Two government departments using a payment-by-results scheme as part of initiatives to help troubled families have been accused of not doing enough to understand its risks.
The payment-by-results element for the Department for Communities and Local Government’s (DCLG’s) programme saw the department paying local authorities for attaching families to its programme, with a further payment made for achieving agreed outcomes.
The Department for Work and Pensions (DWP) scheme pays contractors for activities that are designed to address a range of barriers to employment to help clients become more “job ready”.
The National Audit Office (NAO) said that payment-by-results had “helped to increase the focus on outcomes and encouraged the collection, sharing and reporting of outcome data”.
However, it added: “There is a lack of information on costs and the non-intervention rate (the level of outcomes that would have been achieved without the programmes). Without this information, there is an increased risk that the outcome payments will be set either too high or too low.”
The NAO further criticised the DCLG’s use of payment-by-results saying that it “is not currently incentivising all local authorities to invest all the available central government funding in services”.
The report added: “Whilst payment-by-results has benefits, both departments could have done more to understand its risks. Neither department is likely to achieve all the potential benefits of using payments-by-results. And performance varies significantly between the best and worst performing local authorities and the best and worst performing contractors.”
The NAO called for the Cabinet Office to share with government the lessons learnt from how both departments designed and implemented a payment-by-results programme.
It said: “In particular it should share lessons on the need for programmes to be flexible and adaptive if they are launched without the benefits of supporting data sets or piloting. It should also disseminate lessons on the impact of the incentives that payment-by-results mechanisms give.”
DCLG permanent secretary Bob Kerslake said: "Recently the Government announced that 22,000 of the most troubled families in England have already been turned around and 62,000 were being worked with by councils at the half-way stage of the programme. This means that children are back in school for at least a year, youth crime and anti-social behaviour are significantly reduced and adults are in a steady job or on a path back to work. These are substantial achievements that are changing lives for the better in multiple ways and bringing down the cost of troubled families to the taxpayer, so we are pleased with the progress so far with this innovative initiative."