Select Committee on Work and Pensions Minutes of Evidence

Examination of Witness (Questions 93-99)




  93. Good morning, ladies and gentlemen. May I call the Committee to order? This morning we are engaged in taking evidence from witnesses in the Committee's current inquiry into the Government's employment strategy. We welcome this morning Mr Keith Faulkner, who is the Managing Director of Working Links. Thank you very much for your written memorandum which is very helpful. It would be useful if you could just spend a moment or two saying a little about the organisation, its structure, how it is funded and a bit about its scale. Then we have three or four areas of questions, none of which will come as a surprise to you but we should really like to pursue them with you to elucidate what you have already said in your written submission.

  (Mr Faulkner) The fundamental principle behind Working Links is a concern about what appears sometimes to be an attempt to distinguish and categorise public and private sector services. The fundamental belief behind Working Links is that the most effective forms of delivery in any policy area—and we work particularly in the field of tackling unemployment—is to integrate public and private. We think there are some new ways of tackling that and Working Links grew out of a determination to demonstrate that you could do it in different ways. What it may be valuable to explain, because it does probably show through in my submission, is how the three shareholders came together in Working Links because it is a company which is owned in equal shares by Manpower—

  94. So it is a company limited by guarantee or by shares.
  (Mr Faulkner) It is a normal, in effect private, company in which an equal number of shares is held by Manpower, the recruitment business with whom I have been associated for more than 30 years now, Cap Gemini Ernst and Young—just Ernst and Young when we first began this programme—and what was then the Employment Service and is now Jobcentre Plus. One third of the shares in the company are held in effect on behalf of the Secretary of State. The principles of the operation of the board are that all major business decisions require unanimity. It is therefore impossible for either the public or the private sector shareholders to act independently of the others.

  95. Do the articles of association make it a not-for-profit company or does it actually generate profit?
  (Mr Faulkner) One of the important principles which we believe delivers sustainability in performance is a for-profit company. The board has subsequently established the principle that we will set a threshold for profit, which is currently set at five per cent of revenue, as a return to the shareholders for the original risk taken in setting up the business and that all profit beyond that—50 per cent at present—is returned by way of grants into the local communities where we operate. It is a for-profit company because we need to continue to invest in the development of the concept and we believe it is important that we do work on that basis. There is also a return into the communities to limit that.

  96. All of that is clear in your annual accounts and report. That is all transparent?
  (Mr Faulkner) Yes; entirely. The origins of the three companies coming together was that my original company, Manpower, committed to the New Deal when it was originally first announced and provided consultancy in both the design and delivery of New Deal and in the marketing of New Deal. We were closely associated with that and formed a strong relationship with the Employment Service through that activity. Ernst and Young, in the days of compulsory competitive tendering, had established the principle of not supporting private organisations bidding under those terms, but of supporting in-house teams. If you will forgive me, these figures may not be exact, but in broad terms they submitted some 22 bids on behalf of in-house teams and won 21 of them. In evidence I gave to an earlier inquiry into the future of the Employment Service, Manpower is on record as believing that we should have a strong public service and indeed that it should be developed further. The intention in forming Working Links was to take Ernst and Young, who were acting as consultants on the modernisation of the Employment Service and had a commitment to public service, Manpower, who had similar commitments, and the Employment Service led by Leigh Lewis and try to find a new way of delivering employment zones. The announcement of 15 employment zones for which we originally bid was the spur to it. That is the background.

  97. Are you unique? Do you think this model is special to you? Are you aware of any other similar organisations to the one you have just described to us?
  (Mr Faulkner) No, we are not aware of any other organisation in which the Government actually had an active shareholding in a full risk profit-making venture of this type.

  98. What do you bring to the party which Jobcentre Plus does not?
  (Mr Faulkner) This is a question we are always asked. One of the important principles is that it is not that we bring different things, it is essentially the combination of the three organisations and the inherent strengths. If I may sidestep the question briefly to illustrate what we are achieving, a number of our zone directors operating the original employment zone contracts are Employment Service staff on secondment to Working Links. We are achieving results through a management team where probably at that mid-management level, two thirds of our managers are public service employees on secondment to us. The results we are achieving are not therefore being achieved through introducing private sector managers with a different background and a different training; they are being achieved through providing certain freedoms and certain structural advantages to allow people, in the case for instance of Plymouth who had already had 25 years experience in the public service, to suddenly outperform anything they had done before. This is an issue of synergy rather than saying here is something distinct that the public and the private sectors bring. I believe that in the setting up of the business, however, were we to make any distinction, the Employment Service, as then was, more than anything brought the close understanding of our client group, the long-term unemployed people, which is not a group that Manpower had particular experience of and it is not a group Ernst and Young brought particular experience of, other than through their consultancy to the Employment Service. They brought the close understanding of what makes the difference as far as the long-term unemployed person getting back into work is concerned. Ernst and Young brought the financial and planning capability, because after winning the bid we had to set a viable commercial operation up from scratch, set up premises and build a management team in something like four months. It required considerable expertise to structure that properly and effectively. Ernst and Young brought that. I guess in the original set-up Manpower brought marketing and management expertise; some new ways of putting management teams together, a more consultative approach, a way of exploiting some of the freedoms the employment zones allowed us, which the Employment Service did not have.

  99. If you were to think about scaling up what it is you do, because it is quite an impressive record looking at the success rates compared to other systems, would you do that by including lots of little clones of Working Links as it is established here or would you scale up your own operation and just have one big Granddaddy operation covering the whole of the United Kingdom?
  (Mr Faulkner) The instincts are to scale up the existing operations. There are certain policy implications about that. We are not endeavouring to create a vehicle which becomes a dominant or a monopoly influence in this area. We are very happy that the model should be taken and used by other people. In as far as we are invited to do so, we should be very willing to scale up our operations and indeed we are already responding to an inquiry from the Spanish Government to establish a similar model in Spain. It has some significance outside the UK and we are perfectly willing to make that sort of level of investment. So yes, we are fairly ambitious in that respect, but we recognise the potential risks and limitations.

  Chairman: It might be easier to get people to go and work in Spain.

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