More evidence private companies aren’t better in getting people into work

9:38 am - February 9th 2013

by Richard Exell    

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If there’s one doctrine that unites the current government and the last one, it’s the notion that the private sector always does things better than the public.

Independent research, published this week, provides another example to show that this belief is based more on faith than evidence.

This “private is best” bias is exemplified by the Work Programme, delivered entirely by private and voluntary sector organisations on a payment-by-results basis, with the DWP’s own Jobcentre Plus excluded from taking part.

But it was the last government that introduced a “right to bid” for private sector organisations that wanted to take over employment and welfare services, and the process of creating private-only reserves where public sector organisations were banned dates back to the early days of the New Deal.

But it has always been supported by very weak evidence. David Freud, now a Minister himself, admitted as much in his 2007 report for the last government, when he compared the cost per sustained job of the private sector-led Employment Zones (£5,110) and Jobcentre Plus’s New Deal 25+ (£5,130).

Well, the DWP has just published the final evaluation of another programme from the time of the last government: Pathways to Work.

Pathways to Work (PtW) was an attempt to get more people off Incapacity Benefit and into work, initially run by Jobcentre Plus, but, in its final phase, run on a ‘Provider-led’ model. In this phase, 2007 – 11, in 31 areas PtW was delivered by private, not-for-profit and voluntary organisations.

‘Provider-led’ Pathways also anticipated the Work Programme in its funding model, with providers paid a ‘service fee’ for taking people on to their caseloads, a job-outcome payment for getting someone a job and a sustained employment payment when they had been in work for 26 weeks. This evaluation looks at the ‘provider-led’ Pathways.

Now, overall, Pathways to Work was not a huge success. After some initial good results (and I was a strong supporter) it was a bit of a disappointment, so it wouldn’t be fair for me to quote the mediocre results for provider-led Pathways. But it is fair to see how these private and voluntary sector providers compared with Jobcentre Plus – especially as, coming late to the game, they were in a position to learn from JCP’s experience.

The study measures success in moving people off benefits, with the authors finding “similar impacts for PL Pathways and Jobcentre Plus Pathways, all showing an impact of around four percentage points.” The authors emphasise the difficulties in comparing success rates at getting people into jobs, but again, the impact seems to have been “comparable in scale”, though patterns of receipt of services “differed distinctly” between provider-led and JCP Pathways and they quote other studies suggesting that this pattern reflects “parking” of customers who were harder to help. The study’s conclusion on this issue is that

The overall net impacts of PL Pathways appeared to be comparable in scale to those found for Jobcentre Plus Pathways.

Once again, the alleged superiority of the private sector is hard to find. Don’t expect the DWP spinners to go to any great lengths to publicise this finding.

This is a shorter version of a longer piece here.

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About the author
Richard is an regular contributor. He is the TUC’s Senior Policy Officer covering social security, tax credits and labour market issues.
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Story Filed Under: Blog ,Economy ,Westminster

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Reader comments

Given that the opening sentence is incorrect, it’s no wonder that the whole article is poorly argued. How about using observation rather than ideology?

Private companies employ people to add value.
The Public Sector employs people to provide a service, paid for by the value added by the Private Companies.

It’s completely different.

3. gastro george

“Private companies employ people to add value.”

That’s funny, I thought private companies employed people to make money.

How about explaining why you believe the opening sentence is incorrect and why you disagree with the piece?


The public sector provide services which the private sector can’t make a profit from, these include education, public health, infrastructure, policing and defence. No doubt all the stuff that the private sector doesn’t need.


No, the public sector provides services the government decides should be provided by the state. The private sector could very easily make a profit from health and education.


The idea that “the private sector always does things better than the public” is one made up by those who don’t understand the thinking behind the Tories. It’s an easy one to rally behind if you want government to run public services, but difficult to justify in practice.

Does the author really believe that Tories want the military or the justice systems to be outsourced? How about government itself?

It is a matter of how much outsourcing you want, not all or nothing. I don’t hear any complaints about the drugs supplied to the NHS being developed by private companies, or buses and trains being built in the private sector. We used to have a government owned computer manufacturer and many other similar examples.

Only employers can create new jobs- by employing employees.

£5k a job!!!

They should all just keep out of the process.

9. gastro george

“Does the author really believe that Tories want the military … to be outsourced”

Some would – what happens in the US has a habit of migrating here. Google Blackwater Security.

Does the author really believe that Tories want the military or the justice systems to be outsourced?

Pretty sure the last labour and this current government were trying to flog off forensics lab services, which you’d think would be a key part of the justice system.

11. Vincent Alexander

Workfare is THE final solution. If people keep choosing to live the life of Reilly on benefits, let’s get something out of them in return for the benefit of all: everybody who has been on benefits for thirteen weeks should be made to do as much hard labour as possible, e.g., breaking rocks or cleaning sewers, to discourage malingering and to get some payback from such people for benefits given to them by society. I bet some “hard workfare” would soon “encourage” these idlers to move into employment, and, if it didn’t, then at least we’d have roads clear of rock and unblocked sewers and similar, which would benefit the many at the expense of the lackadaisical, slothful few.

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