Welfare Policy Paper

Responsibility Agenda: Making families stronger and society more responsible

Contents

Page

Foreword by David Cameron.............................................................................................................................. 1–2 New world................................................................................................................................................................................ 3 Old politics............................................................................................................................................................................... 4 Change required................................................................................................................................................................ 5–6 Our Responsibility Agenda............................................................................................................................... 7 Our welfare reform plans in summary.................................................................................................... 8 Our welfare reform plans in detail 1. Overview....................................................................................................................................................................... 9–12 2. What is wrong with our return to work system?..................................................... 13–21 2.1 What is wrong with Jobseeker’s Allowance? 2.2 What is wrong with Incapacity Benefit? 2.3 What is wrong with income support for lone parents? 2.4 What is wrong with the Government’s employment programmes? 2.5 What is wrong with the Government’s new proposals? 2.6 How does our broader benefits system hold back return to work? 3. Who are we going to help?.................................................................................................................... 22–24 3.1 Claimants who are capable of work and want to do so 3.2 Claimants who are capable of work but refuse to do so 4. What succeeds? Best practice from around the world. .................................... 25–27 4.1 Clear, rapid and universal assessment of work readiness 4.2 Strong linkage of benefits to work or work-like activities: if you do not participate you do not get benefits 4.3 Creation of a managed market for return to work employment services

5. How will the out of work benefit system change?................................................ 28–35 5.1 The gateway 5.2 A profiling system to tailor support 5.3 Conditions and sanctions 5.4 Tackling long-term dependence on Incapacity Benefit 5.5 Community work programmes for the long-term unemployed 5.6 Supporting lone parents 6. How will we build a financial structure................................................................................ 36–45 that can deliver our goals? 6.1 How can we afford a programme on the scale we need? 6.2 How much difference can we make and how much will it save? 6.3 Does the private sector have the capacity to deliver a programme of this kind? 6.4 Can the labour market absorb a programme on this scale? 7. Questions for consultation................................................................................................................... 46

Appendices A1. Main out of work benefits A2. The assessment, conditionality, sanction and support system

47–50 51–52

Responsibility Agenda: Making families stronger and society more responsible

The Conservative Party has a vision of the Britain we want to see: a country where people have more opportunity and control over their own lives; where families are stronger and society more responsible; and a Britain which is safer and greener. In November 2007 we published the first in a series of Policy Green Papers, introducing our Opportunity Agenda: a radical plan to raise standards in schools and to create more good school places for parents to choose from. The second, Power to the People, looked at how decentralised energy production could revolutionise our electricity supply.

Labour’s bureaucratic approach has failed. We need a thorough overhaul of the way that benefits are administered. Our plans for welfare reform will help those who want to work into sustained employment, and cut benefits for those who refuse to work. They will give some of our most deprived citizens the opportunity to live independent and fulfilling lives. Above all, they will help more people contribute to the responsible society I want to achieve.

This, the third Policy Green Paper, introduces our Responsibility Agenda. The world in the 21st century offers amazing opportunities for individuals to exercise freedom and to improve life for themselves, their families and their communities.

8th January 2008

But Conservatives believe that with opportunity comes responsibility. To make the most of the new world of freedom, we need to strengthen the structures which bring stability and a sense of belonging: home, neighbourhood and nation. This Policy Green Paper sets out how a Conservative Government would help create stable families and a more responsible society through reform of the welfare system. It is not acceptable that nearly five million of our fellow citizens are languishing on out of work benefits. Mass welfare dependency is a waste of the country’s human resources and a huge drain on the taxpayer – benefits cost the country over £100 billion a year, by far the biggest item in public spending. But worse than this, benefit dependency is a tragedy for the people involved, one of the primary causes of low aspirations and social breakdown.

1

2

New world

Opportunities to connect

Labour is stifling society

Modern technology is opening horizons and diminishing distances. The opportunities to connect are greater than ever – there are now more mobile phones than people in the UK, while Myspace.com has a membership of 125 million, twice the size of our population.

Rather than nurturing these new possibilities for social action and interaction, however, the present Government is stifling them under a rigid state superstructure.

Society is adapting to take advantage of the new possibilities technology offers, and to respond to the changing way we live our lives. The entrepreneurial spirit and neighbourliness latent in the community are finding expression in a new generation of voluntary associations, social enterprises and online networks.

The post-bureaucratic age Britain is entering what we have called the post-bureaucratic age – an era of dispersed knowledge and power rather than the concentration of authority in the central state. We are finding new ways to socialise, to run our businesses and public services, and to look after our local neighbourhoods. People are weaving a new social fabric that is strong but flexible, founded on small, dynamic, informal structures.

Our approach Conservatives know that what matters in life is our relationships, our ability to provide for our families and to contribute to our communities. The proper response to the new global forces of the 21st century is to strengthen the units of society, not the state. Small acts by small groups make a big difference. Society is the product of the cooperation and interaction of individuals, families and communities. Wisdom lies in co-operation, diversity and innovation. The state has a responsibility to help this interaction take place, not to replace it with its own artificial processes. We believe that a responsible society is the links directly to our two other priorities: it will ensure people have more control over their lives and it will make Britain safer and greener. 3

Old politics

Labour’s characteristic response to the large and impersonal forces of technology and globalisation has been to assume that the state, too, must get ever larger and do ever more. The result is a major extension of state control over the lives of individuals and communities – a last gasp of the old bureaucratic age rather than an adaptation to the post-bureaucratic age. Gordon Brown has built up distant systems of administration and bureaucracy that not only fail basic competency tests, but are complex and insensitive, inflexible and impersonal, with counter-productive incentives which damage the fabric of society.

Society is at breaking point Labour’s tax and benefits regime means it makes more sense for couples to live apart than together. Labour’s welfare system isolates people in long-term dependency on the state. Labour’s proliferation of new regulations and criminal offences creates contempt for the law. Labour’s increase in targets imposed on councils and public services undermines local democracy. Their actions are making society less, not more, responsible. The result is a society at breaking point. The UK now has one of the highest rates of family breakdown in Europe, and a higher proportion of its children living in workless households than in any other EU country. There are 600,000 more people in deep poverty than when Labour came to power. The number of people in problem debt has risen to almost 4 million, and the number of people with alcohol and drug disorders has risen to over 8 million. The cost of these social failures amounts to £100 billion a year.

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Change required

Conservatives have a vision for change: from state control to social responsibility. We believe in fostering both the traditional ties of family, neighbourhood and nation, and the newly emerging social associations created by the internet.

We will champion local social action, through supporting the establishment of forms of civic engagement such as modern co-operatives. And we will offer a new deal to third sector organisations, with more trust and responsibility.

Personal responsibility

To harness the talents, commitment and energy of young people, we will introduce a six-week programme of National Citizen Service for all 16 year olds. This will help young people understand the value of public service and of contributing to our society, as well as giving them a shared experience of living alongside others from different backgrounds.

The primary institution in our lives is the family. It looks after the sick, cares for children and the elderly, supports working people and the unemployed, and provides people with their most fulfilling relationships and most cherished memories. Families depend on the personal responsibility of parents in caring for their children. We want to make sure that Government supports couples rather than undermines them, so we will make sure that more couples are offered relationship counselling at critical moments in their lives. We will end the misguided couple penalty in the tax credit system, and support married couples in the tax system. And as this Policy Green Paper sets out, we will help more people off out of work benefits and into work, so they can live independent and fulfilling lives.

Professional responsibility We trust in the vocation of our public service professionals to deliver the higher standards that are needed in our schools and hospitals. We believe that many more groups can contribute to running these services, and want to open up our vital public services to the energy and commitment that the voluntary, charitable and private sectors can provide.

Civic responsibility Conservatives are the party of localism. We will reverse the advance of central government into local life.

