its income from local welfare contracts that are not being renewed because, she says, local commissioners mistakenly think the national Work Programme caters for all welfare needs.

"I feel betrayed, because the government has trumpeted more work for the voluntary sector and it looks like there will actually be less," she says.

Rachael Maskell, national officer for the voluntary sector at the trade union Unite, agrees. "The agenda is being controlled by the private sector," she says.

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