The New Enterprise Allowance is initially only available in areas that face the greatest unemployment challenge, to JSA customers who have been claiming for more than six months. But if people choose this route, they can't also go on the Work Programme.

Once they can demonstrate they have a viable business proposition they will be able to claim financial support – a weekly allowance payable at the same level as their JSA payments for three months, and then at half that rate for a further three months. And if they need start­ up capital, they may also be able access to a loan up to £2,000 to help with their start-up costs.  But they can’t also go on the Work Programme in their area.

NEA kicks off with a Merseyside pilot running now, and will be national by the autumn of 2011: but on 24 January the PQQ for running the loan elements of the Merseyside scheme was published, which suggests big delays with the pilot already.

NEA also gives customers access to a business mentor who will provide guidance and support as they develop their business idea and through the early stages of trading.  There’s no information yet on the level and experience of the business mentors, who matches or manages them, trains them to work with disadvantaged clients, or indeed information about how the NEA is being run at all, except it’s a JCP responsibility.

In our experience, three months going from pre-start to being able to (nearly) support yourself is a tough challenge. And DWP have also announced that JSA customers will not be able to participate in both the NEA and the Work Programme at the same time. It is for Work Programme Primes to determine what provision they plan to offer customers, including – or not – any self-employment support.

A self-employed job, no matter how achieved, that takes a customer off benefit, is an ‘outcome’ that they can claim for.  So Work Programme providers have to deliver either their own self-employment offer or use NEA via JCP.

On the surface, it looks like NEA will become the de-facto scheme, since what Prime would be able to justify paying for self-employment support, setting up a loan fund, and forgoing the JCP ‘free’ offer?

But with jobs so scarce, and NEA being so short-term, we think the Work Programme providers will have no option but to use some of their outcome money to commission or deliver self-employment support to get people to work for themselves, and drop the New Enterprise Allowance.  NEA is capped at 40,000 clients anyway, which is a drop in the Work Programme ocean.