A4e: a scandal so big it could be seen from 2008

Emma Harrison’s double resignation has finally focused media attention on the privatisation of job placement, argues Alex Nunns.
25 February 2012

A4e, a for-profit company entirely dependent for its business on £180 million of government contracts under which it is supposed to help unemployed people get in to work (something which used to be the job of the State), last year paid Harrison £8.6 million in dividends - money directly siphoned from tax-payers.

But this cosy arrangement has now gone catastrophically wrong with the arrest of four A4e employees over claims of fraud. It has emerged that, among other allegations, A4e has had to pay back public funds on five occasions after government investigations found irregularities, and that the company made job seekers work in its offices for at least a month for no pay.

Margaret Hodge for Labour has called for all of A4e’s contracts to be suspended until the allegations of fraud have been investigated, but the government has so far resisted, and for good reason – under New Labour and the Coalition, A4e has practically made itself into an arm of the State. In five regions of the UK it is in charge of the government’s Work Programme, responsible for selecting providers to do the work of job placement and channelling public money to them, taking a huge fee along the way. Some third sector providers (charities, non-profits, community initiatives etc) that work under A4e in these regions have complained that job seekers have not been sent their way by the company and that they were merely window-dressing for A4e’s contract bid. In other areas of the country A4e wears a different hat, working as a provider itself.

This is what the patchwork privatisation of the welfare system looks like. A dominant player gets itself into an indispensible position and (allegedly) abuses the system, so that even when it is being investigated for fraud and is under so much public pressure that its celebrity chairman has to resign, the State appears powerless to act.

This is all the more shocking because the activities of A4e should come as no surprise – exactly the same scenario played out in Australia under the Howard government when it implemented the original scheme which the Tories have explicitly copied.

The problem, common also to other faux-market reforms of public services, is that there is (and can be) no functional market because there are no proper customers (the unemployed) and only one source of money – the tax payer. What emerges instead is a form of contractual clientelism.

In 2008 Red Pepper published an article called 2014: A Tory dystopia. The piece was written from an imaginary future but was based on the policy papers developed and published by the Tories in opposition – no one can say they weren’t warned. We are still two years from the imagined date of the article, but the piece bears re-reading (even if I did write it myself) because so much of it has already come true. (This speaks volumes about the Lib Dem’s “moderating” influence on the Tories.)

And what do you know, the piece contained a section on the Tories’ plans for job placement privatisation and the likelihood that it would end in fraud. The article predicts the emergence of dominant players with huge power to abuse the system, the sidelining of third sector organisation, and points to New Labours culpability. Here is the section, written back in 2008, but as if it was 2014:

As well as squeezing the benefits system, the Conservatives have privatised its job placement function. Jobcentres now grade potential benefit claimants according to their capability for different kinds of work and refer them to a private company to find a job. This fundamental reshaping of the welfare system built on New Labour's reforms - Tory ministers defend their policies by saying they are only continuing James Purnell's work.

The 'payment-by-results' system, under which companies' funding depends on getting people into jobs and keeping them there, is meant to provide the state with the levers it needs to control the process. But it doesn't work like that. The Tory plans were largely based on the Australian system introduced by the Howard government, but in that country the profit motive produced perverse outcomes and fraudulent behaviour. There was no real market, because the 'customers' (unemployed people) didn't pay for the service and couldn't choose to switch between companies. Although private providers were paid by results in Australia as in the Tory scheme, there was minimal competition once a few companies became dominant. To compensate for the failure of the market, the Australian government was forced to tighten regulation and central control - undermining the original aim of cutting bureaucracy and costs.

The Conservatives chose to ignore this evidence, and promptly repeated the Australian experience. They also faced an outcry from the voluntary sector, which had been promised a key role delivering job placement services but didn't have the capital necessary to win many contracts. The sector belatedly realised that its involvement had been used as PR cover for privatisation.

When the current scandal could be seen from as far back as 2008, we should say 'I told you so' as loudly as possible.