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We will inaugurate a new era of independent local government, giving back to town halls the power to spend their money as they see fit, and to manage local services independently of Whitehall. We will put local police forces directly under local control, with voters given the right to choose the man or woman who holds each force to account.

Corporate responsibility Businesses are crucial not just to a country’s economy but to its society: employment practices impact directly on family and community life, while the sourcing, production and transport of materials and products impacts on the environment. Conservatives are confident that British businesses can fulfil their corporate responsibilities. In response to the environmental challenge, corporations are already taking the lead in going carbon neutral. We also want to see them doing more to provide a family-friendly working environment, which is why we will give all employees with children the right to ask for flexible working.

Social cohesion through social responsibility At the heart of our Responsibility Agenda is what we have called the Social Covenant. This is the common bond of mutual responsibility between individuals, the state and society. The Social Covenant is the basis of social cohesion – a commitment on the part of all of us to fight the prejudice and extremism which threatens our national unity. Social cohesion does not require unlimited extensions of state power. But it does require the state to fulfil its functions properly, including controlling our borders. Most of all, it requires individuals and communities to celebrate what unites us rather than exaggerating what divides us. 6

Our Responsibility Agenda

Welfare reform. Work for welfare. We will introduce radical reform to help people off out of work benefits and into paid employment.

REAL welfare reform to help make British poverty history

Health. The National Health Service is our number one priority. We will scrap Labour’s top down targets and stop their pointless reorganisations. We will place doctors and nurses, not politicians, in charge of delivering healthcare and ensure funding follows patients’ choices.

1. Respect for those who cannot work

Rewarding marriage and strengthening relationships. Our ambition is to help parents come together and stay together. We will end the couple penalty in the tax credit system and pilot relationship counselling to strengthen families. Addiction and debt. Large numbers of our citizens suffer from spirals of addiction, poor health and debt. We will give courts powers to apply new Drug Rehabilitation Orders, using abstinence-based treatment, and reclassify cannabis as a class B drug. We will introduce a single Consumer Credit Act to provide greater information and transparency for borrowers. Responsible business. Every business has an important role to play in producing a responsible society. Responsible businesses will get a lighter regulatory touch – for example, equal pay audits will apply only to those firms which lose pay discrimination cases. We want employees to be able to balance their work and private lives better, so we will introduce further flexible working provisions. Social care. Our ageing population means that more elderly people than ever rely on social care. We will give people access to the money allocated for their care and allow them to spend it as they see fit. A cohesive society. In many of our towns and cities whole communities seem to be living separate lives. We will work to increase cohesion across our diverse population, and introduce 100 Social Enterprise Zones to help social enterprises provide jobs and community services. National Citizenship Service. We are determined to strengthen social relationships in the teenage years by setting the course towards responsible adulthood. We will introduce a universal, voluntary National Citizen Service Programme to help young people make the most out of life and give them a sense of achievement and focus. 7

Our welfare reform plans in summary

●

Those recipients of Incapacity Benefit who really cannot work will receive continued support and will remain outside the return to work process.

2. Employment for those who can

Every out of work benefit claimant who is capable of doing so will be expected to work or prepare for work. ● A comprehensive programme of support for jobseekers including training, development, work experience and mentoring. ● Welfare-to-work services to be provided by the private and voluntary sector on a payment by results basis, according to their success in returning people to sustainable employment. ●

3. Assessments for those claiming out of work benefits Rapid assessments for every recipient of out of work benefits – for all new and existing claimants. ● The assessment process will determine how much welfare-to-work providers are paid for placing a claimant in work. ●

4. Limits to claiming out of work benefits ● ●



●



People who refuse to join a return to work programme will lose the right to claim out of work benefits until they do. People who refuse to accept reasonable job offers could lose the right to claim out of work benefits for three years. Time limits applied to out of work benefit claims, so that people who claim for more than two years out of three will be required to work for the dole on community work programmes.

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Our welfare reform plans in detail Overview

For too long, welfare reform has been trapped in a ghetto of technocratic tinkering. Politicians have promised that tightening the rules here, or changing the way benefits are paid there, will solve the severe social and economic problems created by Britain’s welfare state. But those problems have proved stubbornly resistant to that tinkering. Despite repeated promises of radical reform, our welfare system still makes it possible for people to choose a life on benefits. It still fails to encourage and help all those who can work, to work. And it still discriminates against families. In the end, welfare reform is less a question of rules and regulations, systems and procedures; it is more a question of culture and values. What kind of culture have we created when a young man can grow up in our country certain in the knowledge that the state will provide a living for him regardless of the choices he makes? What kind of values are we transmitting when the state, through the benefits system, actively discourages couples from getting together and staying together to bring up their children? Real welfare reform should help re-ignite the social mobility that has stalled under Labour. It should help reverse the disastrous rise in family breakdown. It should help tackle the persistent and long-term poverty that shames our nation. Real welfare reform must be radical not just in the detail of its policy priorities but in the confidence of its moral authority. So it is in that spirit that we present these initial proposals for welfare reform. We believe it is time for an entirely new welfare system, based on an entirely new culture of responsibility. Not the state taking responsibility away from people and making them dependent, but people and communities taking responsibility for themselves and achieving the success and satisfaction of independence. We believe that our current welfare system is broken, wasteful and a massive barrier to the achievement of the progressive society we want to see.

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The importance of work There is overwhelming evidence that being in work is a key component of mental and physical wellbeing.1 In contrast, welfare dependency blights communities and ruins lives. For a child, being brought up in a workless household is much more likely to mean failure at school and worklessness in later life. In many communities worklessness is being passed on from generation to generation. Millions of British lives are being wasted. As the Conservative Social Justice Policy Group Report convincingly showed, work is the principal route out of poverty. Combating worklessness is the single most important thing that we can do to lift hundreds of thousands of our fellow citizens out of multiple deprivation and achieve our long-term goal of making British poverty history.

Gordon Brown’s failure Today, after ten years of a Labour government that promised to end the costs of social failure, those costs now stand at £100 billion a year.2 After ten years of a Labour government that promised to get people back into work, almost five million people now depend on out of work benefits. Gordon Brown’s shameful use of BNP slogans about “British Jobs for British Workers” serves simply to highlight the total failure of his employment strategy. During the past ten years, there has been no shortage of work in this country. Indeed the Government boasts about the millions of new jobs it has “created”. But a simple, devastating fact is now clear from all the official statistics: as many as 80 per cent of new jobs created in the past ten years have gone to migrant workers. In many of our cities, you can walk down a street where only a handful of households have someone in work. In large parts of many communities, only a small minority of adults are in work. Yet only a short distance away the city centre is often a hive of activity. Tower cranes dot the skyline. But building sites are very often manned by migrant workers; offices, shops, restaurants, bars and hotels are the same. It makes no sense. 1. Department of Work and Pensions, Reducing Dependency, Increasing Opportunity: options for the future of welfare to work, David Freud, p.5 2. Centre for Social Justice, Breakthrough Britain, July 2007, p.12

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Of course we have already been promised change. Gordon Brown promised that the New Deal would make all the difference, but it has not. Despite over £3 billion spent on the New Deal, ten years later youth unemployment is actually higher than it was in 1997. Britain has a higher proportion of children living in workless households than any other country in Europe.

Time for REAL change Timid tinkering with the existing system is not good enough. It is our moral obligation to end the culture of long-term welfare dependency in Britain. In a responsible society, individuals who are capable of working accept their responsibility to work – and the government accepts its responsibility to help all those who can work get into work. We believe that the time has come to put an end to the culture of deliberate worklessness in Britain. We believe that it should not be possible for any person who can work to choose not to do so and live on out of work benefits instead. We will build on the experience of the welfare reform programmes that began in the United States and have been emulated in countries like Australia and the Netherlands. Our plans provide a much more comprehensive programme of support for jobseekers. But they also mean that those who refuse to participate in the return to work process will no longer receive out of work benefits. We will ensure that people participate fully by introducing mandatory conditions and time limits. The long-term unemployed will have to join community work programmes to get them back into the work habit. The features of our REAL programme for welfare reform include: ● Respect

for those who cannot work – recipients of Incapacity Benefit who really cannot work will stay outside the return to work process.

