Welfare Policy Paper

8/14/2019 Welfare Policy Paper

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Contents

Foreword by David Cameron.............................................................................................................................12New world................................................................................................................................................................................3

Old politics...............................................................................................................................................................................4

Change required ...............................................................................................................................................................56

OurResponsibility Agenda ..............................................................................................................................7

Our welare reorm plans in summary....................................................................................................8

Our welfare reform plans in detail

1. Overview.......................................................................................................................................................................9122. What is wrong with our return to work system?.....................................................1321

2.1 What is wrong with Jobseekers Allowance?2.2 What is wrong with Incapacity Beneit?2.3 What is wrong with income support or lone parents?2.4 What is wrong with the Governments employment

programmes?2.5 What is wrong with the Governments new proposals?2.6 How does our broader beneits system hold back

return to work?3. Who are we going to help? ...................................................................................................................2224

3.1 Claimants who are capable o work and want to do so3.2 Claimants who are capable o work but reuse to do so

4. What succeeds? Best practice from around the world.....................................25274.1 Clear, rapid and universal assessment o work readiness4.2 Strong linkage o beneits to work or work-like activities:

i you do not participate you do not get beneits4.3 Creation o a managed market or return to

work employment services

Responsibility Agenda:Making amilies stronger and

society more responsible

Page 5. How will the out of work benefit system change?................................................28355.1 The gateway

5.2 A proiling system to tailor support5.3 Conditions and sanctions5.4 Tackling long-term dependence on Incapacity Beneit5.5 Community work programmes or the long-term unemployed5.6 Supporting lone parents

6. How will we build a financial structure...............................................................................3645that can deliver our goals?6.1 How can we aord a programme on the scale we need?6.2 How much dierence can we make and how much

will it save?6.3 Does the private sector have the capacity to deliver

a programme o this kind?6.4 Can the labour market absorb a programme on this scale?

7. Questions for consultation ..................................................................................................................46

Appendices

A1. Main out o work beneits 4750

A2. The assessment, conditionality, sanction and support system 5152


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The Conservative Party has a vision o the Britain we want to see: a country

where people have more opportunity and control over their own lives; whereamilies are stronger and society more responsible; and a Britain which is saerand greener.

In November 2007 we published the irst in a series o Policy Green Papers,introducing our Opportunity Agenda: a radical plan to raise standards inschools and to create more good school places or parents to choose rom.The second, Power to the People, looked at how decentralised energyproduction could revolutionise our electricity supply.

This, the third Policy Green Paper, introduces our Responsibility Agenda.

The world in the 21st century oers amazing opportunities or individualsto exercise reedom and to improve lie or themselves, their amilies andtheir communities.

But Conservatives believe that with opportunity comes responsibility.To make the most o the new world o reedom, we need to strengthenthe structures which bring stability and a sense o belonging: home,neighbourhood and nation.

This Policy Green Paper sets out how a Conservative Government wouldhelp create stable amilies and a more responsible society through reormo the welare system.

It is not acceptable that nearly ive million o our ellow citizens arelanguishing on out o work beneits. Mass welare dependency is awaste o the countrys human resources and a huge drain on the taxpayer beneits cost the country over 100 billion a year, by ar the biggestitem in public spending.

But worse than this, beneit dependency is a tragedy or the people involved,one o the primary causes o low aspirations and social breakdown.

Responsibility Agenda:Making families stronger andsociety more responsible

Labours bureaucratic approach has ailed. We need a thorough overhaul o

the way that beneits are administered. Our plans or welare reorm will helpthose who want to work into sustained employment, and cut beneits orthose who reuse to work. They will give some o our most deprived citizensthe opportunity to live independent and ulilling lives. Above all, they willhelp more people contribute to the responsible society I want to achieve.

8th January 2008


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Opportunities to connectModern technology is opening horizons and diminishing distances. Theopportunities to connect are greater than ever there are now more mobilephones than people in the UK, while Myspace.com has a membership o 125million, twice the size o our population.

