Innovation in the Work Programme and beyond
In June 2010, the new Government announced its intention to overhaul and further streamline the employment, welfare and benefit systems.
From June 2011, FND was discontinued and was replaced by the coalition Government's flagship 'Work Programme' across Great Britain. The Work Programme has used innovative ways of commissioning and contracting, and has been designed with the intention of stimulating innovation, through freeing up of providers to deliver within a 'black-box' approach (building on FND), longer outcome-based contracts and incentives to work with those who need it most.
However, no evidence has yet been published on the extent to which innovation is actually taking place within the Work Programme, or whether constraints such as the financial models behind it are preventing investment in innovation.
For instance, the focus in the Work Programme on cutting costs and delivering performance may be crowding out the ability to try new things and to learn from those that do not work (particularly as some, including the NAO, have predicted that providers will fall short of their targets). The use of a black box approach may prevent the benefits brought by more open innovation processes.
In general, the welfare-to-work market has a number of structural rigidities that inhibit the innovation process. As a result, innovation can still happen, but is haphazard, and happens within a restricted framework.
Competition normally drives adoption of innovation and eventually drives those out of the market who do not adopt innovation. However, the welfare-to-work market is still at an early stage of development, and has not reached the stage where innovators are dominating the market. The use of payment-by-results and prime contractors to deliver services has also led to concerns that small, and often innovative, providers have been squeezed out of the delivery system.
To address these concerns the Merlin Standard has been designed by DWP with providers and representative bodies to try and ensure balanced supply chains and to prevent in future small organisations being written into contracts as 'bid candy' who are then not used in delivery of services.
The impetus for competition has also led to a lack of recognition that collaboration in some industry-wide issues will be beneficial. Market mechanisms to support collaboration are lacking, for example in staff training and leadership and in promotion of dialogue.
Alongside the emphasis DWP has put on trying to design innovation into the Work Programme, there have been a number of other serious efforts by DWP to actively stimulate innovation beyond the Work Programme and to use innovation thinking in the system. DWP announced in January 2012 of a £200 million payment by results scheme to help 'troubled families' and the launch of the Innovation Fund. However, it is too early to say how successful these two initiatives are being.
DWP Innovation Fund
On 12 May, the Government announced a package of measures to help address youth unemployment. These included a new 'Innovation Fund' of up to £30 million over 3 years from 2012 to support social investment projects. The projects will support disadvantaged young people and those at risk of disadvantage. The Innovation Fund (IF) is being commissioned via two rounds.
The first round of the IF focused on 14-24 year olds and provision starts in early 2012. The second round, which focuses on disadvantaged young people, and those at risk of disadvantage, aged 14 and 15 years to reduce prospects of them being or becoming long term NEET, was launched on the 20th January 2012.
Alongside the Work Programme, a new and innovative system of benefits and tax credits 'Universal Credit' is to be launched in 2013.
Universal Credit has the potential to help in moving beyond some of the constraints that have long undermined innovative ideas in the past. In theory it will enable individuals to more flexibly combine packages of work by removing the 'cliff edges' in the current benefits system, where benefits fall away sharply when individuals work a certain number of hours, disincentivising people to work small numbers of hours and disincentivising some people to move into work.
This should also make it easier to test and further develop new ideas around stimulating new markets in working time. In practice, its success will depend on the detail of implementation, much of which is still being worked out.
Next week we explore what innovation thinking can tell us about how innovative the current system is.
 NAO (2012) The introduction of the Work Programme. NAO http://www.nao.org.uk/publications/1012/dwp_work_programme.aspx
 Inclusion Blog: Innovation in employment services
 DWP (2012) The Merlin standard: promoting supply chain excellence, emqc
 There are a number of mechanisms in early stages to address these issues. The Institute of Employability Professionals focuses on skilling the 20,000 people in the UK who work in the sector (http://www.iemployability.org/)