Alex Nunns is Red Pepper's political correspondent. He tweets at @alexnunns


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michael booth 25 February 2012, 11.32

who do these people think they are?wasnt slavery abolished,

Eric Greenwood 26 February 2012, 09.49

Detectives are investigating the alleged misuse of thousands of pounds’ worth of Government vouchers meant to help the jobless back into work.
Officers from Thames Valley Police’s Economic Crime Unit are examining claims that staff at employment firm A4e used the vouchers to boost their annual salaries instead of handing them to the unemployed clients they were supposed to be helping.
Staff at A4e – the firm built up by multi-millionaire Emma Harrison – are believed to have stolen the vouchers and exchanged them for goods in high street stores. The widening of the inquiry comes as a male A4e employee was interviewed under caution by Thames Valley detectives.

Read more: http://www.dailymail.co.uk/news/article-2106569/Now-work-tsars-staff-probed-vouchers-meant-buy-interview-suits-jobless.html#ixzz1nTnjRJEh

I have been 3 times to a4e.

Eowyn Rohan 26 February 2012, 10.35

Lets not ignore the fact that other organisations, held in similar esteem, have creamed £Billions through the New Deal, Flexible New Deal and Work Programme, including Working Links.

And, without the Proligate Era of reckless spending and economic incompetence under Gordon “Mr Casino Banker” Brown, supported by New Labour, such organisations would never have been able to get a foothold.

Kay Fabe 26 February 2012, 19.56

“This is all the more shocking because the activities of A4e should come as no surprise – exactly the same scenario played out in Australia under the Howard government when it implemented the original scheme which the Tories have explicitly copied.”

Heh-heh.. this is the point of their doing it, isn’t it? Ripping off the taxpayer. I’ve said for years that welfare reform was simply a raid on the public purse in a socially acceptable disguise. It’s getting more and more obvious I was right.

Anonymous 28 February 2012, 15.44

A4e – Professionals or Unfit for purpose?

Fit for purpose?

‘My view is that this company has demonstrated that it is unfit to hold this kind of contract’.
MP Fiona Mactaggart who sits on the Public Accounts committee 2012

“I have had so many serious concerns and allegations raised with me about what now appears to systemic poor practice and fraud at A4e that I shall be calling on the minister on Monday to undertake a transparent, thorough and urgent investigation,”
MP Margaret Hodge, chair of the Commons Public Accounts Committee 2012

A “Social Purpose Company”?

A4e is notorious for its now threadbare pretentions to being a “social purpose” company.


One whistleblower … said: “I have witnessed colleagues who were bullied by management so badly that it caused stress and depression leading to them resigning.”

Paying Contractors?

And The People’s Supermarket, which worked with A4e, said it had not received £15,000 for helping 17 people into work.
Boss Kate Bull said: “We feel we have been totally used.”

Touting for Business?

Supermarket group Sainsbury’s claimed that A4e had “persistently approached” its stores asking it to take on job seekers on unpaid work experience, “against our wishes”.


“A4e, a training company which is at the centre of an investigation into allegations of fraud, made jobseekers take up the unpaid four-week placements in at least two of its London offices.”

Several whistleblowers from around the country had already told the Mail about dubious practices at A4e while asking to retain their anonymity.

You decide.

Mike Matthews 11 April 2012, 12.07

I used to work for Working Links, who also provided employment advice under the JCP contract. There was an issue with them, where they got paid £1500 for getting someone into work and they stayed there for 26 weeks. All well and good, but if someone was referred to them and they already had a job lined up, they were fast-tracked through the system so Working Links could claim the £1,500 as if THEY got them the job.

I also lost my job there for reasons I am barred from discussing – nothing criminal, except immoral on their side ! – and it was clear to me then they were not the pukka organisation they claimed to be. I’m not saying they were on the scale of A4e, but their approach to their customers could be cavalier, and the things I saw in terms of the way they treated staff was awful.

antony 11 April 2013, 17.51

A4e is awful. I hate a4e. Time wasters money wasters wasting the country

Comments are now closed on this article.

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