Society is adapting to take advantage o the new possibilities technology oers,and to respond to the changing way we live our lives. The entrepreneurial spiritand neighbourliness latent in the community are inding expression in a newgeneration o voluntary associations, social enterprises and online networks.

The post-bureaucratic ageBritain is entering what we have called the post-bureaucratic age an era odispersed knowledge and power rather than the concentration o authority inthe central state. We are inding new ways to socialise, to run our businessesand public services, and to look ater our local neighbourhoods. People areweaving a new social abric that is strong but lexible, ounded on small,dynamic, inormal structures.

Our approachConservatives know that what matters in lie is our relationships, our abilityto provide or our amilies and to contribute to our communities.

The proper response to the new global orces o the 21st century is to strengthenthe units o society, not the state. Small acts by small groups make a bigdierence. Society is the product o the cooperation and interaction oindividuals, amilies and communities. Wisdom lies in co-operation, diversityand innovation. The state has a responsibility to help this interaction takeplace, not to replace it with its own artiicial processes.

We believe that a responsible society is the links directly to our two otherpriorities: it will ensure people have more control over their lives and it willmake Britain saer and greener.

Labour is stifling societyRather than nurturing these new possibilities or social action andinteraction, however, the present Government is stiling them under a rigidstate superstructure.

Labours characteristic response to the large and impersonal orces otechnology and globalisation has been to assume that the state, too, mustget ever larger and do ever more. The result is a major extension o statecontrol over the lives o individuals and communities a last gasp o theold bureaucratic age rather than an adaptation to the post-bureaucratic age.

Gordon Brown has built up distant systems o administration and bureaucracythat not only ail basic competency tests, but are complex and insensitive,inlexible and impersonal, with counter-productive incentives which damagethe abric o society.

Society is at breaking pointLabours tax and beneits regime means it makes more sense or couples tolive apart than together. Labours welare system isolates people in long-term

dependency on the state. Labours prolieration o new regulations and criminaloences creates contempt or the law. Labours increase in targets imposed oncouncils and public services undermines local democracy. Their actions aremaking society less, not more, responsible.

The result is a society at breaking point. The UK now has one o the highestrates o amily breakdown in Europe, and a higher proportion o its childrenliving in workless households than in any other EU country. There are 600,000more people in deep poverty than when Labour came to power. The numbero people in problem debt has risen to almost 4 million, and the number opeople with alcohol and drug disorders has risen to over 8 million. The costo these social ailures amounts to 100 billion a year.

New world Old politics


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Conservatives have a vision or change: rom state control to social responsibility.

We believe in ostering both the traditional ties o amily, neighbourhood andnation, and the newly emerging social associations created by the internet.

Personal responsibilityThe primary institution in our lives is the amily. It looks ater the sick, cares orchildren and the elderly, supports working people and the unemployed, and providespeople with their most ulilling relationships and most cherished memories.

Families depend on the personal responsibility o parents in caring or theirchildren. We want to make sure that Government supports couples rather thanundermines them, so we will make sure that more couples are oered relationshipcounselling at critical moments in their lives. We will end the misguided couplepenalty in the tax credit system, and support married couples in the tax system.

And as this Policy Green Paper sets out, we will help more people o out owork beneits and into work, so they can live independent and ulilling lives.

Professional responsibilityWe trust in the vocation o our public service proessionals to deliver the higher

standards that are needed in our schools and hospitals. We believe that manymore groups can contribute to running these services, and want to open upour vital public services to the energy and commitment that the voluntary,charitable and private sectors can provide.

Civic responsibilityConservatives are the party o localism. We will reverse the advance o centralgovernment into local lie.

We will inaugurate a new era o independent local government, giving backto town halls the power to spend their money as they see it, and to managelocal services independently o Whitehall. We will put local police orces directlyunder local control, with voters given the right to choose the man or womanwho holds each orce to account.

