Get Britain WorkingConservative proposals to tackle unemploymentand reform welfareGet Britain Working                     ...
Contents1. Executive Summary                        42. The Unemployment and Welfare Challenge   103. The Current Welfare ...
List of Charts and TablesChart 1: DWP spend on unemployment benefits since 1997 (£mns)Chart 2: All jobs (FT and PT) by ind...
1. Executive SummaryLabour’s jobs crisisBritain is in the grip of a jobs crisis. This year has seen the highest increase i...
Our plans for welfare reform will radically transform the support people receive to get into work. Nolonger will anyone be...
The Work ProgrammeThe keystone of our new policy is The Work Programme, a single integrated welfare to workprogramme which...
Youth Action for Work is specifically focused on the cohort most at risk from long term damagethrough a period of unemploy...
this we will establish Work Together, an initiative that connects people with volunteering opportunitiesin their area. Mea...
How is our programme different from Labour’s?Get Britain Working offers a completely different approach to Labour’s piecem...
2. The Unemployment and Welfare ChallengeOver the past decade, Britain’s economy was left vulnerable to a major economic s...
But the cost is not only monetary. There is also a terrible human cost. Before the recession began,almost five million peo...
Cycling through the systemAlso hidden behind the recession unemployment statistics is another structural problem – the per...
Chart 3: Comparative rise in unemployment rates during UK recessions - indexed from recession startSource: ONS, Labour Mar...
Chart 5: Regional Unemployment Rates                 Yorkshire and the Humber                                             ...
However, although the impact of the recession on poor areas has been disproportionate, it has beensignificant across the r...
Chart 7: Comparison of job seekers and vacancies by occupation                   500,000                                  ...
Faced with months or years of unemployment, there is the risk that many young people will fail toacquire work habits and t...
3. The Current Welfare to Work System        “We will face up to the new issues that confront us. We will be the party of ...
It gradually became increasingly clear that the prescriptive central government approach driving the NewDeal was producing...
The New Deal for Young People BlueprintThe New Deal for Young People was launched in 1998 and formed the blueprint for the...
The Growth of New DealsDespite these severe shortcomings, the New Deal blueprint was then replicated for different claiman...
Despite the fact Employment Zones were based in the most deprived areas, they were found tooutperform the New Deals. Resea...
Third, the current structure of the Flexible New Deal runs the risk of encouraging providers to parkclients since the serv...
There has been little evidence of the Government providing support that lone parents need to overcomebarriers and return t...
within the programme to help people improve their skills. Disabled people and people with long-term healthconditions are t...
The real tragedy is that despite all of the Government’s welfare reform rhetoric over the last ten years, thelargest popul...
The key difference between the Young Person’s Guarantee and the New Deal for Young People is thatsupport will be offered f...
Community TaskforceWhen the Young Person’s Guarantee becomes mandatory in 2010, young people who cannot secure aFuture Job...
4. The Work ProgrammeIntroductionThe Conservative approach to welfare reform set out in this document is more radical and ...
Whitehall-based civil servants to identify employment barriers and to segment groups of unemployedpeople. The system today...
The amount paid by the taxpayer to Work Programme providers to help an unemployed person into ajob will therefore vary dep...
The DEL:AME SwitchOne of the anomalies of the Government’s public expenditure management system is the division ofpublic e...
Business-led Training ModulesWe accept too, that in the current economic circumstances it is necessary to ensure that Work...
Young Entrepreneur Academy     Many young people are interested in working for themselves are looking for help to get star...
We believe that work is the best route out of poverty and that transforming our welfare to work systemis a moral as well a...
5. Youth Action for WorkYoung people have been particularly badly affected during the current recession. 947,000 16-24 yea...
As young people approach six months on Jobseeker’s Allowance, they will be transferred to The WorkProgramme. The provider ...
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  1. 1. Get Britain WorkingConservative proposals to tackle unemploymentand reform welfareGet Britain Working 1
  2. 2. Contents1. Executive Summary 42. The Unemployment and Welfare Challenge 103. The Current Welfare to Work System 184. The Work Programme 295. Youth Action for Work 366. Work for Yourself 477. Work Together 528. Work Clubs 549. Funding Get Britain Working 572
  3. 3. List of Charts and TablesChart 1: DWP spend on unemployment benefits since 1997 (£mns)Chart 2: All jobs (FT and PT) by industry, 1997 and 2009Chart 3: Comparative rise in unemployment rates during past recessions – indexed from recessions startsChart 4: Government projections for JSA claimantsChart 5: Regional unemployment ratesChart 6: Comparative local unemployment ratesChart 7: Comparison of JSA claimants and Jobcentre Plus vacancies by occupational groupTable 1: Employment numbers by occupationTable 2: Numbers moving onto Pathways and into paid workTable 3: Get Britain Working costings and funding sources 2010/11 – 2012/13Annex A: List of employment programmes and pilots run by DWP as of August 2009Get Britain Working 3
  4. 4. 1. Executive SummaryLabour’s jobs crisisBritain is in the grip of a jobs crisis. This year has seen the highest increase in unemployment onrecord, with over 2,000 people a day losing their job. The recession is hitting every industry in everypart of the country, with people finding themselves out of work and struggling to make ends meet:• over five million people claim out of work benefits;• in 3.3 million households (17% of all households), no adult works;• Britain has a higher proportion of children growing up in workless households than any other European country;• there are 947,000 unemployed young people aged between 16 and 24;• this year, the Government expects to spend £36 billion on out of work benefits – a 20% rise on last year; and• £1 for every £3 raised in tax is spent on social security and debt interest.We cannot go on like this. We cannot afford for people to be left behind. Ensuring we emerge from recessionwith a work-ready and skilled population is essential if we want our economy to remain competitive.The Jobs Crisis – like Labour’s Debt Crisis – cannot be solved by one policy or one programme alone. Itrequires a change in economic policy and a shift in culture to unleash investment and entrepreneurialactivity. This agenda will be advanced right across the economic policy spectrum: through radicalwelfare and education reform; through deregulation and de-bureaucratisation; through a new andentrepreneurial approach to infrastructure, universities, science, skills, training, apprenticeships – all thethings that a modern economy requires for success. The introduction of this integrated approach – GetBritain Working – will be an immediate priority following the next election.Even before the recession Britain was already struggling with mass levels of hidden worklessness.Almost five million people were claiming some form of out of work benefit and the bill for this level ofwelfare dependency totals £346 billion for the last twelve years. Some of these people, like those withsevere disabilities and those who do invaluable work as carers, will not be able to work, but many otherscould work and more importantly want to work. The Labour Government has left these people behind,offering them the bare minimum of support and sentencing them to a life on benefits.Conservatives believe that we have both a moral and an economic duty to change this situation. Thepublic finances are in a critical condition and the size of the benefits bill is just not tenable. But morally,we cannot leave people to languish on benefits with no opportunities and no chance of changing theirown lives for the better. We have made it clear that those who can work should work, and we arecommitted to giving them the tools and skills to do so.4
  5. 5. Our plans for welfare reform will radically transform the support people receive to get into work. Nolonger will anyone be left to a lifetime on benefits. Everyone who is able to will be expected to prepareto return to work, and in return we will offer them the support they need to do so. But during therecession we need to do even more. So as well as putting together an underlying programme of welfareto work provision, we will introduce a series of emergency measures to offer people immediate supportthrough the crisis period. Our particular focus will be on young people who are at risk of beingpermanently affected by a period of unemployment, but there will be increased support from day onefor all those who need it.What are we offering?Get Britain Working is built around four linked changes:• a new integrated welfare-to-work initiative, The Work Programme, and four supplementary programmes: – Work for Yourself, offering business mentors and loans to would-be entrepreneurs, – Work Together, a programme to connect people to volunteering opportunities in their area, – Work Clubs, places where people can receive mentoring, skills training and help to find local job opportunities, and – Youth Action for Work, which over two years provides 200,000 additional apprenticeships, 100,000 additional FE college places, 100,000 ‘work pairings’, and over 40,000 additional young apprenticeships;• a new generation of technical schools;• a new national ambition to turn Britain into Europe’s leading high tech exporting nation; and• 10,000 new university places. Conservative Work Programme v Labour New Deal A programme for all claimants not piecemeal improvisation Massive simplification of welfare to work not 20+ programmes Long-term support not short-term fixes Aligned incentives for providers not confused rules Genuine upskilling for young people not ‘make-work’ Re-ignition of enterprise and self-help not more bureaucracyGet Britain Working 5