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Employment for those who can – a comprehensive programme of support for jobseekers including training, development, work experience and post- employment mentoring.

●

● Assessments

for those claiming out of work benefits – rapid assessments for every recipient, including all new and existing claimants, to assess suitability for work.

● Limits

to claiming out of work benefits – non-participants or those who refuse reasonable job offers will lose their out of work benefits, and anyone who claims for more than two out of three years will be required to work for the dole on community work programmes. We will fund this extended programme by bringing the principle of payment by results to the return to work arena in the UK. The job of delivering our programmes will be contracted to third party providers from the private and voluntary sectors, including local authorities with relevant expertise. They will be paid when they get people into work. If they do not, they will not be paid. If we can emulate the success of tough programmes overseas we can make massive inroads into the cost of social failure and generate savings amounting to billions of pounds a year. This document sets out the broad shape of the programme we intend to build, sets out the timeframe for its implementation, and the financial implications of our proposals. It illustrates how we will draw together best practice in the UK and from other parts of the world to build a radical programme to get people off out of work benefits. It will serve as the basis for a discussion with those in the field over the coming months, ahead of the publication of a White Paper in due course. In an age where unprecedented wealth and opportunity is available to many, but long-term poverty and multiple deprivation are still the reality of life for millions of people, ending Britain’s welfare culture is a moral duty for any progressive government. Gordon Brown has comprehensively failed in that duty: this document sets out how a modern Conservative government will succeed. 12

2. What is wrong with our return to work system?

number of people claiming out of work benefits for more than five years has grown by 600,000 since 1999.9 Share of persons aged 0–1 / living in households where no one works, 2005

Share of persons aged 0–17 living in households where no-one works, 2005 18

● income

support for lone parents whose youngest child is under the age of sixteen.

● youth

unemployment is now higher than in 1997;5

● as

many as 80 per cent of the jobs created since 1997 have gone to foreign workers;6

● Incapacity

Benefit claims for the under-25s are up 52 per cent; and

● more

than half of the people claiming Incapacity Benefit have been doing so for more than five years.7

13

3. Department of Work and Pensions, Quarterly Statistical Summary, November 2007. 4. The out of work benefits dealt with in this paper are working age benefits. In general they cover people aged 18-60/65. In certain circumstances 16-17 year olds are able to claim these out of work benefits – for example if they are parents or living alone rather than with parents or guardians. More details can be found in Appendix A1. 5. Office of National Statistics, data series AGOL and AGPM, September 2007. 6. Statistics Commission, Foreign workers in the UK- briefing note, December 2007.

12 10 8 6 4 2 0

Croatia

By following the short-termist approach of extending means-testing, Labour has wasted ten years:

14

%

Despite a benign global economic climate, centralised interventions in the shape of the New Deal, Pathways to Work and Employment Zones have failed to bring substantial numbers of people off benefits and into work.

16

Romania

Benefit (IB) for those who cannot work because of illness or disability; and

● the

Germany

● Incapacity

has the highest proportion of children in workless families in Europe;8 and

Poland

Allowance (JSA) for those unemployed but actively seeking work;

● Britain

Ireland

● Jobseeker’s

in six children live in a household where no-one works;

Slovakia

There are three main out of work benefits which are the focus of our plans for reform:

● one

Hungary

837,000 2,640,000 1,308,000

Belgium

Numbers

Bulgaria

Status of claimants Jobseeker’s Allowance Incapacity Benefit Income support

The welfare state is not doing enough to help people who want to work and some people are taking advantage of the system. Current policies are locking people into cycles of dependency:

United Kingdom

In Britain today, a total of 4.8 million people are currently claiming out of work benefits.3 These are made up of approximately:

Country

7. Department for Work and Pensions, Work and Pensions Longitudinal Study, IB caseload by age range and IB claims by duration of claim, August 1999 and May 2007. 8. Share of Persons aged 0-17 who are living in households where no-one works, Eurostat, 2006. 9. Department of Work and Pensions, Work and Pensions Longitudinal Study, Client Group analysis of the Working Age – % of the population, August 1999 to May 2007.

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Many of those receiving out of work benefits desperately want a job. But this Government has failed to create the climate or tools people need to get back into work when they have been out of the job market for some time. This is an absurd state of affairs when 1.4 million people have come to the UK to take up work over the past ten years.10

2.1 What is wrong with Jobseeker’s Allowance? It is too easy to claim Jobseeker’s Allowance repeatedly, and for many it fails to provide a stepping stone out of worklessness. There are 837,000 people receiving Jobseeker’s Allowance. All of the evidence indicates that large numbers of JSA claimants are being trapped in dependency rather than being helped into long-term work: ● around

558,000 JSA claims are repeat claims;11

● 279,000

claimants are spending more time on benefit than in work;

● 250,000

claimants have spent at least eighteen months out of the last two years claiming benefits; and

● around

100,000 of all JSA claimants have spent six of the past seven years on benefits.12

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10. Statistics Commission, Foreign Workers in the UK – Briefing Note, 10 December 2007. 11. Department of Work and Pensions, Quarterly Statistical Summary, November 2007 12. Calculations based on figures in a speech by John Hutton MP, then Secretary of State for Work and Pensions, 20 June 2007.

2.2 What is wrong with Incapacity Benefit? Incapacity Benefit is a trap for large numbers of people, few of whom ever find their way back into the workplace. There are currently 2.64 million people claiming Incapacity Benefit, 120,000 more than in 1997.13 This in itself is a very poor record, but there are particularly worrying trends in the number of young people claiming Incapacity Benefit: ● 52

per cent more under 25s are claiming Incapacity Benefit than in 1999;14

● there

are now 6,600 16-17 year olds claiming Incapacity Benefit;15 and

● around

one in fifteen Incapacity Benefit claimants is aged under 25.16

The amount of time that people remain on Incapacity Benefit is also very troubling: ● at

the moment you are more likely to die or retire than get a job if you have been on Incapacity Benefit for more than two years;17 and

● the

number of long-term Incapacity Benefit claimants has risen under the present Government and more than half of the people now claiming Incapacity Benefit have been receiving it for more than five years.18

13. Department of Work and Pensions, Quarterly Statistical Summary, November 2007; Department for Work and Pensions, 5% Sample Data, IB/SDA Working Age caseload, May 1997. 14. Department for Work and Pensions, Work and Pensions Longitudinal Study, IB caseload by age range and IB claims by duration of claim, August 1999 and May 2007 15. Department for Work and Pensions, Work and Pensions Longitudinal Study, IB/SDA Working Age caseload by age range, May 2007. 16. Ibid. 17. Department of Work and Pensions, Press Release, 15th March, 2007. 18. Department of Work and Pensions, 5% sample data, IB/SDA working age claims by duration of claim, May 1997; Work and Pensions Longitudinal Study, IB/SDA working age claims by duration of claim, May 2007

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Share of persons aged 0–1 / living in households where no one works, 2005

18 16 14

%

12 10 8

United Kingdom

2.3 What is wrong with income support 6 for lone parents? 4

2.4 What is wrong with the Government’s employment programmes?

Croatia

Romania

Germany

Poland

Ireland

Slovakia

Hungary

Belgium

Bulgaria

It is well established that workless households tend to create cycles of deprivation,19 20 and 2 there are currently 766,000 lone parents claiming income support. 0 Government admits that many lone parents could be working part-time. It is The proposing to change the rules gradually, so that by 2010 parents whose youngest Country child is over seven will be expected to work rather than being entitled to claim income support. But there is little evidence of the Government actually helping large numbers of lone parents with older children into work and off income support.

