'Iain Duncan Smith, as ever cavalier with numbers, claimed in the Mail on Sunday that his cap on benefits is driving people into work, before it’s even begun.' Illustration by Satoshi Kambayashi

More on the ‘Workfare’ Ponzi Scheme and, if you get into bed with the Devil, don’t be surprised when he boots you out….minus an organ or two

This article titled “Anna’s charity was bid candy for the Work Programme. Now it’s bankrupt” was written by Polly Toynbee, for The Guardian on Thursday 19th July 2012 20.45 Europe/London

Good unemployment figures? Less bad than feared in this longest of recessions, but how good? Of the 65,000 drop in the total, 61,000 were in London, and the Office of National Statistics suggests these are due to 100,000 temporary jobs at the Olympics as bar staff, cleaners and security guards. Meanwhile, the trend for the long-term unemployed trudges inexorably upwards, now to 441,000. Worse is the continuing rise in the young without work, four times higher in a year. The damage done to them over the whole of their rest of their lives is well-documented from the lost generation of the early 1980s who never recovered, in and out of work for life.

Iain Duncan Smith, as ever cavalier with numbers, claimed in the Mail on Sunday that his cap on benefits is driving people into work, before it’s even begun. “These figures show the benefit cap is already a success and is actively encouraging people back to work.” He says 58,000 claimants were sent a letter warning their benefits will be capped next April. Of these 1,700 have since then taken a job. But that’s fewer than 3%, which the Institute for Fiscal Studies says is consistent “with the policy having no effect at all. Over any period, some fraction of an unemployed group will probably move into work.”

But no one really knows, because the Department for Work and Pensions didn’t collect any figures for how many of this group usually moves into work. So Channel 4’s brilliant FactCheck concludes: “His figures don’t show the benefits cap is already successful at getting people back to work.” When challenged, the DWP had to fall back on faith: “The secretary of state believes that the benefits cap is having an effect.” Faith-based policymaking is something he is good at.

Faith is what’s needed for his Work Programme, too: what sort of claims will he make for that when the first figures are finally published in the autumn? So far, radio silence. This week I was contacted by someone on the Work Programme who had good help from Eco-Actif Services, a small charity delivering specialist help into jobs for ex-offenders and people with mental health and addiction problems. Last Friday Eco-Actif went bankrupt, unable to raise money to tide itself over in a process where payments are complex and delayed.

In the many tiers of the Work Programme in Sutton, A4e holds the prime contract, while G4S has the other part of Surrey. Eco-Actif is the sort of “bid candy” charity big companies use to win their prime contracts: the charity sector was shocked at winning only two of the 40 main contracts but only large commercial companies could raise the up-front investment funds. A4e puts up the money and passes the work down to 3SC, a social enterprise, which hands the work on to a panoply of smaller charities. But nobody knows how much A4e creams off the top. Eco-Actif thinks it may be 50%; 3SC (which only takes 12% for itself) reckons A4e might take 30% – but it’s a commercial secret. Meanwhile, those doing the actual work are paid little until they have placed people in jobs for six months.

Eco-Actif was created when Sutton council closed its employment department. Anna Burke and others made redundant turned it into a social enterprise, just as David Cameron extols. Nearly half of the 14 staff were themselves drawn from those who had been unemployed or were ex-offenders. Now retiring, Anna has lost all the £20,000 life savings she put into it – which she contrasts acidly with A4e’s founder Emma Harrison’s £8.6m dividend.

After a meeting with David Cameron before the election, Eco-Actif staff were enthusiastic believers in his “big society”. No longer. Anna says there is no way a small charity can both survive financially and offer a good service: “The whole of the Work Programme is cherry-picking. We were a small charity signing a contract with a giant A4e and their lawyers. Chris Grayling just says it’s ‘More fool you’ to charities who signed bad contracts.”

The Work Programme payment system is fiendish, with nine grades of jobseeker, depending on age and type of benefit – but payments are not made until they have been in work for 26 weeks. Now Eco-Actif staff are themselves down at the jobcentre, signing on. “We have a fabulous team who do wonderful work, but the Work Programme is toxic if you want to provide real support for people who need it most.” 3SC, the contractor above them, says kindly of them: “Their trouble was they cared more about the hard cases than the easy ones. But you can only get income from the low-hanging fruit.”

The economy is the cause of the Work Programme’s trouble. Contracts were signed back when the Office for Budget Responsibility forecast growth at 2.6% for this year, when the job market should have been soaring – but instead the IMF predicts just 0.2% growth.

Then add in the lack of expected jobseekers with the highest bounty on their heads, the sick on employment support allowance (ESA). Following flawed Atos work capability tests, large numbers appeal, nearly 40% of whom are judged not able to work. The backlog of ESA people waiting for tribunals now stretches out to almost a year. However, Duncan Smith’s revenge on ESA claimants is nigh: a jobcentre informer tells me new rules in the autumn will tell staff to cut all benefit from any ESA claimant missing an appointment. Since they are all sick or mentally ill, there is a 30% no-show rate: “Given the high level of vulnerability and chaos in their lives, this will be a disaster for many.” It will leave them utterly destitute.

Currently Work Programme contractors are gagged, and cannot speak about their results. But when the first official results finally emerge, will they show Work Programme people are getting jobs ahead of others? But, and here is the second question, will there be any point at all to the whole enterprise? With jobs so scarce, firms are just fighting against one another and competing with the jobcentres to get their client in first. What an extravagance for the state to pay companies to leapfrog easier clients over the heads of others for jobs that would be filled fast anyway. The only valuable purpose would be to give intensive, high-quality help to people with difficulties – but that way risks bankruptcy, as Eco-Actif proves.

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