Thousands of experienced employment coaches are expected to lose their jobs over the next few weeks as ministers trigger the first stage of a massive shakeout of the government-funded welfare to work sector that will see it shrink by 75%.
The employment services industry is preparing for what one insider called “a bloodbath” as the Department for Work and Pensions (DWP) moves to replace the work programme with the much smaller work and health programme.
Documents seen by the Guardian reveal that seven of the 15 work programme prime contractors, including big private sector names such as Serco and Maximus, have not made it on to the initial shortlist for the new scheme.
The work and health programme shortlist, which is to be officially announced next week, begins a process in which the remaining eight work programme firms will compete with three new entrants for just six new regional contracts.
The final outcome, expected when contracts are awarded in late spring, could result in some firms being forced to abandon the market, or diversify into other contracted out public service areas, such as criminal justice or apprenticeships.
“This decimates the welfare to work industry. It represents the unravelling of nearly 20 years of unemployment support experience,” one industry insider told the Guardian.
Work coaches provide long-term unemployed clients with help to acquire a range of employment and life skills designed to increase their chances of finding work, such as CV writing, IT skills and literacy, as well as liaising with potential employers.
Thousands of work coach jobs are expected to be lost. “This means large job losses among really experienced frontline advisers, the majority of which are in charities,” said Kirsty McHugh, the chief executive of the Employment Related Services Association.
The work and health programme is expected to start in the autumn and aims to provide specialist support for long-term unemployed people, especially those with health conditions or a disability.
Funding will be about £100m a year over four years. This is about a quarter of the current annual spending on the work programme, which closes at the end of March, and work choice, which will continue for a few months longer.
Ministers have been warned that the cuts will undermine the government’s ambitious commitment to halve the disability employment gap by 2020, which requires it to find jobs for about 1.2 million people with disabilities or long-term illnesses able to work.
Ministers are understood to believe that rising employment levels, coupled with the provision of extra disability employment advisers in Jobcentre Plus, means that recent high levels of investment in employment support are no longer needed.
But the Commons work and pensions committee warned in November that the scale of the cuts to the work and health programme meant that many disabled and ill claimants would be unable to access support.
Tony Wilson, the director of policy and research at the Learning and Work Institute thinktank, said: “The work and health scheme will support far fewer people and it would not be able to deliver services to the extent that could be done previously.
“Our assessment is that this scheme will make a vanishingly small contribution to the halving of the disability employment gap.”
Of current work programme contractors, Serco, Maximus, Seetec, Interserve, Learndirect, NCG and Rehab Jobfit are not on the work and health programme provider shortlist.
The following firms have made it on to the shortlist, known as the framework: PeoplePlus (shortlisted in all six contract regions), Shaw Trust (5), G4s (5), Ingeus (3), Reed (3), Working Links (3), Pluss (2), Prospects (1), APM (1), Remploy (1) and Economic Solutions (1).
The regions covered by the framework are: central, north-east, north-west, southern, home counties and Wales. London and Greater Manchester will run their own devolved work and health scheme.
The work programme – which was launched in 2011 by the then secretary of state for work and pensions, Iain Duncan Smith – achieved mixed results and was fiercely criticised for the low numbers of disabled and chronically ill people it succeeded in supporting into work.
It was also dogged by controversy over alleged misconduct by work coaches, and the high salaries earned by top executives. Emma Harrison, the founder of A4E, was criticised for paying herself dividends of £8.6m in 2011, on top of a £365,000 annual salary.
Harrison, who had a brief spell as former prime minister David Cameron’s “families tsar” sold her personal stake in A4E to Staffline group in 2015 for a reported £20m. The relaunched company, PeoplePlus, is shortlisted in all six work and health programme areas.
Industry insiders expressed surprise that Maximus – which has gained notoriety as the provider of the DWP’s controversial “fit for work” tests – failed to make the shortlist as it had been seen as one of the best performing work programme providers in terms of getting long-term jobless people into sustainable jobs.