We will champion local social action, through supporting the establishment

o orms o civic engagement such as modern co-operatives. And we will oera new deal to third sector organisations, with more trust and responsibility.

To harness the talents, commitment and energy o young people, we willintroduce a six-week programme o National Citizen Service or all 16 yearolds. This will help young people understand the value o public service ando contributing to our society, as well as giving them a shared experience oliving alongside others rom dierent backgrounds.

Corporate responsibilityBusinesses are crucial not just to a countrys economy but to its society:employment practices impact directly on amily and community lie, whilethe sourcing, production and transport o materials and products impactson the environment.

Conservatives are conident that British businesses can ulil their corporateresponsibilities. In response to the environmental challenge, corporations arealready taking the lead in going carbon neutral. We also want to see them doingmore to provide a amily-riendly working environment, which is why we will

give all employees with children the right to ask or lexible working.

Social cohesion through social responsibilityAt the heart o our Responsibility Agenda is what we have called the SocialCovenant. This is the common bond o mutual responsibility betweenindividuals, the state and society. The Social Covenant is the basis o socialcohesion a commitment on the part o all o us to ight the prejudice andextremism which threatens our national unity.

Social cohesion does not require unlimited extensions o state power. Butit does require the state to ulil its unctions properly, including controllingour borders. Most o all, it requires individuals and communities to celebratewhat unites us rather than exaggerating what divides us.

Change required


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Welfare reform. Work or welare. We will introduce radical reorm to help

people o out o work beneits and into paid employment.

Health. The National Health Service is our number one priority. We will scrapLabours top down targets and stop their pointless reorganisations. We willplace doctors and nurses, not politicians, in charge o delivering healthcareand ensure unding ollows patients choices.

Rewarding marriage and strengthening relationships. Our ambition is to helpparents come together and stay together. We will end the couple penalty in thetax credit system and pilot relationship counselling to strengthen amilies.

Addiction and debt. Large numbers o our citizens suer rom spirals oaddiction, poor health and debt. We will give courts powers to apply newDrug Rehabilitation Orders, using abstinence-based treatment, and reclassiycannabis as a class B drug. We will introduce a single Consumer Credit Actto provide greater inormation and transparency or borrowers.

Responsible business. Every business has an important role to play in producinga responsible society. Responsible businesses will get a lighter regulatory touch or example, equal pay audits will apply only to those irms which lose paydiscrimination cases. We want employees to be able to balance their work and

private lives better, so we will introduce urther lexible working provisions.Social care. Our ageing population means that more elderly people than everrely on social care. We will give people access to the money allocated or theircare and allow them to spend it as they see it.

A cohesive society. In many o our towns and cities whole communities seemto be living separate lives. We will work to increase cohesion across our diversepopulation, and introduce 100 Social Enterprise Zones to help social enterprisesprovide jobs and community services.

National Citizenship Service. We are determined to strengthen social relationshipsin the teenage years by setting the course towards responsible adulthood. Wewill introduce a universal, voluntary National Citizen Service Programme to helpyoung people make the most out o lie and give them a sense oachievement and ocus.

Our Responsibility Agenda Our welare reorm plansin summary

REAL welare reorm to help make British

poverty history

1. Respector those who cannot work Those recipients o Incapacity Beneit who really cannot work will

receive continued support and will remain outside the return to work process.

2. Employmentor those who can Every out o work beneit claimant who is capable o doing so will be

expected to work or prepare or work. A comprehensive programme o support or jobseekers including

training, development, work experience and mentoring. Welare-to-work services to be provided by the private and voluntary

sector on a payment by results basis, according to their success inreturning people to sustainable employment.

3.Assessmentsor those claiming out o work beneits Rapid assessments or every recipient o out o work beneits

or all new and existing claimants. The assessment process will determine how much welare-to-work

providers are paid or placing a claimant in work.

