Freudian slips

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The desertion of New Labour's welfare reform adviser Sir David Freud to the Tories highlighted how little there is to choose between the main parties' policies.

Freud's real expertise (if you can call it that) was as a banker, organising such notable successes as the flotations of Eurotunnel and Railtrack. And as we now know, failure in banking is no barrier to huge earnings. He could retire in his 50s, turning his attention to drafting up welfare reform proposals.

After a mere three weeks' research he announced that most Incapacity Benefit recipients could work, and that private contractors could get the long-term unemployed back to work - if the price was right. He also favoured making claimants work for their benefits.

This was music to Labour's ears. Work and pensions secretary James Purnell drafted the Welfare Reform Bill to put Freud's prejudices into practice. The bill's cornerstone is privatisation of Jobcentre work. New Labour has always justified its obsession with privatisation by claiming it simply believes that "what matters is what works". Yet what little evidence exists regarding private and "third sector" contractors does not show that they are any better at helping people find work than civil servants in Jobcentres.

In fact, they are clearly worse. Staff working for contractor Maatwerk, for example, were found to be bribing jobseekers to sign fake papers saying Maatwerk found them jobs, thus earning the staff bonuses. Another contractor, Carter and Carter, had to return government payments for tuition at its North-East Skills Unit after an inquiry found falsification of documentation. Both of these have now gone bust.

The suitability of some contracting charities is also open to question. Working Links, for example, is partly owned by an Australian evangelist organisation, Mission Australia. Tomorrow's People is a charity founded by the directors of an alcoholic drinks company, Diageo. Chief executive Debbie Scott was previously an officer in the Salvation Army. The TUC warned that such religious organisations may discriminate against staff or clients on the grounds of religion, lifestyle or sexuality.

So why contract out? Firstly, Labour (just like the Tories) still believes in the magic of the market, despite the evidence of the banking crisis. Secondly, staff working for contractors will not show up in statistics as public employees. And thirdly, the contractors have a sophisticated lobby. Freud boasted that his proposals would create a multi-billion pound market. This would mean big profits - had it not been for the recession.

One contractor, A4E (which pays David Blunkett as an adviser), pulled out of a contract to train offenders in Kent prisons last year because it could not make money out of it. Now A4E and other potential contractors complain that the payment by results regime proposed by Purnell will not permit them to profit from the unemployed. Nor should they.

The public service PCS union is coordinating a national campaign against the Welfare Reform Bill, with organisations representing many of the groups threatened by Purnell's proposals. This should be built in every town and city in Britain.