  6. 6. The Work ProgrammeThe keystone of our new policy is The Work Programme, a single integrated welfare to workprogramme which will cover those transferring from Incapacity Benefits to Employment and SupportAllowance as a result of work tests, the long term unemployed, lone parents and the recentlyunemployed. This fully funded programme will replace Labour’s failing New Deals, the Flexible NewDeal and Pathways to Work. It will offer support to the vast majority of the people currently onIncapacity Benefit that have been abandoned by this government.Through The Work Programme, we will offer people targeted, personalised help sooner – straight awayfor those with serious barriers to work and at six months for those under 25.Providers will be paid by results, driving up quality and encouraging innovation. The principle behindpayment by results is simple: if you don’t place someone in a sustainable job, you don’t earn your fee.And a sustainable job under The Work Programme means being in work for a year or even longer, unlikethe Flexible New Deal which rewards providers when someone has been in work for just 26 weeks. Thisprogramme is about transforming people’s lives, not finding a quick fix.We’ll extend the period of engagement that providers have with claimants, so they can work with themover the medium to long term, delivering better results for those individuals. In a difficult jobs market,it also means that providers have a better chance of placing someone in a job and earning their fee.Under the Flexible New Deal when an individual has been with a provider for a year and still not found ajob they return to Jobcentre Plus and begin the whole process again. This makes the Flexible New Deala flawed scheme, particularly during a period when vacancies may be scarce.Crucially, we’ll have a differential payment system, whereby providers will earn more for helping thosewho need the most support. This will discourage them from ignoring the hardest to help and onlyworking with the easier cases. Labour’s programmes offer the same fee for every claimant, a systemwhich fails to recognise that people are essentially different and require vastly different levels ofsupport. There is no incentive for providers to help those furthest from the labour market.The Work Programme will be flexible and robust enough to withstand every phase of the economic cycle.This is not just a recessionary measure. It will form the basis of our support during this crisis period andbeyond. However, in response to the recession and the unemployment crisis we are also offering anumber of emergency programmes to offer immediate help and to complement The Work Programme.The money from the New Deal will continue to go into our new Work Programme, but will enable us tosupport many more people because we are being much more aggressive in terms of payment by results. Inaddition, we will abolish Train to Gain and other failing Labour schemes. And we will reduce payments forthose who should not be receiving Incapacity Benefits, which will deal with the extra up-front cost. Details ofthe extra costs and the sources from which they will be funded are provided in chapter nine of this document.6
  7. 7. Youth Action for Work is specifically focused on the cohort most at risk from long term damagethrough a period of unemployment – the young. All those aged 18-24 who have been claiming JSA forsix months will be referred to a Work Programme provider with a responsibility to help that youngperson into work. They may decide that the best option for that individual is to offer them training andjob support within their own organisation, or they may wish to make use of the suite of options whichour Youth Action for Work programme will make available to them.• Work Pairings - young people will be assigned to sole traders for six months of meaningful work experience and mentoring. The sole traders will pass through to the young people a wage equal to the benefits that would otherwise be paid, together with £1 an hour of additional pay. Work Pairings will be aimed at young people who are demotivated by classroom based learning but do not yet have the skills to secure an apprenticeship or permanent job.• Apprenticeships – we will provide 100,000 additional apprenticeships and pre-apprenticeships each year by offering SMEs incentives to take on apprentices and by simplifying the system. We will ensure that all apprenticeships are work focused and will make it easier for companies, especially SMEs, to run apprenticeship programmes. We will also introduce a programme of pre- apprenticeships for those who do not have the basic skills required to access a full apprenticeship.• FE College places – we will help FE colleges to provide 50,000 additional training places per year for young people who have been on JSA for six months or more. By freeing up FE colleges from the bureaucracy of the LSC we will give them greater power to work with local partners to provide the courses that will be of most benefit to students. We will also encourage FE colleges to work together with Work Programme providers to offer the courses that are most appropriate.• Vocational education for 14-16 year olds – we will expand the government’s Young Apprenticeship (YA) scheme, which offers vocational training for 14-16 year olds, from the current 10,000 to over 30,000. We will also simplify the system to make it easier and more attractive for schools to offer the YAs.We recognise that young people are not the only group being affected by the unemployment crisis andwe are determined to make sure that no one gets left behind. But as well as offering emergency supportwe also need to transform the British economy and bring about a real focus on enterprise andinnovation. One aspect of this will be the Work for Yourself programme to help move people into self-employment. We will support business start-ups, including new franchised businesses. We will build anetwork of business mentors and offer substantial loans to would-be entrepreneurs. Mentors will berewarded on the success of the businesses they support, ensuring there is a real incentive to offersupport and to finance only projects with genuine potential. We will work with specialist organisationsthat already have a proven track record in this area, like the Prince’s Trust and the Bright Ideas Trust, tooffer the best support.As well as focusing on business and enterprise we also recognise that the best hope for getting throughthis crisis comes from the British people themselves. By harnessing the resilience and spirit of many ofour communities we can turn our resources towards pulling together through the crisis. To facilitateGet Britain Working 7
  8. 8. this we will establish Work Together, an initiative that connects people with volunteering opportunitiesin their area. Meaningful activity has many benefits for those who are looking for work and manyvoluntary organisations would welcome volunteers from all backgrounds to help them during this verydifficult period. We are launching which contains over one millionvolunteering opportunities across the UK.We will also build on the success of job clubs – many of which are being led by Conservative candidates– in creating more opportunities and support within local communities. We will establish a network ofWork Clubs, places where people can gather to share experiences and offer support. These will besimilar to job clubs, but will also provide an opportunity for people to offer and receive mentoring, skillstraining and to find local opportunities. We envisage that many of these Work Clubs will be set up byexisting community groups, thereby capitalising on local knowledge and resources, but we will offersome modest funding to enable them to grow their offering.A new generation of Technical SchoolsIn addition to these programmes we plan to change radically the way we train future generations so wecan build a more competitive, entrepreneurial environment. We will support the creation of a newgeneration of Technical Schools. The new Technical Schools will have academy status and be open toall students from 14. They will be sponsored by leading businesses and universities, working with thetrust set up by Lord Baker. These high quality, high tech academies will raise the status of technicalqualifications, boost Britain’s science and engineering base, and provide real choice for parents andyoung people.Europe’s leading high tech exporterTo complement this support for enterprise, Sir James Dyson, one of the world’s leading entrepreneursand industrialists, will head a Conservative Party taskforce looking at how we can make Britain theleading high tech exporter in Europe. This taskforce will set out a clear vision for boosting high tech inBritain. It will look at how we can harness the fantastic resources of our world-class university scienceand engineering departments, and at how we can generate a major expansion of high tech productdevelopment.10,000 more university placesDemographic pressures and high youth unemployment mean that thousands of young people with goodexam results risk missing out on going to university because of an acute shortage of places. AConservative Government will address this problem by creating an extra 10,000 university places. Wewill fund the cost for this by giving graduates an incentive to repay their student loan debts to thetaxpayer ahead of schedule.8
  9. 9. How is our programme different from Labour’s?Get Britain Working offers a completely different approach to Labour’s piecemeal and disjointedpolicies. Instead of multiple schemes, we offer one major programme of support for the unemployedwhich brings together welfare, enterprise, training, skills and education, helping to transform theeconomy and promote competitiveness.The Work Programme is a radical departure. We will provide a simple, integrated programme for all outof work benefit claimants. Those who need the most help will be referred more quickly than underLabour’s schemes – straightaway for the hardest to help and at six months for all 18-24 year olds.The Work Programme providers will be paid almost entirely by results, ensuring that we get value for money.And our system of differential payments means that providers will be incentivised to help those furthestfrom the labour market, not ignore them in favour of easier to place candidates. By lengthening the periodof engagement between providers and individuals we will make it more likely that providers will be able tohelp people back into work. Our whole programme is designed to achieve meaningful, long term, highquality results. We want to transform welfare to work provision in this country to benefit everyone.In contrast, the Flexible New Deal (FND) is only a timid step towards the reforms we really need. There is nodifferential payment system – providers receive the same fee for all categories of claimant regardless of workhistory or barriers to work. This encourages them to focus on the easiest cases. Under FND, a sustainable jobmeans being in work for 26 weeks. We don’t believe this is long enough and will instead reward providers forgetting people into work and helping them stay for at least a year. Most critically individuals in the FND regimeare not referred to specialist providers until they have been claiming JSA for 12 months. We believe that,particularly for young people, this is too long and so we are committed to offering them better support sooner.Youth Action for Work will offer real opportunities for young people while also offering a service tobusiness. We recognise that businesses of all sizes are suffering during this recession and so instead ofmaking it more difficult for them to take on apprentices or offer training places, we want to cut out someof the bureaucracy. Supporting business and the unemployed should be complementary objectives.Unlike Labour’s Young Person’s Guarantee, ours is an integrated approach with inbuilt flexibility andpersonalisation. Our work and training places are meaningful and high quality. Because Youth Action forWork will be part of the Work Programme, the providers will have an incentive to offer each youngperson the form of training that is most likely to get them into a job. Channelling young people awayfrom provider-led support into short term placements or community task forces is a short term fix. Ourprogramme offers a long term solution.Coming out of the recession with a skilled and motivated workforce will be essential if Britain is toremain competitive. Get Britain Working is a real plan to capitalise on this opportunity to train youngpeople and solve the problem of underlying worklessness.Get Britain Working 9
