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Welfare to profits as contractors cash in

That the results of the government’s welfare-to-work scheme have turned out to be worse than if it hadn’t existed at all is certain to be a disappointment for the ConDems, but for the rest of us it shouldn’t be a surprise.  

As most people are only too well aware, the economy is contracting, jobs are disappearing, real incomes declining. But the targets for the scheme were set in the run up to last year’s launch in the absurdly optimistic expectation that the economy would improve.

The target set for the 18 contractors of getting 5.5% of the 2.4 million long-term unemployed and people on sickness benefits a job for at least six months was hardly going to make a dent in the jobless figures, but not one of them has achieved anything like it.

Only 3.5% – that’s one in every 28 – of the people referred to the Work Programme have found long-term jobs. In spite of this the work and pensions secretary Iain Duncan Smith defended the scheme, claiming that over 50% of those who have been referred to the scheme have been taken off benefits. 

Either somebody is not doing their sums, or there’s now an awful lot of people out there without jobs or benefits – just like in America.

And although the scheme is supposed to work on a payment-by-results basis, making the contractors’ profits dependent on forcing people off benefits, hundreds of millions of pounds have already passed into their hands.

They include A4e – the subject of systemic fraud accusations from its own internal auditor earlier this year, G4S – the company that failed to supply the promised Olympic security force – and Ingeus, part of a global corporation founded by the wife of Kevin Rudd, former Australian prime minister.  

There’s a group of voluntary sector groups also signed up to the scheme which includes Mencap, the Citizens Advice Bureau, the Prince's Trust and Action for Blind People. Well meaning? Maybe, but they’ve become willing accomplices to this £5 billion torment of the sick and unemployed. Even Charles Dickens would be appalled.

So what has gone wrong? The Employment Related Services Association (ERSA), the lobbying group for the array of predatory companies feeding off the unemployed and sick, claims that things are now getting into gear and are set to improve.

The latest World Economic Outlook from the Organisation for Economic Co-operation and Development promises something very different. Already in July they predicted that unemployment in advanced economies would remain high until at least the end of 2013, with young people and the low-skilled bearing the brunt of what they euphemistically termed “the weakest economic recovery in the past four decades”.

But four months later, things have got a whole lot worse. The OECD has slashed its forecast for next year’s growth in the world’s advanced economies from 2.2% to 1.4% and warned that the risk of a serious global recession cannot be ruled out.

The OECD expects the seriously troubled eurozone economy to contract further in 2013.  Growth in the US is forecast at 2% next year down from a May estimate of 2.6 per cent – but only if Obama can pull off a deal with the Republicans and prevent the country falling over the “fiscal cliff”. Japan’s economy is expected to expand 0.8%, little more than half the growth expected in May.

Greece is expected to be the worst performer among the membership, with the OECD expecting its economy to shrink 4.5% next year. The Spanish, Italian, Slovenian and Portuguese economies are also predicted to contract over the course of 2013.

And the UK? The OECD predicts an expansion of 0.9%. But as far as the budget deficit is concerned – the subject of all the austerity, and the welfare-to work programme in particular – the UK will be performing worse than every other member except Japan.

So, in effect, the contractors – private sector and charities alike – have really been contracted to manage the contraction. They get state funding and the unemployed get state harassment and benefit cuts. More like welfare to profits than welfare to work.

Gerry Gold
Economics editor
28 November 2012

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