The rate of reduction in the number of lone parents claiming income support has slowed markedly. In 1999 the average monthly reduction was 7,950; this has now fallen to 2,280. At this rate, by June 2010 the number of claimants will be just over 700,000 – achange reduction onlyParent 66,000, far short of the Government’s target of Quarterly inof Lone Income Support getting another 300,000 lone parents into work.21 15.00

Quarterly change in lone parents claiming income support

10.00

Spending on employment programmes in 2006/7 (£’000s) New Deal 18-24 and 25+ (1) New Deal for Lone Parents New Deal for Disabled People New Deal for Partners New Deal 50+ Employment Zones Pathways to Work (2) Total

321,887 41,517 72,981 613 247 110,179 148,000 695,424

Source Jobcentre Plus Annual Report 2006/7 Notes: (1) Costs for each New Deal and Employment Zones are from the Annual Report and Accounts 2006/7 of Jobcentre Plus. (2) This cost was submitted to the Work and Pensions Select Committee in a written note by the DWP (Vol 2 of evidence, ev 256). The £148 million cost is based on the ‘long run’ cost of the current Pathways network, which is one third of the intended network.

Feb 07

Nov 06

Aug 06

May 06

Feb 06

Nov 05

Aug 05

Feb 05

Nov 04

Aug 04

May 03

Feb 03

Nov 03

-5.00 -10.00

Aug 03

Thousand

0.00

May 05

5.00

Billions have been spent on employment programmes which are failing to get people into sustained employment. The Government is currently spending £695 million a year on its employment programmes: New Deal, Pathways to Work (only a third of which have been rolled out) and Employment Zones. Since 1998, the New Deal alone has cost a total of £3 billion, and its annual costs have escalated by 94 per cent.22

-15.00 -20.00 -25.00 -30.00 -35.00 Quarterly change

17

19. Breakthrough Britain, Centre for Social Justice, 2007. 20. Department of Work and Pensions, Quarterly Statistical Summary, November 2007. 21. Ibid.

22. Hansard, 4 June 2007, Column 32W (Costs for the New Deal for Young People, New Deal for 25 plus and New Deal for Lone Parents)

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Despite this heavy expenditure, the performance of the New Deal is deteriorating: ● New

Deal for Young People In the first two months of 2007, only 28 per cent of leavers found sustained jobs – compared with 54 per cent in 1998.

Deal 25+ In 2007 only 21 per cent of leavers found sustained jobs, compared with 34 per cent in 2001.

● New

● New

Deal for Lone Parents In 2006 only 22 per cent of leavers found sustained jobs compared with 51 per cent in 1998.23 The failure of the Government’s employment programmes is demonstrated in the number of workless households. There are now 6.1 million people living in workless households – an increase of 200,000 from last year.24

2.5 What is wrong with the Government’s new proposals? In 2006, recognising the failure of the New Deal, the Government commissioned David Freud, of the Portland Trust, to make recommendations about a new approach to getting people back to work. The radical blueprint set out in the Freud report, involving the contracting out of the return to work process to a series of independent providers on a payment by results basis, offers a clear way forward for the UK. Tony Blair and then Work and Pensions Secretary John Hutton were enthusiastic about the Freud report. Gordon Brown was not, and it was initially buried. More recently, the Government has adopted some of its language, and has modified some of its welfare-to-work plans to enable it to be seen to be acting tough on welfare issues.

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23. House of Commons Library analysis and Department of Work and Pensions tabulation tool, February 2007. 24. Office of National Statistics, Work and Worklessness among households, August 2007

However, reflecting its failure over the last ten years to help people back into work, Labour’s plans are just tweaking at the margins. They will have no serious impact on the culture of worklessness or the poverty it produces.

2.5.1 Changes to the New Deal The Government plans to make gradual reforms to the New Deal in the next few years. It will introduce a skills health check for some new claimants and merge the New Deal for Young People and New Deal for 25+ into one new ‘Flexible New Deal’ delivered by Jobcentre Plus and private and voluntary sector providers. The Flexible New Deal will still mean that JSA claimants have to wait at least a year before being referred to a private or voluntary sector provider, and the majority of back to work services will still be provided by Jobcentre Plus.25 Also, Flexible New Deal will not deal with people who are abusing the system by repeat claims of JSA because it fails to set time limits for receipt of the benefit.26

2.5.2 Pathways to Work Pathways to Work programmes apply to new claimants of Incapacity Benefit and are scheduled to be rolled out to existing claimants under the age of 25. But the under 25s represent only six per cent of existing claimants, so this change will do nothing to help the vast majority of Incapacity Benefit claimants back into work.

2.5.3 Work Capability Assessment A new Work Capability Assessment (WCA) is forecast to reduce by ten per cent the number of people accessing Incapacity Benefit from a new claim. But, again, this will have no impact on those who are already claiming Incapacity Benefit. As a result, even assuming that it is successful in its own terms, it will only reduce IB rolls by just 20,000 a year, less than one per cent of the total number of claimants.27 25. Department of Work and Pensions, Ready for work: full employment in our generation, December 2007 26. Ibid. 27. Department of Work and Pensions, Press release, 19 November 2007

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3. Who are we are going to help?

2.6 How does our broader benefits system hold back return to work?

Our radical programme is built on three simple principles:

One of the most frequent complaints from benefit recipients about the welfareto-work issue is that some of the detailed elements of the benefit system actively discriminate against people returning to work.

2. if you are out of work, we will do everything we can to help you back into work; and,

Examples of this include the fact that people can lose benefits if they embark on a short full-time training course, even if this course is a central part of preparing them to get back into work. This Green Paper has not sought to address the obstacles to returning to work in the wider benefit system. This is a separate and complex project, and the Government is also planning to introduce some changes. We intend to review this issue as part of the next phase of our work, leading up to the publication of a full White Paper in due course.

1. if you are able to work there will be no automatic out of work benefits;

3. if you are medically unable to work then we will give you the help you need. There is a clear link between a culture of worklessness in the family and the likelihood that a young person will end up failing in education and failing to enter the workplace after school, leading many families into a spiral of dependency. We want to help as many as possible of the 4.8 million people currently receiving out of work benefits, and, reflecting our principles, our policy is designed to be flexible and to give the amount of help that is right for each individual. We can split those current recipients of out of work benefits who are capable of some form of work into two categories: those who want to work and those who do not. We will take a very different approach to each type of claimant.

21

22

3.1 Claimants who are capable of work and want to do to so

3.2 Claimants who are capable of work but who refuse to do so

The majority of out of work benefit claimants want to work but find that taking the right steps back into work is something that they are ill-equipped to do. They may lack the skills, self-confidence or family exposure to the culture of work, and so getting a job can be a difficult and daunting prospect. Our approach is to offer these people the support, training and encouragement they need to successfully re-enter the workplace.

While the majority of out of work benefit claimants would like to work if they could, there is a significant minority who are playing the system. Equally, there are clearly some people who have managed to use Incapacity Benefit registration as a way of avoiding the greater conditionality and lower cash amounts of Jobseeker’s Allowance,

Equally, although there are clearly some people who have managed to use Incapacity Benefit registration as a way of avoiding the greater conditionality and lower cash amounts of Jobseeker’s Allowance, most of those receiving Incapacity Benefit do or have faced genuine health issues. Many will need to look for a different kind of job to the one they held previously if they are to return to work. Some, including often those with mental health issues, will face self-confidence challenges in returning to the workplace.

Our welfare system has tolerated this kind of abuse for too long, and the Government has done little to clamp down on those that exploit the system. In line with our principles, we will deal robustly with those who can work but who refuse to do so, with tough but fair sanctions and time limits meaning that those who refuse to participate in our welfare programmes or accept reasonable job offers will lose their right to claim out of work benefits.