  10. 10. 2. The Unemployment and Welfare ChallengeOver the past decade, Britain’s economy was left vulnerable to a major economic shock. When the creditcrunch hit, we had the biggest debt-fuelled boom and the worst budget deficit of any large country. Andwe have experienced the deepest recession since the war.1Britain now faces a jobs crisis. This year we have seen the highest increase in unemployment on record.2 Thisincrease in unemployment is compounded by an already high benefit-dependency ratio. Despite Governmentclaims of record employment3, we went into the recession with enormous numbers of people on out of workbenefits.4 Even during the pre-recession boom years, we spent more on working age benefits than we raisedin council tax.5 Repeatedly the Government proclaimed unemployment was at an all time low; but, in reality,welfare dependency has remained high. In addition to the 1.5 million people6 claiming Jobseeker’sAllowance and the other unemployed people who are counted within the official unemployment rate of7.9%7, 2.6 million8 people rely on Incapacity Benefit and 736,000 lone parents receive Income Support.9An incoming government therefore faces two imperatives. The first is to ensure that we do not allowthose made unemployed because of the recession to become long-term unemployed. The second is totackle Britain’s long-standing structural unemployment and the welfare dependency culture.Structural UnemploymentOur structural unemployment is unaffordable for taxpayers. We have spent £346 billion10 since 1997 onbenefits to support people of working age who are out of work. This year the DWP projects it will spend£36 billion on these same benefits, a 20% rise on last year.11 As a result, at a time when we face thehighest budget deficit in our peacetime history, £1 for every £3 raised in tax is spent on social securityand interest payments.12Chart 1: DWP spend on unemployment benefits since 1997 (£mns)Source: DWP, Benefit Expenditure Tables, medium term forecast, Spring 200910
  11. 11. But the cost is not only monetary. There is also a terrible human cost. Before the recession began,almost five million people13 (12%14 of the working age population) claimed out of work benefits. Some ofthose claiming such benefits could not work because of disability or caring responsibilities. Others usedbenefits for their original purpose, as a short term safety net between jobs. But, in too many cases,people relied on benefits as a way of life.The result is 3.3 million households (17% of the total) where no adult works.15 Almost two millionchildren live in households that depend entirely on benefits16. Britain has a higher proportion of childrengrowing up in workless households than in any other European country.17 One of the reasons for this isthe culture of welfare dependency that drives intergenerational worklessness.What makes this culture of worklessness and structural unemployment particularly unfortunate is thefact that, during the last 12 years, the economy created a net additional 2.6 million jobs18 – roughlyequal to the number of people on Incapacity Benefit. But these jobs were not filled by British citizens onout-of-work benefits.Chart 2: All FT and PT jobs by industrySource: ONS, workforce jobs by industry, August 2009Rather than tackle welfare reform during the boom times, Labour instead relied on migrant labour tofeed Britain’s labour shortage. The last twelve years represent a tragic missed opportunity to reform ourwelfare system. The limited reforms Labour did introduce focused on those closest to the labour market,by-passing those on Incapacity Benefit: over 800,000 people have been claiming Incapacity Benefitduring the entirety of Labour’s twelve years in office.19 The human and social effects of this neglect arerevealed by the fact that people who have been on Incapacity Benefit for two years or more are morelikely to die or retire than get a job.20Eradicating welfare dependency will take significantly longer and be significantly more difficult intoday’s economic conditions than it would have been just a few years ago. Action must be taken to helpback into work those who have been stuck in the benefits trap.Get Britain Working 11
  12. 12. Cycling through the systemAlso hidden behind the recession unemployment statistics is another structural problem – the perpetualjobseeker. Before the recession started, of the 800,000 people claiming Jobseeker’s Allowance,21 twothirds claimed the benefit before. Of those repeat claimants, one in three had made five or more claimsin the past.22 Some of those returning to Jobseeker’s Allowance do so only briefly, spending shortperiods on benefits between jobs. But, for many others, Jobseeker’s Allowance is becoming a way of life:one in five of all new Jobseeker’s Allowance claimants have claimed the benefit within the last fourweeks; one in three made a previous claim within the last three months.23 More than 250,000Jobseeker’s Allowance claimants have spent over three-quarters of the last two years claiming benefits.24The Jobseeker’s Allowance system currently allows people to cycle in and out of benefits. Jobseekers canavoid the escalating conditionality requirements expected of longer term claimants by signing off thesystem, just to make a brand new claim a few weeks later. Despite rules supposedly making it verydifficult to claim Jobseeker’s Allowance for longer than 18 months, there are still 7,00025 people whohave claimed it for more than five years and 31,00026 who have claimed it for between two and fiveyears. One of the reasons some individuals are allowed to claim Jobseeker’s Allowance for such a longperiod is because the Government simply does not know what to do with them. Around 8,000 peoplehave been made exempt from the New Deal on the grounds they are potentially violent, have a seriousdrink or drug addiction or other health issue.27With an incoming Conservative government, this situation will end. The payment of unemploymentbenefit by the state is an entitlement which is earned, not owed. In return for proper support andintervention for those who require it, the taxpayer should expect people to follow through on their sideof the bargain. Under Conservative proposals, people will no longer be allowed to cycle through thesystem. Their continued entitlement to benefits will be contingent on their efforts to find work. Oncethe recession has ended, it is our intention that anyone who has been through the new system withoutfinding work and has claimed the Jobseeker’s Allowance for longer than two of the previous three yearswill be required to join a mandatory long-term community work scheme as a condition of continuing toreceive benefit support.28 There will also be sanctions if people turn down reasonable job offers.Recession-related unemploymentNow the country faces not just a chronic structural unemployment problem but also a surge inunemployment thanks to the deepest and longest recession since the war.29 The UK officially enteredrecession in April 200830. Since then, unemployment has risen sharply. The number of Jobseeker’sAllowance claimants has almost doubled in one year to 1.58 million31The rise in unemployment since the beginning of this recession has outstripped that in the last threerecessions, as Chart 3 illustrates. According to government forecasters, unemployment will continue to rise.3212
  13. 13. Chart 3: Comparative rise in unemployment rates during UK recessions - indexed from recession startSource: ONS, Labour Market Statistics, September 2009. Annual change in unemployment rate indexedfrom start of each recession.In past recessions, unemployment has continued to rise after the start of the economic recovery.33 TheGovernment predict that this will happen again, and that unemployment will not reach pre-recessionlevels for at least a decade – with two million people projected to claim Jobseeker’s Allowance in 2016and 1.8 million still projected to be claiming Jobseeker’s Allowance as late as 2020.34Chart 4: Government Projections for JSA Claimants (000s) 3,50 3,00 2,50 2,00 1,50 1,00 0.50 0 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21Source: DWP, Jobcentre Plus Workload Projections, April 2009As in the past, geographical areas – towns and cities – with higher than average unemployment ratesbefore the recession, have experienced a higher than average growth in unemployment since therecession. As chart 6 illustrates, the ten areas most affected by this recession are all areas of highunemployment35.Get Britain Working 13
  14. 14. Chart 5: Regional Unemployment Rates Yorkshire and the Humber Unemployment rate Apr - Jun 2008 West Midlands Growth in rate Wales June 2009 South West South East Scotland North West North East London East of England East UK 0.0 2.0 4.0 6.0 8.0 10.0 12.0Source: ONS, Labour Market Statistics, July 2009Chart 6: Comparative Local Unemployment Rates National Avg Walsall Newham Lambeth Manchester Hartlepool Wolverhampton Birmingham Tower Hamlets Sandwell Leicester 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%Source: ONS, Local Labour Market Statistics, August 2009It may seem counter-intuitive that when a recession hits, it is the areas where there are fewer jobs (andtherefore lower employment rates) that experience a disproportionate number of job losses. Theexplanation lies in the structure of their local economies and workforces. Areas of higher than averageunemployment are often also home to a population with lower skills than the national average. Thisreflects the fact that skilled industries have been lost and partially replaced with low skilled servicejobs. The loss of skilled jobs available locally has deterred people from investing in their skills. As aresult, entry-level service jobs became the only viable employment option for many in thesecommunities (and for those entering these communities). This in turn creates a vicious circle in whichbusinesses employing relatively skilled labour virtually disappear from the area. It is this economicfragility inherent in areas of high unemployment that leads to faster than average increases inunemployment during recessions.14
  15. 15. However, although the impact of the recession on poor areas has been disproportionate, it has beensignificant across the rest of the country. Different factors have driven up unemployment in differentregions. As would be expected given the origins of the recession, the number of managers and seniorofficials losing their jobs has more than doubled in the last year36; and one third of these jobs have beenlost in London and the South East following the collapse in City financial services37. And, as the effects ofthe financial collapse rippled across the economy, we have also seen large numbers of lawyers,engineers, management consultants and other finance-related professionals losing their jobs in otherparts of the country.38Nonetheless, as Table 1 illustrates, the bulk of jobs lost have been in the low-skilled, low-wagedoccupations where recent job growth had been the greatest – catering, retail, call centres andconstruction. As the credit crunch took effect, people lucky enough to have any spare cash diverted it topay off debts and mortgages, and retail took a hit as a direct result. The freezing of commercial lendingplunged construction projects big and small into limbo and tens of thousands of construction workerslost their jobs.Table 1 – Employment Numbers by Occupation39Occupation July 2008 July 2009 % of All % change Jobs Lost1: Managers and Senior Officials 32,855 79,815 5 1432: Professional Occupations 25,365 58,075 4 1293 : Associate Professional and Technical Occupations 52,890 105,225 7 994 : Administrative and Secretarial Occupations 93,085 168,400 11 815 : Skilled Trades Occupations 97,600 207,370 13 1126 : Personal Service Occupations 44,400 75,200 5 697 : Sales and Customer Service occupations 141,570 242,900 15 728 : Process, Plant and Machine Operatives 92,995 180,665 12 949 : Elementary Occupations 285,110 444,975 28 56Total Unemployed 867,825 1,567,890 100%Source: ONS, JSA claims by usual occupation change from July 2008 to July 2009Current figures suggest that there are more unemployed people with low skills than there are availablelow-skilled jobs. The ratio of Jobseeker’s Allowance claimants who worked in elementary occupations tosuitable low-skilled vacancies is roughly 12 to 1.40 So we have both an unemployment crisis and a skillshortage. The failure of our education system over the past decade has made the unemployment crisismore intractable.Get Britain Working 15
