www.guardian.co.uk/politics/2012/fe...o-work-contractThis is interesting. A company called A4e has been awarded the contract aimed at getting the unemployed into work. This is a private company and all of its income comes from government contracts. They had contracts for previous schemes: they did not work. This is not disputed. Astonishingly that track record could not be taken into account when awarding new contracts. Apparently it would not be fair because other companies, who presumably did not win earlier contracts, do not have a track record of failure, and so it would not be fair to take that failure into account. That is the evidence given to a parliamentary committee, according to the report.
So, the private sector is more efficient, and it is accountable for the results it delivers; but those results are not part of the decision in awarding new contracts. Hmmm....
We are not talking chicken feed here. We are talking about contracts worth £160 - £180 million. And from that public money the company paid out £11 million in dividends: 87% of that went to the chief executive and the rest to another 4 directors. This is apparently because they take risks. Risks like not getting another contract if you are completely useless? Apparently not.
It is a fundamental tenet of privatisation that the profit and remuneration packages will be dwarfed by the "efficiency" savings etc. So we are asked to believe that those improvements will outweigh the additional 6+% paid in dividends: a cost which does not exist in public provision? Even if all else is equal that seems unlikely. But all else is not equal. This company must pay for premises: which is not true of staff who work for the DWP: they are being sacked in numbers and their premises are already being paid for. No idea how much to add for that.
An individual who claims unemployment benefit gets £67.50 per week. Many have dependents so let us pretend that they have a spouse and two children. In that case the family gets 235.29 a week (after housing costs) to live on. To be generous let us imagine they get £500 a month for rent. So the total amount of benefit for such a family is £ 1519.59 a month: but they do not see £500 of that: it goes to the landlord. Anyway, that is the total benefit bill.: £18235 a year.
A4e got a minimum of £160 million to get these folk into work. If we assume the whole amount is devoted to getting people into work, which is the purpose of the company, then it seems fair to assume that the contract cost can be divided by the benefits in payment to get a figure for reducing the benefits bill. If you do that on the basis of a family of two adults and two children it looks as if they they must find work for 8774 people. Not an unachievable target; and for everyone over that figure there is presumably a benefit to the public purse.
But that takes no account of the sums we pay to employers so they don't have to pay decent wages. So if one worker in our family gets a minimum wage job they will earn £6.08 per hour. On a 40 hour week that is about £12650 per year. After tax and NI contributions that will be Tax credits of about £1600 a year will be awarded in those circumstances. Housing benefit of about £6000 a year will be payable. The net saving in year one is then £18235- £7600 = £10635. The family had £18231 before they got the job and now they have £10562 (after tax and NI) plus tax credits and housing benefit: which totals £18162. They are not actually worse off because they will have child benefit on top: but that also increases the benefit bill. CB is £33.70 per week. So the family will get £1752.40 and a total income of £19914. And the benefits saving will be £10635-CB = £8882.6
The savings must be reduced by the cost of the exercise, of course: and that is not identifiable, because it depends on how many folk they get jobs for: and there is no way of telling whether any such jobs are real or are "substitutes", as the article points out. But we can say this much: each person signed up to the scheme attracts £400 no matter what happens next. In addition a tory minister recently said there are a total of about 400,000 vacancies in the UK now: there are 2.8 million people unemployed. We can be sure that some of those vacancies will be filled without the intervention of this company. So let us suppose they manage to find 50,000 jobs in any given year: I think that is generous, In that case the cost per job is £3200: and the benefit saving is then £5683 in the first year.
What is the point of this? Minimum wage jobs are insecure, so there is no guarantee of that year on year. £11 million goes directly into the pockets of the shareholders (who happen to be the 5 directors) so they have to find jobs which last at least two years for 1200 people just to pay their wages. It is actually worse than that because a job also includes work of 16 hours a week: and of course the benefits rise as the minimum wage income declines with fewer hours. In contrast if staff were employed by the DWP to do the same job we could have 458 people trying to help people into work if they all earned the median wage. And that is just for the directors remuneration: it takes no account of the other £149 million which is going to this enterprise.
So far as I can see this is not efficient: it is absurd
Edited by FionaK - 9/2/2012, 17:22
