Tackling the challenges of supporting public services
by Ben Salisbury
Mark Lovell is the executive chairman of a company called A4e, which stands for action for employment and the company promotes clear and fair financial products to help low income families.
A4e tries to promote innovative and transparent financial products to help deliver better and more useful services at lower costs to low income families.
I caught up with Mark and put some questions to him about what his organisation does, how the current financial climate is affecting A4e’s work, the challenges facing young people and what he hopes George Osborne’s first budget will deliver for low income families.
Q) Name the top three things that financial services providers could do to help low income consumers?
A) 1) Ask them about the services they need. Too often there is no dialogue and so products are not what the consumer needs and wants.
2) More transparent and lower cost short term lending facilities linked to savings products (ideally higher interest bearing small savings pots) so we can enable people to change their financial behaviour and get out of financial dependency on loan providers/pay day cash companies.
3) Link financial capability and support to their services and increase the accessibility of services – locations in the community, phone and web.
Q) How could schools help young people prepare better for financial independence?
A) There are three key things for schools in my view:
1) First, make financial skills and competencies an accessible and interesting topic. When we started programmes with HBOS with schools a few years ago, the starting point was the consumer issues and things that they enjoyed. So, linking loans and learning about interest rates to buy an I-phone and so on. This needs to be a hard part of curriculum development not a ‘nice to have’.
2) Second, one of the suggestions we have from people in their early/mid-20’s is to invite older peers into schools to talk about their financial experiences. This is important in making sure kids have knowledge about banks, credit cards, loans, debt—none of this is touched upon in schools consistently across the country.
3) Finally, more constructive involvement in schools from the finance community is helpful. It was a shame to see a bank criticised recently for launching some good on-line and other services to help children with financial capability. Some of the media focus was on ‘potential current accounts in the future’ and branding as opposed to the need to tackle financial capability and the impact of debt on some of our poorest communities.
Q) In the current financial climate, what are the three most important initiatives your company is undertaking?
A) Interesting question – we are doing a lot across the range of services we deliver. We help people set up their own business, we’re involved in skills training for young people and adults and provide services helping people to get back into work – and stay there. Answering the question from a ‘financial’ perspective, the three most important issues we are working on are:
- Extending and joining up our services to provide debt advice and support to people in financial difficulty. We currently deal with over 60,000 people per annum across a range of our services – from legal aid to welfare – and we anticipate this increasing, towards 150,000 over the next 12 months.
- Developing a fund with finance partners from which the people we work with who start their own business, or a social enterprise, can secure capital to help them get going. Access to capital and microcredit/finance is more important than ever in the current economic climate and self-employment or business start up is really important.
- Working with likeminded organisations – banks, charities, credit unions, intermediaries, lenders, utilities – to change the way financial products and services are designed and reach low income consumers. Biting off a big challenge on that one!
Q) Why do you think the proportion of 16-24 year olds who are unemployed stayed so high during the good economic times of 2002 - 2008?
A) That’s a big question. From my perspective there are three key things:
1) There are too many ‘gaps’ in the transition points in education and skills provision in the UK. At 11, 16, then 18 - and then 21 for most graduates - we have a number of ‘hand off’ points where careers advice, access to skills, access to employment opportunities, options for leaning and education, and support with other advice and social needs are delivered by different agencies.
2) There isn’t enough join up – that includes organisations like mine – and so we all need to improve this to support young people because the system is part of the problem and it will be overhauled.
3) The way that skills and employment services in the UK have developed leaves a risk that some young people get locked into a vicious cycle of getting a job for a short period of time – often minimum wage and/or unskilled – and then leave, change to a similar short term position with a new employer and then lose the job.
- This creates a cycle of employment- out of work for weeks or months, and the young person never gains a proper foothold in employment. Often this means they never reach the ‘eligibility’ for broader support available when they are out of work, or in work, through the employment and skills programmes available, or they are simply unaware of them. This has contributed to the figures.
- In some cases, young people have been very adept at avoiding the support available. A young man I met kept signing off every few months, lived without any benefits and then signed back on, so he never ‘got sent on one of those programmes’.
When he did, he found himself a job, a career and is still there. We are not doing enough to foster a sense of aspiration amongst young people. We also need to stimulate a sense of more responsibility for ‘making things happen’ in young people and creating opportunity.
Q) This week’s unemployment figures show that unemployment for young people is now at over 20 per cent:- What should the government do in next week's budget to attempt to rectify this?
A) There are a number of things we are suggesting. I think there are two simple but important priorities:
1) First, allow young people to access the new Work Programme at an earlier stage – it is planned for nine months but whilst unemployment is stubbornly high, reduce this to three or six months.
My ‘ready reckoner’ is that the multiplier in cost between us seeing someone at 0-3 months compared with 9-12 months and helping them back to a sustainable career is a factor of four.
The costs increase fourfold and the time it takes is significantly extended. The longer a young person is out of work, the broader the range of challenges they have to face – loss of confidence, skills, debt problems and so on.
For those organisations working with young people, make their payment based on the outcome only for this group to keep HMIT happy if necessary!
Seriously, a study by York University a couple of years ago estimated the total ‘public services cost’ of a young person not in education training or employment was over £56,000 so it is better for the economy if we intervene and support earlier.
2) The second point is to allow investment the government makes in skills programmes and employment/welfare programmes easier to pull together. There are plans in place for this, but at the moment these budgets sit in different departments and agencies.
Q) Your organisation helps to deliver front line public services - How will the cuts affect you and how are you planning on responding to a loss of resources?
A) When we started the business – 20 years ago this year – we grew in the first couple of years by delivering our services on a ‘payment by results’ basis. No-one else was doing it at the time.
1) We have a very, very difficult financial situation in balancing the UK spending and public deficit. In all of our markets, the public sector is asking for us to be innovative and find new ways to deliver better services, at lower cost. That is the challenge – it has to be better, high quality, delivering better results and at a lower cost. So there are four things we are doing in every market in which we work.
Applying ‘invest to save’ and ‘payment for outcomes’ to as many services as possible. We advocate being paid for the results we deliver and from the savings we create. This needs careful work on understanding the savings and being really precise on the outcomes – how to measure reductions in offending, improvements in health, sustained reductions in benefits and on. But it is the right thing to do.
2) We want to join up as many services as possible. We deal with around 400,000 consumers per year at the moment. Most of them are either out of work or on low incomes. They access a range of public services from multiple agencies and we contract with nearly 40 different organisations to deliver these services. We can provide better, joined up services at more marginal cost by bringing some of these activities together.
3) We want to ‘channel shift’ our services. Involving our customers in service design, we have begun to identify areas where services can be delivered through telephone and web based services, better meeting their needs.
There will still be face to face services, alongside telephone and web access, so that customers can choose the method suiting them. As an example, in legal aid, around two per cent of services are by telephone and have massive customer satisfaction ratings in solving problems. Up to 50 per cent of these services could move on-line and to telephone creating savings and better services.
4) Finally, we need to be more efficient and find new ways to create savings in our cost base. No-one is immune to the recession and if we want to deliver public services we must also show efficiency savings and further productivity improvements.
There will be more opportunity for voluntary, charitable, private and mutual organisations to deliver public services over coming years. However, to prosper we will need to be consumer focused and paid on the results we deliver – where this type of funding approach is appropriate.
This is feasible but also requires banks and finance institutions to bring capital to public service markets in new ways as well. Much is being done on this – if we get it right in the UK, the world is watching and keen to pick up on best practice.
To find out more about A4e, take a look at their website here.
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