  16. 16. Chart 7: Comparison of job seekers and vacancies by occupation 500,000 Jobseekers 450,000 Vacancies 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Managers and Senior Officials Professional Occupations Associate Professional and Technical Administrative and Secretarial Skilled Trades Personal Service Occupations Sales and Customer Service Occupations Process Plant and Machine Occupations Elementary OccupationsSource: ONS, Labour Market Statistics, September 2009: DWP, Jobcentre Plus Vacancies. September2009, figures relate to August 2009As a result, an incoming government must also tackle the skill mismatch. Significant and sustainedimprovements in people and skills training must be made now if people are to regain financialindependence once the recovery begins in earnest.Youth UnemploymentYoung people have been hit particularly hard by this recession. There are 947,00041 unemployed youngpeople between the ages of 16 to 24, of whom about 500,000 claim JSA.42 Thirty eight per cent of allunemployed claimants are young people.43 Almost a fifth of economically active 18 to 24 year olds and athird of 16 to 17 year olds are unemployed.44 Sadly, the scale and extent of youth unemploymentreflects not just the recession but deeper structural problems with education and training in Britaintoday; even before the recession began 700,000 young people were unemployed45 and almost one fifthof young people aged 16-24 were not in education, training or employment. The associated productivityloss to the economy was estimated at £10 million a day and the associated future earnings ‘wage scar’on unemployed young people was between 8% to 15%.46During and after periods of recession, many companies impose recruitment freezes. In May 2009, theChartered Institute of Personnel and Development47 found that almost half of all employers were notplanning to recruit any school leavers or graduates this summer. And this is happening at a time when,through a coincidence of demography, 805,000 young people will turn 18, the largest number since1990.48 These two factors – the larger than usual cohort of 18 year olds and the freezing of recruitment– increase the risk that youth unemployment will exceed one million. According to research undertakenby the Prince’s Trust, one in five teenagers receiving their GCSE results this past summer could be inreceipt of JSA by the time they are 2149.16
  17. 17. Faced with months or years of unemployment, there is the risk that many young people will fail toacquire work habits and their skills base will erode; unless we take action, the young unemployed oftoday are on course to become the long-term unemployed of tomorrow. We need a radical new plan toprevent this from happening.We believe the answer is sustained and structured improvement in the education and skills developmentof young people. We do not believe that subsidised temporary ‘make-work’ jobs – which Labour isproviding through the Future Jobs Fund – can conceivably address the failure of the education system toprepare a generation of young people for the future.Get Britain Working 17
  18. 18. 3. The Current Welfare to Work System “We will face up to the new issues that confront us. We will be the party of welfare reform. In consultation and partnership with the people, we will design a modern welfare state based on rights and duties going together, fit for the modern world.” Labour Party Manifesto, 1997Over the last twelve years, there has been endless rhetoric from Labour on welfare reform. During theirtime in office, the Labour government have published numerous green papers and white papersoutlining changes and reforms to the welfare to work system; they have launched 22 differentemployment programmes at a national level and trialled 15 alternative programmes through pilots50.Spending has also been huge. Since 1999, the Government has spent £2.2 billion51 to create over 800Jobcentre Plus offices following the co-location of the Benefits Agency with the Employment Service andan estimated £5.7 billion52 on the New Deal employment programmes. This is in addition to the £346billion that has been spent on benefit payments to those out of work.53And yet, we went into recession with nearly five million people on out of work benefits54; we have thehighest level of youth unemployment in Europe55; and we have a record level of economic inactivity.56It is the responsibility of an incoming government to tackle welfare reform using experience from hereand abroad. This chapter recaps the changes to welfare policy over the recent past, explains where anincoming Conservative government will make changes, and outlines why we believe a wholesale andradical reform of the existing welfare infrastructure is essential.BackgroundPassive labour market policies gained ascendancy in the 1960s and continued through the 1970s. Theintroduction of Restart interviews and a stricter availability test in 1986 marked the beginning of themove towards active labour market programmes in Britain. In 1997, Labour were elected on a platformof welfare reform. Frank Field was asked to “think the unthinkable”.57 But radical reform was blocked bythe then Chancellor, Gordon Brown. Instead, the top-down JSA regime and New Deal programmes werethe two means by which Labour delivered a heavily interventionist approach through the new JobcentrePlus offices.At the very time the JSA regime and New Deals were rolled out, the UK embarked on one of the longestperiods of uninterrupted debt-fuelled economic growth in recent history. Labour market shortages becameacute as 2.6 million new jobs were created.58 But, despite the creation of a complex and confusing andoften contradictory set of initiatives and labour market programmes (such as the New Deal for Musicians)to try and drive down the claimant count, up to 80% of the new jobs were filled by migrant workers.5918
  19. 19. It gradually became increasingly clear that the prescriptive central government approach driving the NewDeal was producing diminishing results. By 2008 fewer than one in four people leaving the New Deal 25plus went into a job.60 With funding linked to processes rather than outcomes, those with multiplebarriers to work were recycled through the system, as the easiest to help were cherry-picked. As a result,264,000 people61 have been through the New Deal more than three times and 18,500 people62 havebeen through it five times or more. After 12 years, the government has identified a group of about250,00063 individuals whom none of the New Deal programmes, despite multiple attempts, could getinto work. These claimants cycle back and forth between brief periods of work, JSA and the New Dealprogrammes. Many in this group had low skills and multiple barriers that prevented them from beinghired by employers, even during a period of tight labour market conditions. Their complex problemscould not be tackled through an employment programme that segmented people on the basis of ageand benefit alone and then mandated interventions on that basis, regardless of individual needs.Multiple evaluations have concluded that the number of people who have entered the world of workthanks to the JSA regime and New Deals, as opposed to those who would have found work anyway, isvery low.64 Whilst this may reflect the fact that, as an economy grows and employers find it more difficultto compete for staff without increasing wages, employers become more willing to invest in individualsfurther away from the labour market it also reflects the inadequacy of the New Deal programmes whichLabour’s own former Welfare Reform Minister, Frank Field, has described as “derisory”.65In 2004, the Government declared its ambition to increase the UK’s employment rate from a static 75%to 80%.66 To achieve this, over the following years the Government turned its attention to those on‘inactive benefits’ – Income Support and Incapacity Benefit. New conditions were placed on both groups;a new programme – Pathways to Work – was introduced for new Incapacity Benefit claimants; and theGovernment announced its plans to require lone parents with older children to seek work. But, radicalreform was blocked by the then Chancellor. In 2006 the Government commissioned David Freud toreport on welfare reform. This report represented “a starting point for a long term process oftransforming the Welfare to Work system”. But again in 2007 the reforms were cold-shouldered byGordon Brown as Prime Minister. Eventually, under pressure from Conservatives, the Governmentperformed a U-turn and accepted that a programme was required for those on Incapacity Benefit andthat it should be designed around outcome-based funding. But the initiative was confined to a modestset of pilots, delayed until 2011.Following Freud’s report, the Government has now introduced the Flexible New Deal, under whichprivate and voluntary providers are contracted to work with the limited number of long-termunemployed. Unfortunately, however, the Government’s failure to tackle welfare reform when theeconomy was booming has meant that the intentions of the Flexible New Deal have not been fulfilled.Instead, rushed measures have been taken to adapt a programme designed to help approximately250,000 long-term unemployed people with multiple barriers, so that it can at least pretend to deal withone million cyclically unemployed people.Get Britain Working 19
  20. 20. The New Deal for Young People BlueprintThe New Deal for Young People was launched in 1998 and formed the blueprint for the New Dealemployment programmes that followed. All young people who had been unemployed for six monthswere required to participate in the New Deal (though this approach was subsequently dropped in favourof a system in which unemployed young people have to wait 12 months before receiving any structuredsupport).There were two main aspects to the blueprint: a case-loading system where claimants wererequired to meet with their New Deal Personal Advisor fortnightly; and a set of prescribed ‘Gateways’ orjob search activities that all New Deal customers had to carry out at different times. During the first fourmonths, claimants were given intensive job search assistance and short basic skills courses. At monthfive, claimants were required to choose between a six month spell of subsidised employment, full-timeeducation or training for 12 months, work in the voluntary sector for 6 months or work in theEnvironment Taskforce.The majority of New Deal elements were administered in-house by Jobcentre Plus staff except for thetraining courses, which Jobcentre Plus contracted out to employment training providers.The first element of the New Deals - the role of Personal Advisors in public employment service support– has also been used in other countries, including the Netherlands, Denmark, Germany, Australia andNew Zealand. Studies have found that other employment advice providers have focused more exclusivelyon employment advice than Jobcentre Plus67. In addition, the cost per successful outcome achieved byJobcentre Plus Personal Advisors (getting an unemployed person into a job) compared poorly withprivate sector New Deal providers and Personal Advisors in other countries.68 Questions should thereforehave been raised early on about whether the role of advisor was suitable for Jobcentre Plus staff orwhether it should be carried out by private-sector or third sector providers – but such questions werenot asked.69The second element of the New Deal blueprint – heavily and centrally prescribed and inflexibleinterventions – has been even less effective. Evaluations of the New Deal for Young People pilots showthat there was significant deadweight: many New Deal for Young People participants who found workwould have done so without the programme. Moreover, a significant number of young people returnedquickly to unemployment. Last year, less than one in three New Deal participants went into employment,whilst over half of all New Deal 25 Plus participants went back onto benefits immediately.70According to the National Institute of Economic and Social Research, of those leaving unemploymentfollowing the New Deal for Young People, between 50% and 80% would have done so anyway without theprogramme.71 This is consistent with estimates of deadweight for the New Deal for Lone Parents whichrange from 60% to 80%.7220