It is not easy for any of these people to make the leap into a job. Just as they have a responsibility to make themselves ready for work and to seek work which they are able to do, so we as a society have a responsibility to ensure that they have access to effective help in taking those steps. Where people want to work but have difficulty persuading employers to hire them, we need to give them the means to make themselves more attractive to employers. Where people have become afraid even to apply for work, we need to help them to build the work habit and give them the confidence to get back into job market. Where people want to work but cannot (for example, because of childcare commitments) we must enable them to get closer to the job market so that they can go back to work at a time which is right for them and for their families. 23

24

4. What succeeds? Best practice from around the world

Many countries have introduced new measures to reduce welfare dependency and to help jobseekers return to work. In the US, poverty, child poverty and welfare caseloads have all fallen as a result of federal and state welfare programmes.28 The Australian welfare-to-work providers have achieved a ten percentage point increase in the likelihood of people who are out of work finding and keeping a job – an impact which puts Australia right at the top of the OECD range.29 These are the goals we want to achieve through our reform of the UK’s welfare system.

The City of New York introduced a standard skills assessment to determine work readiness and the degree of intervention required, and rolled out this assessment to the entire welfare caseload over a two year period. This process is applied at the start of a claim and applicants immediately begin an intensive four- and six-week back to work programme. Claimants are then referred on to a welfare-to-work provider.32 Universal assessments allow much better targeting of spending, ensuring that intensive assistance is offered to those that need it most and at the appropriate times.

We have reviewed the progress made and the lessons to be learned from the main examples in Australia, New Zealand, the Netherlands, Germany, and several states in the USA. No one model is directly transferable to the UK but the best include three key areas of focus that underpin our policy proposals.

4.2 Strong linkage of benefits to work or work-like activities: if you do not participate you do not get benefits

4.1 Clear, rapid and universal assessment of work readiness

The United States and Australia have gone furthest in making explicit the link between benefits and work for the able-bodied. Underlying these reforms are two key concepts: first that work experience helps jobseekers become more employable; and second that benefits involve responsibilities for recipients.

Key factors in successful international reforms have been the establishment of a clear outline of the return to work process, simplification of the programmes and pathways provided to help individuals, and a focus on rapidly engaging people into the back to work process. Like the current system in the UK, many countries started with a fragmented array of interventions and different rules for different types of jobseeker. But, in countries with successful return to work programmes, these interventions have been reduced in number and have been linked to standardised systems of assessment.30 In Australia, a standard assessment is used. The Job Seeker Classification Instrument (JSCI) was introduced in 1997 to assess all applicants for benefits, including the disabled and lone parents, within two days of their first claim. The JSCI score, which is updated regularly, determines what type of work (if any) would be suitable for each claimant and how much and how quickly they need help to find a job. Claimants with no barriers to work are connected with a welfare-to-work provider within two days.31 25

28. Welfare Reform at 10: Analyzing Welfare Caseload Fluctuations, 1996–2002, Michael J. New, Center for Data Analysis Report #06-07, Heritage Foundation, 2006 29. What works and for whom: a review of OECD countries’ experiences with active labour market policies John Martin and David Grubb 2001 and Customised Assistance, Job Search Training, Work for the Dole and Mutual Obligation-A Net Impact Study, DEWR April 2006 30. DEWR Net Impact Study April 2006, reports that Work for the Dole participants were 20 per cent more likely to gain employment after participating in the programme. 31. See www.workplace.gov.au for a full overview of the Job Seeker Classification Instrument

In Australia, many able-bodied jobseekers are required to “Work for the Dole” by engaging in socially useful local work placements for six months, helping them to find work and also benefiting their communities.33 If they do not participate, their benefits are reduced. In many states in the USA, including California, New York and Wisconsin, all able-bodied welfare claimants are required to participate in work or workrelated activities, and there have been dramatic falls in claims during the time that these measures were in place.34

32. Welfare Reform in New York City during the Giuliani Administration: A Study of Programme Implementation, Urban Institute of Washington July 2002 33. Ibid. 34. The Urban Institute series of reports dating from 2001 profiles the TANF changes in thirteen states and reported TANF caseload falls of 33 per cent from 1996 to 1999 in New York State, 47 per cent between 1995 and 1999 in California and 59 per cent between 1997 and 1999 in Wisconsin. Most TANF claimants were subject to new conditionality regimes from 1997.

26

5. How will the out of work benefit system change?

4.3 Creation of a managed market for back to work employment services In almost all the countries studied, successful labour market reforms have involved private or third sector organisations operating back to work programmes. In the Netherlands, over 600 private organisations help jobseekers at a local or national level, while in Germany job seekers can choose to register with a private provider if the government services have failed to help them find work after six weeks.35 Again, the United States and Australia have gone furthest in outsourcing many elements of the return to work process to third party welfare-to-work providers (WTWPs). These private and not-for-profit organisations have provided skills assessments, job search training, intensive and customised employment assistance and provision of work placements. Contract structures and payment arrangements vary but the best examples from Australia use performance based payments, ensure efficient competition between WTWPs for contracts, allow jobseeker choice, and provide dynamic and transparent data on job placement performance.

In contrast to the present Government’s timid tinkering, we propose a radical reform agenda. In line with international experience of successful welfare-to-work programmes, our proposals for reform in the UK will mean: ● a

new system of assessment;

● new

conditions for receiving out of work benefits; and

● new

help for people to get back into work through a network of welfare-to-work providers.

The rules outlined below will mean that out of work benefit claims follow a three year cycle. At the end of the three year period, claimants will be able to re-start the assessment process, but subject to the restoration of sanctions if they choose not to participate or choose to refuse reasonable job offers. Further details of how our reforms will apply to different groups are set out in Appendix A2.

5.1 The gateway We expect Jobcentre Plus to continue to be the first port of call when someone has lost their job or cannot work. It will continue to be the jobseeker’s gateway to employment services. Jobcentre Plus will also continue to manage the benefit system and impose the sanctions regime (as opposed to providing specialist employment services). International evidence suggests that early intervention and assistance is crucial. Within 24 hours of a claim, Jobcentre Plus will provide an in-depth assessment to evaluate claimants’ needs and capabilities. Using this information we can design a package with the right balance of support and benefits to help the claimant back into work.

27

35. Before and After the Hartz Reforms: The Performance of Active Labour Market Policy in Germany. Jacobi and Kluve, 2006

28

5.2 A profiling system to tailor support Each claimant for out of work benefit faces different challenges, and our system must reflect this. Not all people can or should be treated the same. Problems encountered by someone well established in work, but who has been made redundant, are very different to those of someone who has been receiving Incapacity Benefit for many years. We intend to use a profiling system similar to the standard assessments used in New York City or Australia to categorise each person looking for work, with finely graded levels of difficulty associated with placing them in work. The categorisation will be part of the initial assessment at Jobcentre Plus within 24 hours of a benefit claim. At one end of the scale will be those deemed to be most likely to be able to find a new job, who will be given a period of up to six months to do so before they are referred to a welfare-to-work provider. At the other end of the scale will be those facing the most difficult challenges who will be referred immediately. Between these extremes, claimants with challenges of varying degrees will be given varying lengths of time within which to find work supported only by Jobcentre Plus before being referred to a specialist welfareto-work provider. This profiling tool will be rapidly extended to the entire stock of JSA and IB claimants as they are brought into the new system.

effective programmes allow independent providers room to innovate. The welfare-to-work providers will have a strong incentive to offer the best possible tailored support because they will be paid by results – receiving full payment only when they get people into jobs and keep them in jobs for a sustained period. However, we will expect each employment programme to include a number of core elements. These will include: ● training

to increase suitability for work;

● personalised

career and recruitment advice and support prior to entering the workplace; and

● sustained

mentoring and development advice after re-entering employment.

We see post-employment mentoring as a key part of the programme, and something which has been missing in this country. Such mentoring helps when problems arise at work which may be difficult for a new recruit to discuss with an employer – a skill issue, for example. Reports from welfare-to-work providers in other countries make clear that people are significantly more likely to stay in work after getting a job if they receive this type of post-employment support.

