From the FT:
UK seeks private bids on welfare delivery
By George Parker and Alex Barker in London
Britain’s entire welfare system is to be opened to offers from the private and voluntary sectors, in a far-reaching drive to shrink the role of the state and improve service delivery.
James Purnell, work and pensions secretary, will on Wednesday announce a “radical” initiative in which private companies will be encouraged to come up with innovative business models to deliver welfare.
The move opens up a potential multi-billion pound market for private companies and voluntary groups, which could bid to run everything from welfare-to-work schemes to projects to rehabilitate former prisoners.
Mr Purnell, regarded as one of the ruling Labour party’s leading modernisers and sometimes tipped as a potential future leader, told the Financial Times the move represented a “big step” in transforming Britain’s welfare system.
Current rules, under which Mr Purnell’s department decides which services to put out to tender, have seen the value of services run by the private and voluntary sectors rise to £1.8bn ($3.5bn, €2.3bn) from £600m in 2001.
On Wednesday he will announce “a complete reversal” of that approach, so that outside contractors will be encouraged to come up with proposals for the services they want to run under a so-called “right to bid”.
“This is us saying very clearly the only limit is the quality of service and the imagination of the provider,” Mr Purnell said. He said all services would potentially be up for grabs, with his department reserving only a few policy functions for itself.
He said Job Centre Plus, a government agency, provided “world-class” services in helping people back to work, but even that operation could be transferred to outside contractors if they had a better business model.
The test of Mr Purnell’s ambition will be the extent to which business proposals turn into contracts, but the secretary of state said every offer would be properly evaluated by a commissioning team reporting to him and his top civil servant.
He said British companies exploiting this new market would be able to expand into world markets for welfare delivery. He said only Japan operated a similar “right to bid” philosophy.
The “open invitation” to new ideas extends across welfare provision, including proposing welfare to work schemes that would pay private and voluntary sector service providers from the government savings made from finding jobs for the unemployed. “I’m not ruling anything out,” said Mr Purnell.
The measure is a further sign that Britain is willing to open up the “multi-billion pound” welfare-to-work market for private and voluntary providers envisaged in the Freud report, an independent examination of welfare reform.
Several international welfare-to-work companies – including Maximus and Rescare, two big US providers, and Igneus, the Australian owner of Work Directions, the UK-based group – have already begun targeting Britain as a potential growth market. They are joining domestic providers of existing programmes including A4e and Reed-in-Partnership.
Several big government decisions over systems of funding for welfare-to-work schemes and programmes to tackle the 2.6m people on incapacity benefit are expected in coming weeks. [Emphasis added.]