  21. 21. The Growth of New DealsDespite these severe shortcomings, the New Deal blueprint was then replicated for different claimantpopulations. This was predicated on the view that unemployed peoples’ behaviour could be clustered bybenefit type and that all lone parents, for instance, behaved similarly and required the sameinterventions. As a result, numerous further programmes were introduced:• New Deal 25 Plus: Mandatory programme for all JSA claimants at 18 months. Introduced in 1998.• New Deal for Lone Parents: Voluntary programme for lone parents on Income Support. Introduced in 1998.• New Deal for Partners: Voluntary programme for partners and spouses of JSA/Incapacity Benefit and IS claimants. Introduced in 1999.• New Deal for Musicians: Voluntary programme for unemployed musicians. Introduced in 1999.• New Deal 50 Plus: Voluntary programme for JSA claimants over the age of 50. Introduced in 2000.• New Deal for Disabled People: Voluntary programme for Incapacity Benefit and IS claimants. Introduced in 2001.• New Deal for Skills: Voluntary programme for unemployed people with literacy problems. Introduced in 2005.All of the programmes were run by Jobcentre Plus and followed a set of centrally prescribedinterventions that could only be varied marginally according to the participant. Performance of thediffering New Deals varied significantly. However, across all the programmes, there was poorperformance despite the increasing buoyancy of the labour market over the period. For example, theaverage job entry rates for the New Deal for Young People and New Deal 25 Plus was 40%.73The comparative job outcomes rates seem particularly low when three factors are taken intoconsideration. First, the economy grew during the period.74 Second, there were large deadweight costs,that is individuals who would have found work regardless of the New Deal programme. Third, the NewDeal programmes were segmented by customer group, at greater cost, to provide greater andspecialised support and therefore maximise job outcomes. The result of these low job outcome rateshas been a cost per job outcome which is unsustainable going forward.Employment ZonesFrom 2000, the Government tested an alternative employment programme delivery model in some ofBritain’s most deprived areas – Employment Zones. The Employment Zone model trialled an alternativeapproach to welfare to work provision that included greater use of the private and voluntary sector and alimited introduction of payments by results. Employment Zone providers were paid £300 for the first 4weeks; at 26 weeks, providers were paid an amount equal to the average unemployment benefitpayment for 21 weeks which the provider then passed onto the claimant. All other payments under thecontract were outcome-based and the outcome was defined as a 13-week job outcome.Get Britain Working 21
  22. 22. Despite the fact Employment Zones were based in the most deprived areas, they were found tooutperform the New Deals. Research estimates that Employment Zones delivered between 8%75-14%76more job outcomes than comparative Jobcentre Plus areas and 32%77 more job outcomes whencompared to the long-term unemployed. Most significantly, evaluations indicate that Employment Zoneparticipants were less likely to return to unemployment.78There is consensus that the total flexibility given to Employment Zone providers led to a number ofinnovations in delivery which in turn drove the higher performance. For instance, the physical designand location of Employment Zone facilities were markedly different and a number of specialist advisoryroles were created, such as in-work advisors, outreach advisors and recruitment consultants as well asclinical psychologists.79Despite the improved outcomes from Employment Zones, they operated only in a very limited number ofareas accounting for only seven percent of employment programme participants under Labour.80 In2004, the Government announced its intention to launch ‘Building on the New Deal’, a series of pilots tointroduce the lessons learnt from Employment Zones into the New Deal programmes. However, despitethe fanfare these pilots never happened.81Flexible New DealIn December 2007, following the report by David Freud, the Government announced the creation of theFlexible New Deal. The Flexible New Deal was to replace New Deal 25 Plus, New Deal for Young People,New Deal for Musicians and New Deal 50 Plus. Participation on the Flexible New Deal was intended to bemandatory for all JSA claimants over 12 months.It was agreed that the Flexible New Deal would be introduced in two phases. During the autumn of2008, the DWP ran the tendering process to award the FND contracts phase one which were to replacethe New Deals in half the country. The DWP allocated a fixed pot of funding for each geographical areaand asked FND providers to bid on a unit cost basis; by committing to a high job outcome rate, bidderslowered their unit cost per job outcome. This raises obvious questions about the quality of provision.We have consistently raised concerns about the Flexible New Deal model, arguing that it continues toabandon people on Incapacity Benefit. There are currently no mandatory back to work programmes forthe 2.6 million existing claimants on Incapacity Benefit. Flexible New Deal was the Government’sopportunity to extend help to all these people; but they did not take the opportunity.Second, under the Flexible New Deal young people are not given any structured support for 12 months.This is double the length of time they had to wait for support under the original New Deal.22
  23. 23. Third, the current structure of the Flexible New Deal runs the risk of encouraging providers to parkclients since the service fee and outcome payment does not vary by claimant; a claimant who is work-ready when he or she arrives earns a provider the same fee as a claimant who requires hours of trainingand coaching. Providers, particularly in a context of tight resources, are therefore likely to identify work-ready claimants and prioritise their time and resources on them, to the detriment of those who would bemore expensive to help. Differential pricing would address this issue – but the Government have missedthat opportunity too.Fourth, 26 weeks in work should not count as a sustainable job outcome. Under the Flexible New Deal,providers will receive 70% of their fee once a person has been in work for just 13 weeks. A high-performing employment programme should help people for longer.As well as these underlying problems, the Government’s response to the recession has been to changethe phase on Flexible New Deal contracts to pay more for process and less for results than was originallyenvisaged. Flexible New Deal providers will now receive not the originally intended 20%, but rather 40%of their payment up front; so the Government is shouldering more of the risk with no guarantee ofachieving better outcomes. This pricing change made what was an already flawed programmesignificantly worse.Also, under the Flexible New Deal, the provider has only one year to place a claimant into work. Untilvacancies start to reappear in the economy, it is likely to be more difficult to get people into work withinthis timescale. The danger is that providers will spend little on claimants, knowing it will be very difficultto place people into jobs within one year. This would provide poor results for claimants and thetaxpayer. Extending the period by which providers can earn an outcome payment to more than one yearwould prevent such behaviour; but that opportunity, too, was missed.Finally, the Flexible New Deal was never designed to handle the volumes of claimants that are nowanticipated. Rather than addressing this issue head-on, the Government have tried to reduce thenumbers of people who move onto the Flexible New Deal by diverting them into other activities, such asthose in the Young Person’s Guarantee. While this will keep numbers down in the short-term, it will notprovide people with the support and investment they require in the medium-term.In short, the Flexible New Deal contracts, as structure, will not deliver the best possible outcomes eitherfor benefit claimants or for the taxpayer.Support for Lone ParentsLegislation was passed in November 200882 to change the rules for the 736,00083 lone parents claimingincome support. By November 2010, after a series of gradual changes, parents whose youngest child isover seven will be expected to work rather than being entitled to income support.Get Britain Working 23
  24. 24. There has been little evidence of the Government providing support that lone parents need to overcomebarriers and return to work. In May 1999, an average of 7,950 lone parents left income supportfollowing a return to work. By February 2009, the number had fallen to under 6,00084. Progress towardsthe Government’s target of getting another 300,000 lone parents into work has stalled.85Support for People on Incapacity BenefitWhilst a significant amount of Government attention and money has been spent on the unemployed overthe last decade, little attention has been spent on the 2.6 million Incapacity Benefit claimants.Many people who claim Incapacity Benefit are too sick or disabled to work and a Conservativegovernment will protect those in this position. However, many people who claim Incapacity Benefitwould like to return to work.86 And, for a country with a National Health Service free at the point of use,we have a disproportionate percentage of adults not working on health grounds. Some have recoveredfrom episodes of depression, anxiety or other illnesses; others have learned to manage their healthcondition and the sad fact is many should never have been signed onto Incapacity Benefit in the firstplace. We cannot afford to waste the talent of the 7% of the working age population out of work forhealth reasons and we can no longer afford to pay billions of pounds of Incapacity Benefits each year topeople who could be at work.87In 2001 the Government launched the New Deal for Disabled People. Under this voluntary programme,existing Incapacity Benefit claimants were referred to a ‘Job Broker’ who would assess skills, identifysuitable job opportunities and work with the individual throughout the job application and interviewprocess. However, take-up of the programme has remained very low with only 1.5% of all IncapacityBenefit claimants choosing to enrol on the programme each year.88 For the majority of Labour’s tenure,this has been the only programme that targeted existing Incapacity Benefit claimants, despite the factthere were significant labour shortages across many job-appropriate industries.Further attempts were made with the introduction of seven Pathways to Work pilots in 2003/04 thattargeted support on new claimants of Incapacity Benefit entry. From 2004 onwards the Pathways modelwas rolled out across the rest of the country. 40% of the Pathways areas are run in-house by JobcentrePlus and 60% are run by providers on the Government’s behalf.Under the Pathways model, new Incapacity Benefit claimants are required to attend a Work Focused Interviewwith a Personal Advisor. If deemed appropriate, the Personal Advisor refers the individual onto four furtherWork Focused Interviews; entry onto the New Deal for Disabled People (as outlined above) or onto a ConditionManagement Programme89. Advisors can also access a return to work credit which pays Pathways participants£40 a week for a year if their gross annual earnings are no more than £15,000; and an additional £300 ofdiscretionary cash spend which the Personal Adviser can use to support purchases or activities that increasethe chances of finding work. However, the Pathways programme is flawed because there are no measures24