The assessment will also be used to determine how much a welfare-to-work provider is paid when a particular claimant is found a job. Claimants who have been assessed as more difficult to place will attract a higher success fee for the welfare-to-work provider than those who have been assessed as being easier to place. This variable fee system is of the utmost importance – it is the only way of ensuring that the welfare-to-work providers invest sufficient resources in the people who need most help to get jobs, rather than just leaving them on benefits and tackling the easier cases. We will not prescribe the methods used by welfare-to-work providers to help people back to work, because the international evidence suggests that the most 29

30

5.3 Conditions and sanctions The success of conditional benefit systems in other countries shows that using conditions and sanctions helps to build the culture of work that people need to get back into the job market. Under our proposals, there will be three main types of condition applied to the receipt of out of work benefits. ● Everyone



referred by Jobcentre Plus to a welfare-to-work provider will be expected to participate in a return to work programme. If they are not willing to participate, they will cease to be eligible to receive out of work benefits. If they fail to participate in any part of the programme without a reasonable excuse, they will also be liable to lose some or all of their out of work benefits during the period of non-participation.

Depending on circumstances, the loss of out of work benefits would have a significant impact on income. For a couple claiming JSA, they would forgo £92.80 a week – more than half their total income, assuming they also claim housing and council tax benefits. For parents on JSA or IB, they could lose between a quarter and a third of their income if they fail to comply with the conditions of the welfare programme. In the case of parents who are subject to out of work benefit sanction, child- and family-related entitlements such as child benefit and child tax credit will not be affected. The operation of conditionality for parents will specifically allow for special circumstances – such as the need for childcare faced by individual parents. However, there must remain a clear financial penalty in the form of lost out of work benefits for wilful non-participation. We will consult on the current operation of hardship payments and on their interaction with the sanctions regime.

● Everyone



who receives a reasonable job offer, as defined by the current government guidelines and confirmed in their initial assessment (and Work Capability Assessment if relevant), will be expected to accept that offer. If they do not do so, they will lose one month’s out of work benefits. If they refuse a second reasonable offer, they will lose three months’ out of work benefits. If they refuse a third reasonable offer, they will be excluded from receiving further out of work benefits for a period of three years.

● We



31

will apply a time limit to the receipt of Jobseeker’s Allowance for long-term and repeat claimants. Our intention is that anyone who has been through the new system without finding work and has claimed the allowance for longer than two out of the previous three years will be required to join a mandatory long-term community work scheme as a condition of continuing to receive benefit support.

32

5.4 Tackling long-term dependence on Incapacity Benefit We want support for those who are incapacitated in some way to be designed around what someone can do rather than what they cannot. Our aim is to help as many as possible of those who have incapacities, but who are capable of at least some work, into jobs. We will require all current recipients of Incapacity Benefit to go through a thorough Work Capability Assessment as soon as is practicable. People whose disabilities make it impossible for them to work will continue to receive unconditional support, but will be able to access support services on a voluntary basis. People with a non-permanent condition will be asked to repeat the Work Capability Assessment at regular intervals. Those who are found to be fully capable of working will be transferred immediately onto Jobseeker’s Allowance and will be required to seek work in the normal way. For those making inappropriate use of Incapacity Benefit, this will lead to a benefit cut of around £20 a week. Recipients of Incapacity Benefit who are found to be partially incapacitated but capable of preparation for work will be referred to welfare-to-work providers, but with additional support to reflect their conditions.

5.5 Community work programmes for the long-term unemployed

We will not allow anyone claiming Jobseeker’s Allowance over a long period to do nothing. We will apply a time limit to the receipt of Jobseeker’s Allowance for long-term and repeat claimants. The exact criteria for the time limit will be subject to consultation, but we envisage that anyone who has been through the new system and has claimed the allowance for longer than two out of the previous three years will be required to join a community work scheme as a condition of continuing to receive benefit support. The design of the community work scheme will build on successful international schemes like the Australian “Work for the Dole” programme. Participants will be required to spend most of their time in supervised productive work in their communities while still retaining access to back to work activities as designed by their welfare-to-work provider. Failure to participate in these community work programmes without certified sickness or other compassionate reasons for absence will lead to an immediate loss of out of work benefits on a pro-rata basis: as in any other form of employment, payment will depend on turning up for work. Participation will be for one year, at the end of which participants will start a fresh back to work cycle with a fresh assessment. We envisage that the programme will be administered by a national network of private and non-profit organisations that will be paid on a per-claimant basis. These may or may not be the same welfare-to-work providers who are delivering back to work services. We will consult with providers on the details of how the scheme should operate.

It is well established that the longer someone is out of the workplace the more difficult it is for them to go back. But the current system allows the long-term unemployed to continue to claim Jobseeker’s Allowance for most of their lives without participating in proper back to work schemes. 250,000 people have been on JSA for eighteen months out of the previous two years and 100,000 people have claimed for six out of the previous seven years.36 33

36. Calculations based on figures in a speech by John Hutton, MP, then Secretary of State for Work and Pensions, 20th June, 2007

34

6. How we will build a financial structure that can deliver our goals

5.6 Supporting lone parents The Government is in the process of significantly tightening the rules for lone parents. We accept the widespread evidence that helping a household make the transition from worklessness to work has beneficial effects for both parents and children alike.

This section describes how our proposals will work financially and how we will generate savings in the overall welfare bill to release funds to spend on other commitments. There are four particular areas that need to be addressed: ● how

we can afford to build a welfare-to-work programme that goes so far, in scale, beyond the current Government’s limited plans;

Our Social Justice Policy Group recommended that all lone parents with children of school age should be expected to return to part-time work. It proposed that those with children at primary school should be expected to work for at least twenty hours a week and that parents with children at secondary school should be expected to work for at least 30 hours a week.

● how

Both we and the Government have accepted the principle behind these recommendations. By 2010 we will inherit a situation where lone parents with children over the age of seven will have ceased to receive income support, and will have been transferred to Jobseeker’s Allowance. We will accept this approach, though we will make some refinements.

● how

many additional job placements are we aiming to achieve, and what kind of savings do we expect to be able to generate as a result;

● who

are the contractors who would take on this task, and are they sufficient in number to be able to deal with the scale of the challenge; and can we be certain that the jobs exist for sufficient numbers of those claiming out of work benefits to be able to deliver a rapid reduction in the number of claimants?

We will ensure that there are important safeguards to the conditionality applied to those on Jobseeker’s Allowance. In particular, we will ensure that the definition of a reasonable job as applied to parents will reflect the limitations that good parenting places on the ability to work. We want to ensure that lone parents are encouraged to return to work, but not forced into a position where they have to work hours that are completely incompatible with good parenting. In addition, our policy is to give all parents with children under the age of eighteen the right to seek flexible working from their employers. Our childcare strategy will also address the challenges faced by parents of school-age children.

35

36

6.1 How can we afford a programme on the scale we need? The Government is currently spending £695 million a year on welfare-to-work programmes, and plans to increase this to a figure in excess of £1 billion by 2010. Yet even an increase in spend at this level is not sufficient to allow Ministers to build programmes to help the 2.6 million people currently claiming Incapacity Benefit. The evidence provided in Chapter 2 also shows that current programmes are not substantial enough to have a lasting impact on levels of worklessness. There are two key policy decisions that we have taken which will change normal practice for return to work programmes in this country, and which will enable us to build something much broader in scale than the plans of the current Government.

The second element of the change is to alter the current way that government runs its finances. At the moment, Treasury rules insist that the cost of welfareto-work programmes is met out of the annual departmental budget for the Department for Work and Pensions. When those budgets run out, those programmes end. We have been informed privately by some of the Government’s existing providers for the New Deal programme that they have been told on occasions to stop working as they have got too many people back into work and the budgets have run out. This will always limit the size of programmes according to the Department for Work and Pensions’ regular annual budget.