4. Limitsto claiming out o work beneits People who reuse to join a return to work programme will lose the

right to claim out o work beneits until they do. People who reuse to accept reasonable job oers could lose the right

to claim out o work beneits or three years. Time limits applied to out o work beneit claims, so that people who

claim or more than two years out o three will be required to work orthe dole on community work programmes.


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For too long, welare reorm has been trapped in a ghetto o technocratic

tinkering. Politicians have promised that tightening the rules here, or changingthe way beneits are paid there, will solve the severe social and economicproblems created by Britains welare state.

But those problems have proved stubbornly resistant to that tinkering. Despiterepeated promises o radical reorm, our welare system still makes it possibleor people to choose a lie on beneits. It still ails to encourage and help allthose who can work, to work. And it still discriminates against amilies.

In the end, welare reorm is less a question o rules and regulations, systemsand procedures; it is more a question o culture and values. What kind o culturehave we created when a young man can grow up in our country certain in theknowledge that the state will provide a living or him regardless o the choiceshe makes? What kind o values are we transmitting when the state, through thebeneits system, actively discourages couples rom getting together and stayingtogether to bring up their children?

Real welare reorm should help re-ignite the social mobility that has stalledunder Labour. It should help reverse the disastrous rise in amily breakdown. Itshould help tackle the persistent and long-term poverty that shames our nation.

Real welare reorm must be radical not just in the detail o its policy prioritiesbut in the conidence o its moral authority.

So it is in that spirit that we present these initial proposals or welare reorm.We believe it is time or an entirely new welare system, based on an entirelynew culture o responsibility. Not the state taking responsibility away rompeople and making them dependent, but people and communities takingresponsibility or themselves and achieving the success and satisaction oindependence.

We believe that our current welare system is broken, wasteul and a massivebarrier to the achievement o the progressive society we want to see.

The importance of workThere is overwhelming evidence that being in work is a key component o mentaland physical wellbeing.1 In contrast, welare dependency blights communities andruins lives. For a child, being brought up in a workless household is much morelikely to mean ailure at school and worklessness in later lie. In many communitiesworklessness is being passed on rom generation to generation. Millions o Britishlives are being wasted.

As the Conservative Social Justice Policy Group Report convincingly showed,work is the principal route out o poverty. Combating worklessness is the singlemost important thing that we can do to lit hundreds o thousands o our ellowcitizens out o multiple deprivation and achieve our long-term goal o makingBritish poverty history.

Gordon Browns failureToday, ater ten years o a Labour government that promised to end the costso social ailure, those costs now stand at 100 billion a year.2 Ater ten yearso a Labour government that promised to get people back into work, almostive million people now depend on out o work beneits. Gordon Browns

shameul use o BNP slogans about British Jobs or British Workers servessimply to highlight the total ailure o his employment strategy.

During the past ten years, there has been no shortage o work in this country.Indeed the Government boasts about the millions o new jobs it has created. Buta simple, devastating act is now clear rom all the oicial statistics: as many as 80per cent o new jobs created in the past ten years have gone to migrant workers.

In many o our cities, you can walk down a street where only a handul ohouseholds have someone in work. In large parts o many communities, onlya small minority o adults are in work. Yet only a short distance away the citycentre is oten a hive o activity. Tower cranes dot the skyline. But building sitesare very oten manned by migrant workers; oices, shops, restaurants, barsand hotels are the same. It makes no sense.

Our welare reorm plans in detail

Overview

1. Department o Work and Pensions, Reducing Dependency, Increasing Opportunity: options for the future of welfare to work, David Freud, p.52. Centre or Social Justice, Breakthrough Britain, July 2007, p.12


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O course we have already been promised change. Gordon Brown promised

that the New Deal would make all the dierence, but it has not. Despite over3 billion spent on the New Deal, ten years later youth unemployment isactually higher than it was in 1997. Britain has a higher proportion o childrenliving in workless households than any other country in Europe.