  25. 25. within the programme to help people improve their skills. Disabled people and people with long-term healthconditions are twice as likely to have no qualifications as the rest of the population, and only 59% of thedisabled population is qualified to level two, compared with 76% for the rest of the population90. Anotherproblem is that, like the New Deals, the Pathwasys programme is highly prescriptive and does not givesufficient flexibility to providers to work with claimants. Providers complain that it has therefore been difficultto develop a working relationship with local health care providers – often essential for clients in this group.A 2007 study by the National Audit Office found that the Pathways programme had cost £304 million91over the years since 2003 and that, in this time it had cumulatively placed only 67,000 people (or 2.6%of all Incapacity Benefit claimants) back into work; this equates to a job entry rate of 15% for theprogramme at a cost of £4,500 per initial job entry.92Table 2: Numbers moving into Pathways and into paid work through to January 200793 All Claimants New Claimants Existing ClaimantsPathways entrants 455,780 427,290 28,480Subsequent job entry 67,410 59,760 7,660Job outcome rate 15% 14% 29%Source: Institute for Fiscal Studies, 2008It became clear that radical change was required if the Incapacity Benefit trap was to be tackledseriously. In January 2006 the Government published A New Deal for Welfare, a Green Paper which setout the introduction of the Employment and Support Allowance, the successor to Incapacity Benefit. Thechanges were codified in the Welfare Reform Act which gained assent in May 2007 and the new benefitwas introduced in October 2008. Under these reforms, new claimants undergo a medical assessment –the Work Capability Assessment (WCA) - during the first 13 weeks of their claim to determine whetherand to what extent their illness or disability affects their ability to work. Claimants are then streamedonto different benefit categories (and associated payments) according to the outcome of theirassessment. People who are deemed to have no capability for work are paid a ‘Support Component’ of£30.8594 in addition to the Basic Allowance of £64.30. People who are deemed to have limited capabilityfor work-related activity receive a ‘Work Related Activity Component’ payment of £25.20 in addition tothe Basic Allowance.While tackling new claimants, Labour refused originally to commit to moving existing Incapacity Benefitclaimants onto the new Employment and Support Allowance. However under pressure fromConservatives, the Government announced in the 2008 Budget that it would reassess all 2.6 millionexisting Incapacity Benefit claimants through the Work Capability Assessment over a period of threeyears. Early results from the tougher Work Capability Assessment pilots indicate a much higher thanexpected proportion of new ESA applicants who have been judged able to work and have had theirclaims rejected.95Get Britain Working 25
  26. 26. The real tragedy is that despite all of the Government’s welfare reform rhetoric over the last ten years, thelargest population of benefit claimants, both in terms of numbers of people and cost, has been essentiallyignored. As a result, at the very time the Government could have helped hundreds of thousands of IncapacityBenefit claimants back into work – during the period of tight labour market conditions – it did very little. Thenumber of Incapacity Benefit claimants rose to a record high96, despite the range and availability of jobs.And despite Labour’s claims to be getting to grips with welfare reform once and for all, it is still currentlyfailing to provide proper welfare to work programmes for the 2.6 million people on Incapacity Benefit.Labour’s Response to the Unemployment CrisisBritain entered recession in April 2008. Following pressure from Conservatives, from January 2009, theGovernment announced a series of measures for the unemployed with particular emphasis on theyoung. These included a government subsidy for employers hiring unemployed people called the‘Golden Hello’97, the Young Person’s Guarantee98 and the Future Job Fund99. These measures cost £1.7billion.100 An extra £3 billion was awarded in the Pre-Budget Report 2008 and Budget 2009 to reversejobs cuts in Jobcentre Plus and to increase Flexible New Deal volumes.But the approach to the jobs crisis has thus far been unintegrated and piecemeal, with no clear strategyfor tackling the problems we face. Each of the crisis programmes suffers from sever structural flaws.And the programmes almost entirely end in March 2011, despite the fact that unemployment ispredicted to remain significantly above pre recession levels for some years to come.The Young Person’s GuaranteeThe Young Person’s Guarantee is intended to offer a job, work-focused training or meaningful activity toall 18-24 year olds before they reach the 10 month stage of their Jobseeker’s Allowance claim and this ismeans to be fulfilled via: 1. a subsidised six month job placement through the Future Jobs Fund; or 2. support to take an existing job in a key employment sector; or 3. a work-focused training place for a maximum of 6 months; or 4. a place on a Community Task Force.However, the Government has already tested this approach before through the New Deal for YoungPeople, a programme that only managed to place one in five young people into work. 101 It is as if wehave wound the clock back twelve years. The original offer of support under the New Deal for YoungPeople was: a. a subsidized six month job placement; or b. training; or c. volunteering; or d. a place on the environment task force.26
  27. 27. The key difference between the Young Person’s Guarantee and the New Deal for Young People is thatsupport will be offered four months later under the Young Person’s Guarantee.While some young people may benefit from these options, the New Deal has taught us that aprescriptive approach to tackling unemployment ultimately fails. Diverting all young people onto fulltime activity – in order to artificially lower the unemployment figures - may actually prevent some youngpeople from actively looking for and moving into work.Future Jobs Fund100,000 six month work placements for young people are to be funded through the £1 billion FutureJobs Fund102 and an additional 50,000 places are to be made available to all unemployed people inunemployment ‘hot-spots’.103 The jobs are to be offered in three separate tranches over a period of 18months. Employers are to be given a £6,500 subsidy by the Government to cover the cost of each sixmonth work placement and the DWP determines centrally which employers can offer subsidised workplacements through a bidding process.The first round of bidding was completed in August 2009. Almost all of the successful bids were madeby local councils.104 This raised concerns that council jobs were being displaced since most councilswere in the process of shedding jobs at the time the bids were made.105 Questions have also been raisedabout the quality of the Future Jobs Fund jobs themselves and whether any could turn into permanentpositions in the future. DWP’s bid criteria for the first round of Future Jobs Fund jobs did not include anyindication of whether the job could become permanent if the candidate excelled106.Support to take an existing job in a key employment sectorThe Government has committed to helping up to 100,000 young people access existing jobs in keyemployment sectors. 50,000 of these jobs are to be in the Government’s Care First programme underwhich employers will receive a £1,500 subsidy to take on new social care workers. The other 50,000jobs are expected to be in key growth sectors such as hospitality. Employers are to be eligible for a£2,000 subsidy for employing a young person who has been on Jobseeker’s Allowance.Work Focused Training CourseThe Government has reserved a budget of £122 million107 over 2009-11 to support young people inwork-focused and pre-employment training.As the maximum period a young person can attend training under the Young Person’s Guarantee is sixmonths, longer term training which provides significant new skills or a qualification is disqualifiedautomatically. This is a significant short-coming of the Young Person’s Guarantee and a missed opportunity.Young people, particularly those with low skills, should be encouraged and supported to invest in hard skillsand qualifications while jobs are thin on the ground. The Further Education college system and Apprenticeshipstructure are well placed to work with young people to address skills deficits but Further Education courses orApprenticeships of over six months are carelessly debarred by the Government’s scheme.Get Britain Working 27
  28. 28. Community TaskforceWhen the Young Person’s Guarantee becomes mandatory in 2010, young people who cannot secure aFuture Jobs Fund job, or who choose not to undertake work-focused training will be required toparticipate on the Community Taskforce for 13 weeks. So far, the Government has been unable orunwilling to provide any detail on what activity these taskforces will entail.Those who return to Jobseeker’s Allowance after completing a Young Person’s Guarantee placement willbe directed to the Flexible New Deal programme. With most Future Jobs Fund placements unlikely tolead to permanent work, it is likely that many young people will find themselves unemployed again oncetheir placement finishes. This would mirror the experience of the New Deal for Young People.In short, the Young Person’s Guarantee does not offer long-term investment or solutions for youngpeople, despite its hefty price tag. None of the four elements of the Young Person’s Guarantee will helpyoung people to overcome the educational and skills deficits which hinder so many. Such short termmake-work programmes and offers of meaningless guarantees are no substitute for sustainedinvestment and a commitment to young people. In this period of economic uncertainty we need to equipyoung people with the skills and training they require to turn their lives around – and the YoungPerson’s Guarantee does not offer the prospect of that happening.28
