The Department for Communities and Local Government (DCLG) has confirmed that it is reviewing the use of payment-by-results in its controversial Troubled Families programme, after warnings that the model created perverse incentives for councils signed up to the scheme.
The Troubled Families programme was launched by ministers in the last parliament, and sees central government give councils up to £4,000 to identify and "turn around" families with entrenched social problems including unemployment, domestic abuse and truancy.
But a series of reports have called into question the effectiveness of the project, which was heavily backed by Downing Street under David Cameron. An analysis carried out for the DCLG by the National Institute of Economic and Social Research (NIESR) was "unable to find consistent evidence that the programme had any significant or systematic impact".
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The study also warned that the scheme had only a "limited mechanism" to avoid paying councils for results "not attributable" to the programme itself, saying local authorities could have been paid for outcomes that would been achieved even without specific Troubled Families interventions.
MPs on the Public Accounts Committee meanwhile concluded that the use of PBR had incentivised local authorities to move families through the programme “without providing the support necessary to tackle deep rooted problems", and urged the DCLG to review the model.
The DCLG has now published its formal response to the PAC's report, accepting the call for a review of PBR issued by the cross-party group of MPs.
DCLG says it has made "a number of changes" to the way PBR operates since the period covered by the highly-critical NIESR study, including by stepping up central government scrutiny of local authorities.
"Each local authority is now subject to two spot checks during the lifetime of the programme," the DCLG says.
"The spot checks now include a visit by a department expert, as well as scrutiny of local authority data systems, and these visits include an interview of local authority keyworkers to assess local practice."
Those spot checks will be used, the DCLG says, "to make sure the payment by results system is not resulting in local authorities diluting the quality of the support they provide to families".
And it adds: "More widely, the use of payment by results in the programme continues to be kept under review."
In the wake of the criticism of the 2012-15 version of Troubled Families, DCLG has already set up a "National Impact Study" of the programme, and the department says this will be used to "track family progress for periods up to five years after interventions undertaken within the scope of the programme have ended".
In the previous parliament, ministers published regular updates on the numbers of people whose lives they said had been "turned around" by the programme, but the PAC argued that this phrase had "overstated the success" of the scheme.
The DCLG concedes that point, and says the latest version of the programme "recognises that families with multiple problems, some of the hardest to help in the country, will not have their problems resolved overnight".
As a result, it says it will no longer refer to families who have benefited from Troubled Families intervention as having been "turned around", instead referring to "significant and sustained progress‟.
Jonathan Portes, former director of the NIESR and a longstanding critic of the Troubled Families programme, told CSW it was "welcome that DCLG have broadly accepted the findings of the highly critical PAC report".
"However, it is regrettable that the senior civil servants responsible have not been held accountable for the very large amounts of taxpayers' that were wasted because they chose to ignore well-publicised warnings about the design, structure and targeting of the programme," he added.
While Portes welcomed DCLG's move to "greatly" improve its collection of monitoring data on the Troubled Familes scheme, he called for the internal analysis of the 2015-20 phase of the programme to be "independently reviewed and verified" in the interests of transparency.
And he warned that changes to the payment-by-results aspect of Troubled Families still "do not appear to be adequate".
"It will still be largely the case that local authorities will be reporting on and claiming for outcomes they measure and monitor themselves, with the resulting perverse incentives that, in my view, largely explain the failure of the first phase of the programme."
He added: "There is a place for the use of PBR in social and welfare policy programmes – but it is not clear that the Troubled Families programme is it, nor is it clear that CLG are capable of devising and implementing an efficient and effective PBR scheme in this context."