Peter Hoskin

More reasons why the Tories should release a second Freud Review

More reasons why the Tories should release a second Freud Review
Text settings

One of the more under-the-radar, but most significant, news stories of the day is Theresa May's suggestion that the Tories may change the terms of contracts currently being hammered out between the government and welfare-to-work providers:

"'If contracts have not been signed one of the things I’m looking at is making the changes we want to those contracts quickly, so that we would be operating on our welfare reform proposals rather than the government’s,' she said."

The FT adds that one of the changes might be "smaller upfront payments" for the welfare providers.

Why so significant?  Well, because it highlights perhaps the main dilemma that the Tories face on welfare reform.  On the one hand, it's perfectly understandable why they want to cut costs.  This is the Age of Austerity, after all, and earlier welfare contracts seriously overestimated the ability of welfare-to-work providers to get claimants back into work during an economic downturn.  On the other hand, welfare-to-work providers are already losing money on existing contracts and are worried about the willingness of banks to extend their overdrafts, so a cut in upfront payments could dissuade them from getting involved at all.

One option, of course, is to say to hell with the welfare-to-work providers: if they can't abide smaller payments, then they should just get out of the game.  But that risks stopping the welfare reform agenda in its tracks; an agenda which - while it hasn't been as successful as many would have hoped during the recession - is still superior to more centralised alternatives and will become even more crucial in the post-recession years.  A balance clearly needs to be struck.

To my mind, all this just increases the necessity for a second Freud Review.  Not only is one needed to reframe Freud's original proposals for the new economic landscape, but it would also reassure welfare-to-work providers about the Tories' direction of travel.  In view of Michael Gove’s comments earlier, welfare reform is actually one of the two areas (along with schools reform) where the Tories have already put "flesh on the bones".  Now they need to coat that flesh with some skin.