  29. 29. 4. The Work ProgrammeIntroductionThe Conservative approach to welfare reform set out in this document is more radical and morecomprehensive than the half-hearted measures that have been belatedly adopted by the current LabourGovernment. We will introduce a single, fully-funded integrated programme of welfare to work which willcover more people, intervene earlier and be more focused on results – getting people into work andhelping them to stay there.A Conservative government will introduce The Work Programme built on the key principles of ourapproach to welfare reform announced in our 2008 Green Paper. This will be the central programme,designed to help both the cyclically and structurally unemployed.An incoming government will face two great jobs challenges. First, we must take action to address thenumber of people on out of work benefits, three million of whom have not worked for long periods oftime – either by virtue of claiming Incapacity Benefit or as a result of long spells on Jobseeker’sAllowance.108 We must provide structured long-term support to help hundreds of thousands of people inthe condition to make the transition from welfare dependency into sustainable jobs.Second, we must provide hope and a future in employment for the 800,000 people have who havejoined Jobseeker’s Allowance since the beginning of the recession109 and for others who becomeunemployed. To ensure that such people are able to fill the jobs created as the economy comes out ofrecession, we must provide effective support and access to genuine training and skills development.Through The Work Programme, we are committed to giving people access to structured employmentsupport much earlier in the cycle. We believe that young people, in particular, should be provideddedicated case managers and mentors through The Work Programme from six months into their claim.By intervening earlier, a spell of unemployment can be prevented from turning into a period ofprotracted unemployment. Those with poor attachment to the labour market and former IncapacityBenefit claimants will be transferred to The Work Programme on a rapid basis.The Work Programme PrinciplesThe Work Programme is a radical departure from Labour’s approach to employment programmes and itscore principles are different:One Employment ProgrammeWe will replace Labour’s numerous unemployment programmes with one flagship programme – TheWork Programme. First, we believe that specialist employment support providers are better thanGet Britain Working 29
  30. 30. Whitehall-based civil servants to identify employment barriers and to segment groups of unemployedpeople. The system today centrally streams people according to which benefit they claim – differentemployment programmes have been created for different benefit types.We do not believe that people are defined by the type of benefit they receive but by the employment barriersthey face. For this reason, we believe all people should have access to one employment programme.Second, we believe that many individuals – particularly those who have claimed Incapacity Benefit formany years – will require specialist support. The Work Programme providers will be given incentives towork with voluntary and specialist organisations to address particular employment barriers as they arisein the population of participants. This flexibility is not possible in centrally designed and prescribedemployment programmes; nor is it easily achieved when there are multiple employment programmes.Third, it is costly to run multiple employment programmes. The Flexible New Deal goes some way totackling this since it replaces the New Deal for Young People and New Deal 25 Plus. However, there arestill multiple employment programmes and support mechanisms that are contracted for separately,despite the fact they all deliver broadly similar support. We believe that it would be better value fortaxpayer if the majority of programmes were rolled into one.Therefore, under Conservative proposals all unemployed people of working age claiming benefits will bereferred to The Work Programme. The entry points will be staged, reflecting the likelihood of claimantsfinding work under their own steam. Those who have not worked for many years (such as formerIncapacity Benefit recipients) will move onto the programme rapidly - young people aged 16-24 will bereferred after six months, and those who have established solid work experience could be transferredup to 12 months after their first claim. The types of claimant include:• people who have lost their job during the recession;• the long-term unemployed or people who cycle through the welfare to work system repeatedly without securing employment;• people who have migrated off Incapacity Benefit onto Jobseeker’s Allowance following a Work Capability Assessment in cases where they have been found to be fully able to work. For many, this will be the first exposure to an employment programme following many years outside of the workforce; and• people who have migrated off Incapacity Benefit onto the ‘Employment’ component of the Employment and Support Allowance following a Work Capability Assessment where they have been found to be able to undertake some work-related activities. Again, for many, this will be the first exposure to an employment programme after many years outside of the workforce.Differential paymentsAs The Work Programme will cover all unemployed people, payments to providers must reflect the factthat some people will be relatively easy to help while others will require significant investment. Anindividual who has become unemployed as a result of the recession is likely to require less help than anindividual who has claimed Incapacity Benefit for several years.30
  31. 31. The amount paid by the taxpayer to Work Programme providers to help an unemployed person into ajob will therefore vary depending on a range of factors such as how long an individual has been out ofthe labour market, their health, and their skills. Factors like these have often been found to be reliableindicators of the relative difficulty and cost of restoring an individual into the world of work. As thesystem develops, differential pricing is likely to become increasingly sophisticated.Outcome-based contractsThe level of investment in people who have been unemployed for a long time – and who are likely toremain unemployed unless the Government offers them targeted support – should be assessed againstthe medium-term cost to the taxpayer. By investing in the long-term unemployed now, the taxpayer willsave money in the medium-term and society will benefit immediately. We believe that the currentGovernment’s refusal to invest significantly in the long-term unemployed and those on Incapacity Benefithas been irresponsible and short-sighted. By insisting on payment by results, the necessary investmentcan be provided without an unaffordable upfront cost to the taxpayer.The Conservatives have long argued for the establishment of outcome-based contracts. This is why webelieve that private and third sector providers should only be paid when they have delivered. Undercircumstances of fiscal crisis, we cannot afford to waste a single penny – and, through payment byresults, we can ensure that no public money is wasted – the provider takes the risk the taxpayer paysonly as the taxpayer saves.We are therefore determined to restore the correct balance between upfront financing for providers andrewards for positive results.We have also considered the question of what constitutes a positive outcome. We believe that theanswer is sustained employment for a period well beyond the current 26 weeks. Individuals need notstay with the same employer throughout the retention period, but must remain in employment.Traditionally employment support has come to an end once an individual moves into work. However, manypeople require extended support as they made their way into the world of work. This is particularly thecase for individuals who have health conditions to manage. Linking outcome payments to longer retentionperiods will ensure Work Programme providers provide participants with post-employment support. Theprovision of post-employment support will help prevent the cycle of people moving into work, facing a setof problems they do not know how to negotiate, quitting work and returning onto benefits.Accordingly, once on The Work Programme, unemployed people will remain the responsibility ofproviders for an extended period, both in and out of work. This means we will eliminate the revolvingdoor between providers and Jobcentre Plus. The providers will be rewarded for sustained participationby their clients in the world of work, for periods which in some cases may extend as long as three years.Short breaks as clients change or upgrade jobs, or undergo training, will be absorbed within theproposed structure.Get Britain Working 31
  32. 32. The DEL:AME SwitchOne of the anomalies of the Government’s public expenditure management system is the division ofpublic expenditure into DEL – Departmental Expenditure Limit – and AME – Annually ManagedExpenditure. DEL covers the funding that is spent by government departments through multi-yearSpending Review Agreements. In the context of DWP, DEL includes all funds spent on employmentprogrammes and the running of Jobcentre Plus. AME consists of large, volatile and demand-led spendingwhich cannot be subject to multi-year spending limits; in DWP’s case this includes out of work benefitpayments of £35 billion in 2009/10.110While DEL expenditure is controlled tightly by HM Treasury and departments are held to account forspending within agreed limits, there is no active management of AME.There is at present no linkage between DEL and AME expenditure. The Government does not considerthe cost of effective employment support (DEL spend) against the fiscal gain of a year-long move intoemployment (AME savings). Instead, per capita DEL limits are set and managed in isolation. So theamount of money that can be spent on programmes for getting people into work is limited and takes noaccount of the money the Government could save by getting someone off benefit and into work.This is short-sighted, since the total AME cost of a long-term unemployed individual is significant. DavidFreud calculated in his report that the gross annual saving to the DWP of moving an average recipient offIncapacity Benefit into work is £5,900. With wider exchequer gains (offsetting direct and indirect taxespaid with additional tax credits) this figure rises to £9,000. The equivalent figures for Jobseeker’sAllowance are £4,100 and £8,100 respectively.We believe it makes more sense to share AME savings for a fixed period of time than to pay out AMEthrough benefits indefinitely. Our proposals will therefore introduce the DEL:AME switch where there is areliable counter-factual against which to measure savings. Groups for which this is suitable may includethe long-term unemployed, including former Incapacity Benefit recipients and those claimants who havecycled back and forth from Jobseeker’s Allowance. By contracting out and paying by results, we can givesuccessful Work Programme providers greater rewards for taking a greater share of the risk, providestructured employment support to all benefit claimants and not just those in Jobseeker’s Allowance, (asis the case today) and make large long-term savings for the taxpayer.We recognise that, given the mix of claimants and the current economic conditions, it may take WorkProgramme providers a significant period of time to place people successfully into work. We alsorecognise that Work Programme providers will require interim finance. We would expect suchinvestment to be financeable in normal conditions, particularly once providers have established a trackrecord. However, given the more difficult conditions the financial markets now face, we would beprepared to work with providers to find a way to secure cash-flow funding. We are in addition preparedto fund modest service payments to providers when they take on clients.32
