Making A Fortune From The Jobless

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Therese Rein, the founder of international employment services agency Ingeus and Kevin Rudd’s wife, was last week named by BRW as one of Australia’s wealthiest 200 people, worth an estimated $210 million. Although Rein’s business grew from humble beginnings, she’s become wealthy through intervening in the lives of the poorest and most disadvantaged members of society.

Ingeus, in a 50:50 joint venture with global financial firm Deloitte, is by far the biggest player in the UK public-private "welfare-to-work" sector, David Cameron’s replacement for the Blair-Brown Labour government’s New Deal programs.

The Conservatives’ "Work Programme" involves 40 five-year contracts with 18 companies, aimed at getting long-term unemployed people jobs at a cost of up to £5 billion.

Ingeus holds seven of those contracts, adding up to a 23 per cent stake, estimated to be worth £1.4 billion over five years.

Global public-private giant Serco, which has faced scrutiny over its business practices in the UK and in Australia, where it runs our immigration detention centres, is also a large stakeholder in the welfare-to-work program.

The scheme operates by paying employment services companies such as Ingeus, Serco and A4e a fee to find their long-term unemployed "clients" unpaid work placements, which they undertake on a voluntary basis as a pathway to paid work, while continuing to receive unemployment benefits.

This has at times led to situations where the scheme actually reduces overall paid employment because participating companies effectively replace part of their workforce with government-funded labour.

One well publicised instance of this involved supermarket chain Tesco, which received so much negative media attention that other welfare-to-work participants, including Sainsbury’s, Burger King and not-for-profit Oxfam, withdrew from the scheme immediately.

Recent reports suggest several of the contracted employment services companies are also likely to withdraw from the scheme soon, having been unable to fulfil their primary obligation of finding jobs for the unemployed.

Even the most successful firms, Ingeus among them, have only managed to find 26 per cent of their "clients" jobs since the Work Programme began a year ago. The least successful have managed only 18 per cent.

UK Employment minister Chris Grayling has tried to put a positive spin on the figures, claiming the withdrawal of less successful service providers will increase competition.

"This scheme never was and never will be about providing an income stream for charities or the private sector. And competition means that if you’re not coming up with the results, someone else will and they’ll get the work," Grayling said in a speech marking the first anniversary of the Work Programme on Tuesday.

There are many more morally bankrupt ways to make a quid than creating jobs for the long-term unemployed, and it’s hard not to be moved by Rein’s story — she founded her business in Brisbane in the late 1980s with a $10,000 loan after spending her early career as a psychologist counselling injured workers.

But it’s difficult to escape the conclusion that as Britain’s recession deepens and unemployment rises — good news for Rein according to at least one gleeful Australian business journalist — it’s the unemployed and taxpayers who stand to gain the least and lose the most under a scheme supposedly designed for them.

As a source described by The Australian as a "senior executive of one of the older British firms that lost out to Ingeus UK in the government’s long-awaited five-year contract" said of Ingeus last year:

"The danger is that to make the contracts work, it has to deliver more outcomes than ever before for less money than the government paid in the past, and if they fail, it is the unemployed whose necks are on the line."

Ingeus is growing at an unprecedented rate, having expanded to Saudi Arabia and New Zealand in 2011, as well as making a return to Australia in August, following Rein’s forced sale of the Australian branch of the company in 2007, when Kevin Rudd was first vying for the Prime Ministership.

This adds to enterprises already established in Sweden, France, Poland, Germany, Switzerland, South Korea, and of course the UK, with 150 offices worldwide.

Although Ingeus has said it won’t be taking up any more Australian federal government contracts anytime soon, it’s interesting to look at what happened last time they did, as the third-largest contract recipient under John Howard’s Job Network scheme.

A 2010 report commissioned by the Department of Education, Employment and Workplace Relations, found that welfare-to-work reform under Howard failed to increase employment in three of four target groups, namely disability pensioners, the very long-term unemployed, and mature-age unemployed, although there was a significant increase in employment among sole parents.

Meanwhile, a UK parliamentary committee is investigating allegations of widespread fraud in the sector. The "welfare-to-work" scandal, as it’s become known, gained widespread public attention in February after the arrests of four A4e employees and the resignation of its head, Emma Harrison, who was also personally appointed by David Cameron as "families tsar" in 2010.

Included in the long list of allegations against Harrison was the claim she leased several properties to A4e, including her 20-bedroom country home, receiving around £1.7 million in rent over two years from the company she managed.

While no fraud allegations have been made against Ingeus, A4e and the Working Links, the other biggest contract holder, have had staff members arrested and hundreds of fraud claims made against them.

While much of the blame for these statistics lies with entities other than Ingeus, Rein has nonetheless made a fortune. If nothing else, it indicates yet another public-private partnership situation where the disparity between the income of the private companies involved and the outcomes achieved for some of society’s most vulnerable, is unacceptably vast.

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New Matilda

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