Time for REAL changeTimid tinkering with the existing system is not good enough. It is our moralobligation to end the culture o long-term welare dependency in Britain.

In a responsible society, individuals who are capable o working accept theirresponsibility to work and the government accepts its responsibility to helpall those who can work get into work.

We believe that the time has come to put an end to the culture o deliberateworklessness in Britain. We believe that it should not be possible or any personwho can work to choose not to do so and live on out o work beneits instead.

We will build on the experience o the welare reorm programmes that beganin the United States and have been emulated in countries like Australia and the

Netherlands.

Our plans provide a much more comprehensive programme o support orjobseekers. But they also mean that those who reuse to participate in thereturn to work process will no longer receive out o work beneits. We willensure that people participate ully by introducing mandatory conditions andtime limits. The long-term unemployed will have to join community workprogrammes to get them back into the work habit.

The eatures o our REAL programme or welare reorm include:

Respector those who cannot work recipients o Incapacity Beneit whoreally cannot work will stay outside the return to work process.

Employmentor those who can a comprehensive programme o support

or jobseekers including training, development, work experience and post-employment mentoring.

Assessmentsor those claiming out o work beneits rapid assessmentsor every recipient, including all new and existing claimants, to assesssuitability or work.

Limitsto claiming out o work beneits non-participants or those who reusereasonable job oers will lose their out o work beneits, and anyone whoclaims or more than two out o three years will be required to work or thedole on community work programmes.

We will und this extended programme by bringing the principle o paymentby results to the return to work arena in the UK. The job o delivering ourprogrammes will be contracted to third party providers rom the private andvoluntary sectors, including local authorities with relevant expertise. They willbe paid when they get people into work. I they do not, they will not be paid.I we can emulate the success o tough programmes overseas we can makemassive inroads into the cost o social ailure and generate savings amountingto billions o pounds a year.

This document sets out the broad shape o the programme we intend to build,sets out the timerame or its implementation, and the inancial implications oour proposals. It illustrates how we will draw together best practice in the UKand rom other parts o the world to build a radical programme to get peopleo out o work beneits. It will serve as the basis or a discussion with those inthe ield over the coming months, ahead o the publication o a White Paper indue course.

In an age where unprecedented wealth and opportunity is available to many,but long-term poverty and multiple deprivation are still the reality o lie or millionso people, ending Britains welare culture is a moral duty or any progressivegovernment. Gordon Brown has comprehensively ailed in that duty: thisdocument sets out how a modern Conservative government will succeed.


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Country

%

UnitedKingdom

Bulgaria

Belgium

Hungary

Slovakia

Ireland

Poland

Germany

Romania

Croatia

In Britain today, a total o 4.8 million people are currently claiming out o work

beneits.3 These are made up o approximately:

There are three main out o work beneits which are the ocus o our plans orreorm:

Jobseekers Allowance (JSA) or those unemployed but actively seeking work;

Incapacity Beneit (IB) or those who cannot work because o illnessor disability; and

income support or lone parents whose youngest child is under theage o sixteen.

Despite a benign global economic climate, centralised interventions in the shape othe New Deal, Pathways to Work and Employment Zones have ailed to bringsubstantial numbers o people o beneits and into work.

By ollowing the short-termist approach o extending means-testing, Labour haswasted ten years:

youth unemployment is now higher than in 1997;5

as many as 80 per cent o the jobs created since 1997 have gone tooreign workers;6

Incapacity Beneit claims or the under-25s are up 52 per cent; and

more than hal o the people claiming Incapacity Beneit have been doingso or more than ive years.7

The welare state is not doing enough to help people who want to work and some

people are taking advantage o the system. Current policies are locking people intocycles o dependency:

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

Britain has the highest proportion o children in workless amilies in Europe;8 and

the number o people claiming out o work beneits or more than ive yearshas grown by 600,000 since 1999.9

2. What is wrong with our returnto work system?

3. Department o Work and Pensions, Quarterly Statistical Summary, November 2007.4. The out o work beneits dealt with in this paper are working age beneits. In general they cover people aged 18-60/65. In certain circumstances16-17 year olds are able to claim these out o work beneits or example i they are parents or living alone rather than with parents or guardians.More details can be ound in Appendix A1.5. Oice o National Statistics, data series AGOL and AGPM, September 2007.6. Statistics Commission, Foreign workers in the UK- briefing note , December 2007.

7. Department or Work and Pensions, Work and Pensions Longitudinal Study,IB caseload by age range and IB claims by duration of claim, August1999 and May 2007.8. Share o Persons aged 0-17 who are living in households where no-one works, Eurostat, 2006.9. Department o Work and Pensions, Work and Pensions Longitudinal Study,Client Group analysis of the Working Age % of the population, August1999 to May 2007.

Status o claimants Numbers

Jobseekers Allowance 837,000Incapacity Benet 2,640,000Income support 1,308,000

Share of persons aged 017 living in households where no-one works, 2005


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Many o those receiving out o work beneits desperately want a job. But this

Government has ailed to create the climate or tools people need to get back intowork when they have been out o the job market or some time. This is an absurdstate o aairs when 1.4 million people have come to the UK to take up work overthe past ten years.10

2.1 What is wrong with Jobseekers Allowance?It is too easy to claim Jobseekers Allowance repeatedly, and for many it fails toprovide a stepping stone out of worklessness.

There are 837,000 people receiving Jobseekers Allowance. All o the evidenceindicates that large numbers o JSA claimants are being trapped in dependencyrather than being helped into long-term work:

around 558,000 JSA claims are repeat claims;11

279,000 claimants are spending more time on beneit than in work;

250,000 claimants have spent at least eighteen months out o the last two yearsclaiming beneits; and

around 100,000 o all JSA claimants have spent six o the past seven yearson beneits.12

2.2 What is wrong with Incapacity Benefit?Incapacity Benefit is a trap for large numbers of people, few of whom ever find theirway back into the workplace.

There are currently 2.64 million people claiming Incapacity Beneit, 120,000 morethan in 1997.13This in itsel is a very poor record, but there are particularlyworrying trends in the number o young people claiming Incapacity Beneit:

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

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

around one in iteen Incapacity Beneit claimants is aged under 25.16

The amount o time that people remain on Incapacity Beneit is also very troubling:

at the moment you are more likely to die or retire than get a job i you have beenon Incapacity Beneit or more than two years;17 and

the number o long-term Incapacity Beneit claimants has risen under the presentGovernment and more than hal o the people now claiming Incapacity Beneit

have been receiving it or more than ive years.18

10. Statistics Commission, Foreign Workers in the UK Briefing Note, 10 December 2007.11. Department o Work and Pensions, Quarterly Statistical Summary, November 200712. Calculations based on igures in a speech by John Hutton MP, then Secretary o State or Work and Pensions, 20 June 2007.

13. Department o Work and Pensions, Quarterly Statistical Summary, November 2007; Department or Work and Pensions, 5% Sample Data, IB/SDAWorking Age caseload, May 1997.14. Department or Work and Pensions, Work and Pensions Longitudinal Study, IB caseload by age range and IB claims by duration of claim, August1999 and May 200715. Department or Work and Pensions, Work and Pensions Longitudinal Study,IB/SDA Working Age caseload by age range, May 2007.16. Ibid.17. Department o Work and Pensions, Press Release, 15th March, 2007.18. Department o Work and Pensions, 5% sample data, IB/SDA working age claims by duration of claim, May 1997; Work and Pensions LongitudinalStudy, IB/SDA working age claims by duration of claim, May 2007


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2.3 What is wrong with income supportfor lone parents?It is well established that workless households tend to create cycles of deprivation,19and there are currently 766,000 lone parents claiming income support.20

The Government admits that many lone parents could be working part-time. It isproposing to change the rules gradually, so that by 2010 parents whose youngestchild is over seven will be expected to work rather than being entitled to claim incomesupport. But there is little evidence o the Government actually helping largenumbers o lone parents with older children into work and o income support.

The rate o reduction in the number o lone parents claiming income support hasslowed markedly. In 1999 the average monthly reduction was 7,950; this has nowallen to 2,280. At this rate, by June 2010 the number o claimants will be just over700,000 a reduction o only 66,000, ar short o the Governments target ogetting another 300,000 lone parents into work.21

2.4 What is wrong with the Governmentsemployment programmes?Billions have been spent on employment programmes which are ailing toget people into sustained employment. The Government is currently spending695 million a year on its employment programmes: New Deal, Pathwaysto Work (only a third o which have been rolled out) and Employment Zones.Since 1998, the New Deal alone has cost a total o 3 billion, and its annualcosts have escalated by 94 per cent.22

Spending on employment programmes in 2006/7 (000s)

Thousand

Quarterly change

-35.00

-30.00

-25.00

-20.00

-15.00

-10.00

-5.00

Aug03

Nov03

Feb03

May03

Aug04

Nov04

Feb05

May05

Aug05

Nov05

Feb06

May06

Aug06

Nov06

Feb07

0.00

5.00

10.00

15.00

19. Breakthrough Britain, Centre or Social Justice, 2007.20. Department o Work and Pensions, Quarterly Statistical Summary, November 2007.21. Ibid.

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

New Deal 18-24 and 25+ (1) 321,887New Deal or Lone Parents 41,517New Deal or Disabled People 72,981New Deal or Partners 613New Deal 50+ 247Employment Zones 110,179Pathways to Work (2) 148,000Total 695,424

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

Quarterly changein lone parents

claiming incomesupport


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Despite this heavy expenditure, the perormance o the New Deal is deteriorating:

New Deal for Young PeopleIn the irst two months o 2007, only 28 per cent o leavers ound sustained

jobs compared with 54 per cent in 1998.

New Deal 25+In 2007 only 21 per cent o leavers ound sustained jobs, comparedwith 34 per cent in 2001.

New Deal for Lone ParentsIn 2006 only 22 per cent o leavers ound sustained jobs comparedwith 51 per cent in 1998.23

The ailure o the Governments employment programmes is demonstrated inthe number o workless households. There are now 6.1 million people living inworkless households an increase o 200,000 rom last year.24

2.5 What is wrong with the Governments newproposals?

In 2006, recognising the ailure o the New Deal, the Governmentcommissioned David Freud, o the Portland Trust, to make recommendationsabout a new approach to getting people back to work. The radical blueprint setout in the Freud report, involving the contracting out o the return to workprocess to a series o independent providers on a payment by results basis,oers a clear way orward or the UK.

Tony Blair and then Work and Pensions Secretary John Hutton were enthusiasticabout the Freud report. Gordon Brown was not, and it was initially buried. Morerecently, the Government has adopted some o its language, and has modiiedsome o its welare-to-work plans to enable it to be seen to be acting tough onwelare issues.

However, relecting its ailure over the last ten years to help people back into

work, Labours plans are just tweaking at the margins. They will have no seriousimpact on the culture o worklessness or the poverty it produces.

2.5.1 Changes to the New DealThe Government plans to make gradual reorms to the New Deal in the nextew years. It will introduce a skills health check or some new claimants andmerge the New Deal or Young People and New Deal or 25+ into one newFlexible New Deal delivered by Jobcentre Plus and private and voluntarysector providers.

The Flexible New Deal will still mean that JSA claimants have to wait at leasta year beore being reerred to a private or voluntary sector provider, andthe majority o back to work services will still be provided by Jobcentre Plus.25Also, Flexible New Deal will not deal with people who are abusing the system byrepeat claims o JSA because it ails to set time limits or receipt o the beneit.26

2.5.2 Pathways to WorkPathways to Work programmes apply to new claimants o Incapacity Beneit and

are scheduled to be rolled out to existing claimants under the age o 25. Butthe under 25s represent only six per cent o existing claimants, so this changewill do nothing to help the vast majority o Incapacity Beneit claimants backinto work.

2.5.3 Work Capability AssessmentA new Work Capability Assessment (WCA) is orecast to reduce by ten per centthe number o people accessing Incapacity Beneit rom a new claim. But, again,this will have no impact on those who are already claiming Incapacity Beneit.As a result, even assuming that it is successul in its own terms, it will onlyreduce IB rolls by just 20,000 a year, less than one per cent o the total numbero claimants.27

23. House o Commons Library analysis and Department o Work and Pensions tabulation tool, February 2007.24. Oice o National Statistics, Work and Worklessnessamong households, August 2007

25. Department o Work and Pensions, Ready for work: full employment in o ur generation, December 200726. Ibid.27. Department o Work and Pensions, Press release, 19 November 2007


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2.6 How does our broader benefits system holdback return to work?One o the most requent complaints rom beneit recipients about the welare-to-work issue is that some o the detailed elements o the beneit systemactively discriminate against people returning to work.

Examples o this include the act that people can lose beneits i they embarkon a short ull-time training course, even i this course is a central part opreparing them to get back into work.

This Green Paper has not sought to address the obstacles to returning to workin the wider beneit system. This is a separate and complex project, and theGovernment is also planning to introduce some changes. We intend to reviewthis issue as part o the next phase o our work, leading up to the publicationo a ull White Paper in due course.

Our radical programme is built on three simple principles:

1. i you are able to work there will be no automatic out o work beneits;

2. i you are out o work, we will do everything we can to help you backinto work; and,

3. i you are medically unable to work then we will give you the help you need.

There is a clear link between a culture o worklessness in the amily and thelikelihood that a young person will end up ailing in education and ailingto enter the workplace ater school, leading many amilies into a spiral odependency. We want to help as many as possible o the 4.8 million peoplecurrently receiving out o work beneits, and, relecting our principles, ourpolicy is designed to be lexible and to give the amount o help that is rightor each individual.

We can split those current recipients o out o work beneits who are capableo some orm o work into two categories: those who want to work and thosewho do not. We will take a very dierent approach to each type o claimant.

3. Who are we are going to help?


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3.1 Claimants who are capable of work and wantto do to soThe majority o out o work beneit claimants want to work but ind that takingthe right steps back into work is something that they are ill-equipped to do.They may lack the skills, sel-conidence or amily exposure to the cultureo work, and so getting a job can be a diicult and daunting prospect. Ourapproach is to oer these people the support, training and encouragementthey need to successully re-enter the workplace.

Equally, although there are clearly some people who have managed to useIncapacity Beneit registration as a way o avoiding the greater conditionalityand lower cash amounts o Jobseekers Allowance, most o those receivingIncapacity Beneit do or have aced genuine health issues. Many will needto look or a dierent kind o job to the one they held previously i they areto return to work. Some, including oten those with mental health issues,will ace sel-conidence challenges in returning to the workplace.

It is not easy or any o these people to make the leap into a job. Just as theyhave a responsibility to make themselves ready or work and to seek workwhich they are able to do, so we as a society have a responsibility to ensurethat they have access to eective help in taking those steps.

Where people want to work but have diiculty persuading employers to hirethem, we need to give them the means to make themselves more attractiveto employers.

Where people have become araid even to apply or work, we need to helpthem to build the work habit and give them the conidence to get back into

job market.

Where people want to work but cannot (or example, because o childcarecommitments) we must enable them to get closer to the job market so thatthey can go back to work at a time which is right or them and or theiramilies.

3.2 Claimants who are capable of work but whorefuse to do soWhile the majority o out o work beneit claimants would like to work ithey could, there is a signiicant minority who are playing the system. