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Voluntary sector massacred as Pathways goes private

27 September 2007
Voluntary sector massacred as Pathways goes private.

As predicted in August by Benefits and Work, the private sector won most of Pathways to Work regions in the first round of contracts to be awarded by the DWP to get disabled people off benefits and into work.

Private companies won 14 of the 16 regions, whilst the Shaw Trust was the only charity to get a contract. A shocked and furious Association of Chief Executives of Voluntary Organisations has already announced it is holding an inquiry into the matter whilst a trade union has accused the biggest winner, Australian owned 'WorkDirections', of being a 'failing' foreign company.

Pathways to Work is the DWP programme of six compulsory interviews for new incapacity benefits claimants aimed at moving them quickly back into work. It is a cornerstone of the new Employment and Support Allowance to be introduced next year and may eventually involve compulsory participation in 'work-related activities'. The DWP is contracting out Pathways in two thirds of the UK. Phase one covered 16 regions and was worth £250 million. Phase two, the awarding of contracts worth £500 million in 16 further regions, is due to be decided at the end of September.

The awards for phase one were as follows:

A4E Ltd will take over four regions: Devon & Cornwall; North & Mid-Wales; South East Wales; West Yorkshire.

Seetec Ltd will take over one region: Black Country.

Shaw Trust will take over two regions: Greater Manchester; East & West Norfolk.

TNG Ltd will take over one region: Lincolnshire & Rutland.

Triage Central Ltd will take over two regions: Forth Valley; Fife & Tayside.

WorkDirections Ltd will take over 6 regions: Central London; City & East London;
Lambeth, Southwark & Wandsworth; Birmingham & Solihull; Edinburgh, Lothian & Borders; Nottingham.

In August we reported that Peter Hain had said that he wished to 'maximise the voluntary sector and local government' involvement in getting disabled claimants back to work. We went on to warn that "whatever Mr Hain may be saying publicly, Benefits and Work understands that private sector providers did very well in the first round of contracts for Pathways to Work whilst some major voluntary sector agencies did very poorly." (See: Hain shuns private sector 14.08.07)

Even we weren't prepared for the scale of the defeat of the voluntary sector, however. Nor for the enormity of Mr Hain's u-turn on the subject of David Freud, the investment banker with enormous enthusiasm for replacing Jobcentre Plus with the private sector. Mr Hain had previously sough to distance himself from Freud, but when announcing the awards Mr Hain also proclaimed

"I met with David Freud last week and from that discussion it was clear we are in the same place. The old sterile battle for territory between public and private sectors is redundant. I am interested in one thing and one thing only: What Works."

Unfortunately, what works in the view of the DWP appears to be one thing, and one thing only: the private sector.

The decision has angered both the voluntary sector and trades unions. The Association of Chief Executives of Voluntary Organisations claims that the rules for the bids were unclear. They have commissioned Dame Mavis McDonald to hold an independent inquiry into the DWP's procurement system. However, this is unlikely to influence the award of the rest of the Pathways contracts, with the bids already in and a decision due to be made at the end of the month.

'Bloody questions'
The enormous success of Australian owned WorkDirections appears to be due to the fact that they were able to undercut other bidders. They achieved this by not including in their bid any amount for protection of salaries and pensions of staff being transferred over from Jobcentre Plus, something which voluntary sector agencies did. William Smith, Chief Executive of Work Directions parent company Ingeus, told Guardian Unlimited that the charities complaining about their failure to win contracts were 'whingers' who 'should have read the bloody questions and answers document'.

Meanwhile trades unions are enraged because not only does WorkDirections intend not to protect Jobcentre Plus staff pay and conditions but it is also not prepared to offer union recognition. The company is rumoured to be planning to sell its Australian interests, where it has recently had difficulties with staff pay and the quality of its service, in order to concentrate on the potentially much more lucrative UK market. The company is owned by the wife of the leader of the Australian Labor Party.

Mark Serwotka, general secretary of the Public and Commercial Services Union, told Guardian Unlimited: "the government has handed a large chunk of work to a firm which is failing and mired in controversy in Australia."