INDEPENDENT COST ANALYSIS
Rehab Enterprises completed its fifth full year of operations in 1999. Tansey Webster Stewart & Company were invited to evaluate its performance and to estimate the costs and benefits of the pilot programme to Government during the first five years of its life. Here are its findings.
The principal benefit of Rehab's involvement in the Programme has been the provision of integrated social employment for 172 people with disabilities continuously throughout the period.
Through the availability of integrated social employment opportunities at Rehab, many people with disabilities have, for the first time, been provided with clear progression pathways after training. Moreover, many progress onwards from Rehab. Last year, some 13 people with disabilities - eight per cent of the workforce with disabilities - left Rehab to take up jobs in the open market.
But integrated social employment on this scale could not have been delivered unless Rehab Enterprises itself remained financially sound and commercially viable. Our analysis shows that, having incurred sizeable losses in its early years, by 1999 Rehab had become a significant success. Sales at Rehab's eight wholly-owned businesses topped £10 million last year while the net surplus, including associated companies, reached £251,000. The total Rehab workforce was approaching 500 people by 1999, of whom 232 were people with disabilities.
From the outset, the commercial viability of Rehab has been contingent on funding delivered through the pilot programme. Most importantly the programme has financed ongoing operational subsidies of £6.2 million for the employment of people with disabilities.
These subsidies have been crucial to the success of the integrated social employment strategy. They act principally to bridge the productivity gap between employees with disabilities and able-bodied workers. Studies suggest that within Rehab, employees with disabilities achieve about 35% of the productivity of able-bodied workers.
In all, Rehab's gross operational funding under the programme amounted to £7.1 million between 1995 and 1999.
However, two factors have reduced the net costs to Government. First, the state has achieved major savings on state disability payments and training grants as a result of the employment of 172 people with disabilities at Rehab under the programme. Most had previously been trainees at National Learning Network. We estimate these savings on state spending at £4.6 million for the five years 1995-1999.
Second, Rehab's employees with disabilities pay income taxes which they would not have paid as National Learning Network trainees. The resulting incremental revenue gain to the Exchequer is estimated at £1.2 million for 1995-1999.
These expenditure savings and extra revenues accruing to the state have acted to reduce the operational cost of Pilot Programme at Rehab from a gross £7.1 million to a net £1.3 million, or £267,000 annually, for the years 1995-1999. Over this period, the net annual operational cost of providing each job for a person with a disability has averaged £1,550.
On the basis of these figures, we have concluded that the pilot programme has generated social benefits in excess of its net operational financial costs in the first five years of its life.
What of the future? An assessment of current costs in 1999 shows that, after expenditure savings, the net operational cost to the Government of financing integrated social employment at Rehab amounted to just £68,000 last year or about £395 per disabled job.
When, in addition, the income taxes paid by Rehab's employees with disabilities are taken into account - an average of £1,163 in 1999 - the net continuing cost of sheltered employment at Rehab is shown to be lower than any of the alternatives excepting open employment.
Rehab is now generating real added value and net profits. Further, the demand for integrated social employment at Rehab exceeds the existing quota of 172 places. In these circumstances, on cost and efficiency grounds alone, not only should the pilot programme be continued, but the recruitment of people with disabilities into integrated social employment at Rehab should, in our view, be increased.
Paul Tansey,
Managing Director, Tansey Webster Stewart & Company