  33. 33. Business-led Training ModulesWe accept too, that in the current economic circumstances it is necessary to ensure that WorkProgramme providers have access to a variety of options which, in addition to their own in-houseprogrammes, enable them to provide claimants with appropriate education and training.Hence, we will support training programmes designed by business and experts to provide current sectorspecific skills. Training that has been designed directly by major business and experts will ensure WorkProgramme participants have the soft skills and basic industry skills that employers use as siftingcriteria. The business-led training programmes will also give participants an overview of jobs in givensectors before they apply. The training content, materials, structure and delivery means will be designedand determined by business and experts.Three programmes will be set-up immediately, with more to follow. Service Academy We will launch a Service Academy programme to provide pre-employment customer service skills courses with the active co-operation of sector skills councils and of service sector employers. The courses will provide excellent grounding and rebuild the confidence of any long-term unemployed person, so that he or she will be in a position to enter a service sector job. We will take advantage of the parallel new programmes developed by Skillsmart Retail and People1st to prepare people to work in the retail and hospitality sectors. The Service Academy will foster a customer service mindset in participants through training and a two-week work placement with companies across the two industries. Among the companies prepared to provide work experience are Asda, Travelodge and Tesco. The Service Academy will help claimants to build their motivation and confidence, understand better what the interview process involves, tailor their CVs, understand how retail and hospitality operations work and develop the skills they need to work in the retail environment. IT Academy Almost 10 million Britons lack basic IT skills.111 Many of these people are long-term unemployed. In particular lack of IT literacy will be a significant barrier for long-term unemployed claimants who have health issues and therefore can only do office-based work. In September 2009, Microsoft announced its commitment to provide on-line IT training and support to help up to 500,000 unemployed people find work through a £50mn investment called Britain Works. Microsoft has agreed to deliver part of this commitment through The Work Programme. The IT Academy will provide basic IT skills proficiency at a minimum through to basic software developer capabilities where appropriate.Get Britain Working 33
  34. 34. Young Entrepreneur Academy Many young people are interested in working for themselves are looking for help to get started. Bright Ideas Trust has developed a series of training courses for young people that cover the basics of self-employment and entrepreneurship – focusing on the essentials of how to prepare financial projections, where to get help and how to develop a business plan. The courses provide a strong overview of the basics of starting a business or working for yourself and are an effective way to introduce young people to self-employment before they take the plunge. Bright Ideas Trust has agreed to work with Work Programme providers to deliver their training programmes across the country.How The Work Programme will be introducedAs the contracts for all of the private sector-led employment and support programmes conclude, we willreplace them with The Work Programme. We will also phase-out all employment programmes led byJobcentre Plus and incorporate them into The Work Programme.Clearly, the detailed timing of our introduction of The Work Programme will depend on the electiontimetable and the position of Flexible New Deal contracting rounds. The first wave of the Flexible NewDeal is contracted and being rolled out across half the country from October 2009. Under currenttimescales, the Government has indicated that the process of contracting for Flexible New Deal phasetwo will be continuing in spring 2010.An incoming Conservative government will replace the Flexible New Deal phase two with The WorkProgramme. We will also seek to renegotiate the Flexible New Deal phase one contracts to incorporatethe principles outlined above.Why The Work Programme is neededWe are proposing significant changes to the welfare to work system during a period when more peoplethan ever rely on the system. Some would argue that at a time like this we should abandon welfarereform. But never has it been more necessary. We cannot afford to continue with a system that expectslittle and invests little in the millions of people on Incapacity Benefit. We cannot afford to continuerolling out an unemployment support programme – the Flexible New Deal – that we believe is flawed andthat was designed during a different economic era for a completely different client base. Now is thetime to invest in people if we are to prevent a whole new generation from becoming welfare dependent.34
  35. 35. We believe that work is the best route out of poverty and that transforming our welfare to work systemis a moral as well as a financial imperative. We cannot decently leave people trapped in a cycle ofworklessness, deprivation and family breakdown. Any government has a duty to offer people who arecaught in that trap the best help possible to transform their own lives.But we must go beyond the core Work Programme itself to support our radical welfare reform plans weare creating a range of additional programmes to support claimants and those providers preparing themfor work. These are Youth Action for Work, Work for Yourself, Work Together and Work Clubs. They areall integrated into The Work Programme, to form a single, coherent whole.Get Britain Working 35
  36. 36. 5. Youth Action for WorkYoung people have been particularly badly affected during the current recession. 947,000 16-24 yearolds are now unemployed, the highest number since ONS records began. Youth unemployment nowaccounts for 38% of total unemployment112.The dire situation for young people in Britain is the compound of two separate crises; a structuralunemployment crisis and a cyclical unemployment crisis. The Government’s failure to make significantinroads in the NEET population when the economy was buoyant leaves a large cohort of young peoplewho were already out of work even further from the job market and the education system during therecession. Meanwhile, as other young people graduate from education, or leave insecure jobs during therecession, many are finding no opportunities to work, despite being work-ready and work-focused. Thissummer’s fiasco on university place funding, which left tens of thousands of A-Level students unable tofind a place at university,113 coupled with the Government’s ongoing failure to satisfy demand forApprenticeships, means that many of these young people are unable to find a way of further developingtheir skills as an alternative to worklessness.If a Conservative government is elected, it will inherit both of these crises, and will require solutions tore-engage young people who have become disengaged from work or training, while also helping job-ready young people to remain active and return to employment as quickly as possible.With both of these groups, it is important to intervene early. It is vital that young people, who havelimited or no experience of work, are supported early to ensure they retain or develop working habitsand to maintain their self-esteem. Whatever their educational and social background, ten monthsclaiming Jobseeker’s Allowance with no activity, as the current Government allows to happen, could havea negative effect on a young person’s skills, development and self-esteem that lasts for the rest oftheir life.We believe that once young people have been out of work for six months, they are in real need of help.Only 25% of 18-24 year olds who leave Jobseeker’s Allowance between 6 to 12 months leave to a job114.Far more of them simply stop claiming.The type of help that young people need varies depending on their situation. By making Youth Action forWork available to all young people who have claimed Jobseeker’s Allowance for over six months, we willensure that there are options available to help the work-ready find work, to help those with skills- gapsto increase their skills and to re-engage those facing more complex barriers to work. In addition to thejob search and other support offered by Work Programme providers, Youth Action for Work will giveaccess to a range of training and work experience opportunities. These programmes are designed toensure that any young person, whatever their educational achievement or social circumstances, can joina pathway to a qualification or a sustainable job.36
  37. 37. As young people approach six months on Jobseeker’s Allowance, they will be transferred to The WorkProgramme. The provider will be responsible for ensuring that they are given the support appropriate tothem. The provider may guide the individual towards a sustainable job, towards a Youth Action for Worksupport programme, or towards an alternative programme of their own design.For skilled young people, who wish to prepare for a vocational career we will seek to create an additional100,000 apprenticeships and other training places. We will do this by offering SMEs incentives to takeon apprentices, enabling employers to be paid upfront, and thus widening their options on purchasingtraining places.As part of these 100,000 places, we will offer pre-apprenticeships - a preparation route for young peoplewho want to do an apprenticeship, but who have not yet acquired the necessary skills.We will also introduce the Work Pairing programme, which will create up to 100,000 places over twoyears. This programme will team up teenagers with sole traders for extended one-to-one workmentoring of six months. We will help to create an intermediary market to manage this, along the linesof successful models already pioneered.We will also create an extra 50,000 Further Education college places in each of two years, by allocatingour NEETs fund to increase Further Education college and other training places for this group. This willenable Work Programme providers to provide effective help for young people who have becomedisengaged from employment, education and training, or who are at risk of becoming disengaged, andhave left education with skills gaps.To encourage young people to take up these places, we will change the rules which necessitate linkingcourses to a paper qualification, and which therefore drive out innovative ways of re-engaging NEETs. Wewill ensure specifically that Work Programme providers are recognised as being able to link youngpeople to Further Education colleges and to the voluntary and charity sector providers, which alreadyshows some success in re-engaging young people with education and training.For young people who are work-ready, in addition to the intensive job search support provided by theirWork Programme provider, we will work with businesses and charities to open up more internshipopportunities to young people. Following pressure, the present Government have recently announcedthat they will allow young people who are unemployed for six months or more to continue claimingJobseeker’s Allowance whilst participating in an internship. We welcome this move; however, currentrules state that in order to take up this offer, the internship must be arranged through Jobcentre Plus.We will get rid of this unnecessary bureaucracy and allow young people who have taken the initiative toarrange an internship privately to take advantage of this rule change as well.Get Britain Working 37