6.1.1 Payment by results

Treasury rules mean that programmes which would deliver lower benefit expenditure and would save money for the Government are not allowed. They stipulate that money saved from what is called Annually Managed Expenditure – the regular bill for benefit and other payments – cannot be used to top up return to work programme costs.

The first is that we intend to pay the independent providers who take on the welfare-to-work task substantially or completely on the results they achieve. This is established practice in countries like Australia, and it allows us to synchronise outcome payments to the providers with the benefit payments saved once someone is back in work.

The limit prevents investments that would save money. Given that the average annual saving from getting someone from Incapacity Benefit into work is more than £5,000, the scope for encouraging up-front investment by independent providers through paying them out of benefits saved is huge.

That means the providers pay most, or all, of the upfront costs of delivering the programme. They start to recoup their money when they get someone back into work. They are only paid in full once someone is fully established back in the workplace. So, in a typical contract, we would expect to make stage payments to a provider over the course of a year or so after someone is back in work. If they lose their job, the payments stop. Again this is established international practice.

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6.1.2 Amending accounting rules

The Government’s failure to implement the recommendation from their own adviser, David Freud, that welfare-to-work should be delivered on a payment by results basis is a key reason why the Government has not introduced return to work programmes for most of the 2.6 million people in receipt of Incapacity Benefit. This is why David Freud has publicly criticised the current accounting limitations.

38

6.1.3 Items of additional expenditure There are two areas of expenditure within our plans which will fall outside the basic contract structure with the return to work providers. The first is the additional cost of assessments for people currently on Incapacity Benefit. The second is the cost of the community work programmes for long-term and repeat claimants. International evidence suggests that these can delivered at an annual cost of between £1,000 and £1,500 per participant.37 The first programmes will commence around two years after the introduction of the new system. In total these costs amount to substantially less than half the planned Department for Work and Pensions departmental expenditure of over £1bn a year by 2010 on welfare-to-work programmes such as the New Deal, once the existing programmes have been merged with the new payment by results structure. This is because it will no longer be necessary to fund programmes like the New Deal from departmental budgets, as their work will have been subsumed into our new return to work arrangements. As a result, their budgets will be freed up for other purposes.

6.2 How much difference can we make and how much will it save? The obvious and immediate question about a programme of this kind is how many people it will be able to move off out of work benefits into work – and as a result how much money will be saved. We share the Government’s long-term target of an 80 per cent employment rate for people of working age. However, the Government’s current targets for individual benefit claimant groups are wholly unattainable with current programmes. The Government’s audited financial projections are based on the assumption that its own targets will be missed. An example of this is the goal of moving one million people off Incapacity Benefit by 2016. In 2006 Ministers set a target of reducing the number of claimants by one million over the subsequent decade. By late 2007 they had managed only a reduction of 60,000.38 At that rate of progress, it will take until around 2040 for them to hit the one million target, 24 years behind schedule. Our radical programme will increase the rate at which those who can work re-enter the workplace. We will reduce drop out rates, and through post-employment mentoring will reduce the recycling of claimants through Government programmes. We expect to see an initial, one-off reduction in the number of out of work benefit claimants as a result of the introduction of tougher sanctions and conditions.

39

37. For example see http://www.annualreport.dewrsb.gov.au/2004/part2es/1403.htm for the costs of the Australian Work for the Dole scheme.

38. Department of Work and Pensions, Work and Pensions Longitudinal Study, IB/SDA claimants Feb 2006, May 2007 .

40

Evaluation of welfare-to-work programmes around the world suggest that an efficient system of payment by results combined with tough conditions can produce significantly improved employment outcomes. For example, participants in the Job Search Training and Customised Assistance programmes in Australia had employment rates after twelve months that were more than ten percentage points higher than a control group of non-participants. The success rates of their programmes are set out below. The Australian Experience Programme

Total participants to FYE June 2005

Employment rate 12 months after programme commencement (per cent)

Control group (nonparticipant) employment rate after 12 months (per cent)

Percentage point improvement over control group (per cent)

Weighted average (per cent)

Job Search Training

144,300

58.9

47.7

11.2

2.4

Customised Assistance

298,900

46

35.9

10.1

4.6

Work for the Dole

81,900

39.4

32.1

7.3

0.9

Mutual Obligation

148,900

46.6

38.4

8.2

1.7

Total

9.6

Existing welfare-to-work programmes in the UK, for example the New Deal for Young People, achieve a maximum additionality of seven per cent.40 But this is deceptive because, at present, there are no mandatory welfare-to-work programmes for existing recipients of incapacity benefit. Those that do exist only apply to claimants of jobseekers allowance, who are closest to the labour market, and should therefore be easiest to get back into work. As a result of this, additionality figures in the UK represent a success rate well below the comparable figures being achieved in Australia and elsewhere. To achieve our goals, we have to do two things. We have to increase the rate of success of getting conventional jobseekers back into work to the kind of levels being achieved in Australia. In addition, we have to bring the existing recipients of Incapacity Benefit into the net, and bring their employment rate up to the levels being achieved in other countries as well. To illustrate the potential savings from a successful programme, David Freud’s report indicated that the average saving to the Exchequer of moving someone off out of work benefits is £5,000, even before taking into account any additional tax revenues. On that basis, and once initial payments have been made to the welfare-to-work provider, each increase in work placements of 100,000 would generate overall ongoing savings to the Exchequer of £500 million per annum. As an indicator of the potential of getting this right, achieving the long-term goal of getting 80 per cent of people into employment would involve getting an additional 2.3 million people into work.41 The Social Justice Policy Group estimated that full savings from successful welfare reform could be £8 billion per year.42

Research by the OECD has found that targeted interventions and monitoring have achieved similar levels of additionality in countries such as the Netherlands.39 We have built our model around the experience of what has worked in other countries. 41

39. What works and for whom, a review of OECD countries’ experiences with active labour market policies, Martin and Grubb, 2001.

40. Institute for Fiscal Studies, Long-Term Effects Of A Mandatory Multistage Program: The New Deal For Young People In The UK, Giacomo De Giorgi, page 1, 2007. 41. Department for Work and Pensions, In work better off: next steps to full employment, July 2006, p8. 42. Social Justice Policy Group, Breakthrough Britain, July 2007

42

In the medium term, international experience shows that radical welfare reform significantly reduces benefit rolls. For example in the Australian Job Network scheme, between 39 per cent and 66 per cent of participants found jobs, depending on the type of scheme and category of participant. The Intensive Assistance scheme for participants whose profile closely resembles UK Incapacity Benefit claimants had a success rate of 45 per cent.43 By contrast, the Government’s target for reductions in Incapacity Benefit claimants represents a reduction of 120,000 claimants per year between now and 2016. By the end of a five year Parliament, that represents a reduction of 600,000, or just twelve per cent of the nearly five million people who are currently out of work and on benefits. Even hitting the Government’s own target for Incapacity Benefit would be equivalent to a cumulative saving of £3 billion a year by the end of a five year Parliament. This alone would be sufficient to meet our commitment to eliminate the couple penalty in the tax credit system.

