US Edition The new Welfare Reform Bill will sweep away a range of benefits and replace them with a simple Universal Credit. Benefits claimants will get higher payments when they go to work, trying to give them a stronger incentive to take jobs.
Welfare-to-work providers will be rewarded for helping longterm unemployed back into work and able Lord Freud said they would be able to earn “very good fees” from the benefits overhaul.
He said: “Depending on the scale of the challenge the jobseeker faces, we will pay anything between £4,000 and £14,000 to the employment specialists – if they can get people into sustainable employment.”
The Government recognised that “it is very easy to throw an incredible amount of money” at new benefits programmes “without seeing results”.
There are 2.2million people on incapacity benefit, of whom 1.6million will be assessed to see if they are fit for work. Trials have suggested that one in three will be judged to fit to go back to work.
Under the plans, the Government will award contracts to a number of private firms to run its work programme. These companies would then help to find jobs for claimants, as well as appropriate training and even provide support for interviews.
They would receive a basic payment for the contract, and a further sum based on their success rate, to reward good performance. Organisations will be paid on a sliding scale dependant on the nature of the benefit claimant they help.
A recently unemployed jobseeker would attract a smaller premium than someone who has been claiming out of work benefits for years, lacked confidence and had little work experience.
The highest premium - £14,000 - would only be paid to a firm who has moved a long term claimant into work, as long as they have stayed there for at least two years.
Lord Freud, a former City banker, was unapologetic about the prospect of large companies making millions of pounds from plans to replace a number of different benefits with the single Universal Credit.
He said: “Payment by results means that we can reward providers who invest successfully to get people into jobs – especially the hardest to help.
“In turn that means that the providers have an incentive and work with the specialist groups that can deliver the frontline expertise required to achieve the biggest pay-offs.”
Speaking at a conference organised by the Institute for Public Policy Research, Lord Freud said in the past “fundamental reforms like this created too many losers in the short term, even though it was the right thing to do in the long-term”.
However there was now the political will, the political consensus and “the financial imperative to get something done courtesy of the deficit”.
This “payment by results” model was now being expanded into other parts of Government, such as among drug addicts and in prisons. He said: “There is no reason why we can’t replicate this approach more widely.”