Thursday, February 23, 2012

The problem with privatised welfare

At the moment the government is considering privatising welfare provision by outsourcing youth employment services to its providers in the private sector. Surprisingly, Treasury is opposed. Why? Because it exposes the government to a high risk of fraud:

However, Treasury advise that there is significant risk of private providers gaming the system, for example by classifying young people at a higher risk of long term unemployment than might actually be the case. Treasury also advises the complexity of case management will make it very difficult for the Ministry of Social Development to audit the private contracts and compare their outcomes with the Ministry’s own service delivery.
Contrary to Paula Bennett's view, this isn't just a theoretical risk. They did this a few years ago in the UK - and just yesterday, UK police arrested four staff from welfare-to-work provider A4e on fraud charges for falsely claiming that people had been placed in employment. And this isn't an isolated incident. This company alone has been investigated nine times since 2005, and been forced to repay money five times for fraud including falsifying "confirmation of work" forms and forging employers' signatures. They've lost private data of their "clients" by transporting it on unsecured laptops. And its been found to be abusing work-for-dole provisions to extract slave-labour from the very people it should be finding real jobs for. None of these risks exist if the work is done by public servants rather than the private sector.

So who actually benefits from this sort of outsourcing? Not unemployed young people, who either get help they didn't need, or get thrown in the "too hard" basket by profit-seeking businesses. And not the taxpayer, who gets overcharged and defrauded by private providers. The only people who benefit are the donors and cronies who get the contracts. To continue the example of A4e, its five shareholders netted themselves £11m in dividends last year. That's £11m the government could have spent on helping young people, which has instead gone to line the pockets of the rich.