6.3 Does the private sector have the capacity to deliver a programme of this kind? There is already a well established international welfare-to-work industry, with participants in the United Kingdom ranging from large private sector providers through to smaller third sector groups such as Tomorrow’s People. The development of some of the current Government’s programmes has established many businesses in the United Kingdom, though most remain on a relatively small scale by comparison with the bigger international programmes. However, we know from discussions with several of the major international providers that there is a clear willingness to invest in the UK.

to an organisation or range of organisations in different geographic areas of the country. We will consult on the best contracting model based on international and domestic experience, and a series of pilots will inform the model that is rolled out nationally. International experience suggests a number of important lessons for the design of contracting for return to work schemes on a payment by results basis. First, as well as competition for contracts, competition between providers within contracts can be an important driver of good performance. It also creates the potential for credible alternative bidders when contracts come up for renewal. Participant choice can also be an important driver of provider performance. Second, the Australian star rating system provides a good model for monitoring provider performance. The system has been effective in driving up performance and informing the choice of prime contractor when contracts are renewed. Third, smaller specialist providers can play a crucial role in helping some of the hardest to reach groups. Maintaining productive relationships between different types of provider and ensuring that claimants are referred to the provider whose expertise most closely matches their needs are important features of a successful system. Securing the future of these smaller, largely third sector providers, within the overall structure of a system of payment by results, will be a key criterion for us in shaping the new generation of contracts.

Our plan is to build a programme based around the concept set out by David Freud in his report. This will involve responsibility for return to work provision being contracted 43

43. Independent Review of the Job Network, Australian Productivity Commission, Report No. 21, 2002

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7. Questions for consultation

6.4 Can the labour market absorb a programme on this scale? Over the last ten years in the United Kingdom total employment has increased by 2.7 million. At the same time the Government admits that at least 1.4 million migrant workers have found employment in the UK. There has been considerable confusion about what proportion of the growth in employment can be accounted for by migrant workers but even these most conservative Government statistics show the figure to be at least 50 per cent and possibly as much as 80 per cent.44 While there are clear doubts about the employment outlook for the immediate future, official figures from the Office of National Statistics continue to predict net immigration into the United Kingdom each year running at 190,000 per annum.45 These are people looking to live and work in Britain.

Over the next few months we intend to consult widely on the proposals outlined in this Green Paper. There are a number of issues in particular which we intend to discuss with relevant groups and individuals: ● the

sanctions and conditionality set out in this document;

● the

rules for lone parents;

● the

contracting structure for the new return to work providers;

● how

to ensure that the new structure does not exclude smaller providers, particularly in the third sector; and

● the

scope and detail of the community work programmes.

Our goal is to control the number of migrants coming to Britain while at the same time looking to move people off out of work benefits and back into the workplace. In this context, our plans are perfectly containable within current employment trends in the United Kingdom. Furthermore, in the event of an economic downturn and a rise in unemployment, these reforms will help the unemployed to find those jobs that are available.

45

44. Statistics Commission, Foreign Workers in the UK briefing note, December 2007 45. Office for National Statistics, Long-term assumptions for UK population projections, 27 September 2007

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Appendices A1 Main out of work benefits

JSA and the New Deal

Incapacity Benefit

There are currently around 800,000 people on Jobseeker’s Allowance (JSA). The basic rate of JSA for a single person aged 25 or over is £59.15 per week, rising to £92.80 for a couple.

Incapacity Benefit (IB) customers make up the largest group people on out of work benefits in Britain, with 2.6 million people of working age currently receiving IB. This number has grown significantly since the 1970s. It is paid to those who cannot work because of illness or disability.

To claim JSA a person needs to be ‘actively seeking work’. In the first instance, a claimant has to call Jobcentre Plus to book an appointment. They then attend their local Jobcentre Plus to draw up a Jobseeker’s Agreement. The claimant is expected to take steps each week to find work or improve their chances of getting work (or both). Claimants will normally be expected to take at least three steps each week while they are getting JSA. This could include drawing up a CV or contacting employers for work. Claimants must visit their local Jobcentre Plus at least every two weeks. During the visit they will have to sign a declaration to say that they have been actively seeking work, that they are still available for work, and that there has been no change in circumstance which might affect their entitlement. They will discuss what opportunities are available for work. If claimants do not visit their Jobcentre Plus when asked to do so they risk losing their benefit. However, only around 12,000 people are sanctioned each year, and the majority of these sanctions last for just two weeks.46

There are three rates of IB, which vary according to how long the person has spent on the benefit, including any time spent on Statutory Sick Pay: ● the

short-term lower rate (currently £59.20 a week) for the first 28 weeks of incapacity

● the

short-term higher rate (currently £70.05 a week) from 29 to 52 weeks of incapacity

● the

long-term rate (currently £78.50 a week) after 52 weeks

Existing Incapacity Benefit recipients are not currently required to participate in any back to work programmes.

JSA claimants may lose their benefit if they break any of the eligibility conditions. This could include: ● not

making yourself available for work

● not

actively look for work and training, or

● not

having a current Jobseeker’s Agreement.

If a young person have been claiming JSA for over six months, or someone over 25 has been claiming for over eighteen months they will be referred onto the New Deal programme to help them get back to work. 47

46. Hansard, 30 January 2007, Column 258W.

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Employment and Support Allowance

Income support for lone parents

The new employment and support allowance (ESA) will replace IB for new customers in 2008. The ESA has three components. The basic benefit will be set at the level of JSA. A new personal capability assessment process will assess not only disability or illness but also potential capacity for work. Claimants will be divided into two groups: those exempt from work, who will receive the support element of the ESA, and those who are deemed capable of work, who will move on to the employment element of the allowance and to participate in preparation for work activities. If they fail to fully participate in the process they will receive a lower level of benefit under the Government’s plans.

Income support is a means-tested benefit paid to those with low incomes. Lone parents are currently entitled to claim income support until their youngest child is sixteen, at which point they move onto JSA. Recipients are required to attend a work focused interview (WFI) at the start of their claim in order to receive the benefit, a follow up WFI at six months, then regular (usually annual) WFIs subsequently. However they are not required to take any action beyond the WFI. Failure to turn up to a WFI can result in sanctions. From 2008 parents whose youngest child is aged eleven or over will have to claim JSA instead of income support. The government plans to lower the age of the youngest child to seven in 2010.

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Appendices A2 The assessment, conditionality, sanction and support system

Claimant type

JSA, closest to labour market

JSA, furthest from labour market, e.g. severe skill needs

Employment Allowance/IB

Support Allowance/IB

• Initial assessment within 24 hours

• Initial assessment within 24 hours

• Initial assessment within 24 hours

• Initial assessment within 24 hours

• Low assessment score (i.e. not hard to help) leads to six months supported job search with Jobcentre Plus

• High assessment score (i.e. hard to help) leads to immediate referral to WTWP on a payment by results basis

• Work Capability Assessment (WCA) within three months

• WCA within three months

6 months

• Referral to WTWP on a payment by results basis

• Continued investment by WTWP on a payment by results basis

• Continued investment by WTWP on a payment by results basis

• Optional continued investment by WTWP on a payment by results basis

12 to 24 months

• Reassessment of needs

• Reassessment of needs

• Reassessment of needs

• Continued investment by WTWP on a payment by results basis

• Continued investment by WTWP on a payment by results basis

• Continued investment by WTWP on a payment by results basis

• Optional continued investment by WTWP on a payment by results basis

Immediate

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• Referral to WTWP after WCA on a payment by results basis

• Optional referral to WTWP at any point on a payment by results basis

Claimant type

2 years + claims of benefit within 3 year period

JSA, closest to labour market

JSA, furthest from labour market, e.g. severe skill needs

• Community work scheme for longterm JSA claimants

Employment Allowance/IB

Support Allowance/IB

• No community work but WCA reassessment and continued support

• Clock starts with initial assessment • Lasts for one year

Sanctions

• Benefit sanctions for non-participation at all stages, or if turn down reasonable job offer – 1st: one month – 2nd: three months – 3rd: up to three years • Sanction for non-attendance at compulsory work schemes is pro-rata benefit loss

• EA claimants brought into the sanctions regime, but with maximum sanction length of three months

• No sanctions, but regular WCA to reassess work capability

• Definition of “reasonable job” depends on WCA

Promoted by Alan Mabbutt on behalf of the Conservative Party, both at 30 Millbank, London SW1P 4DP Printed by TPF Group, Avro House, Harlequin Avenue, Brentford TW8 9EW.

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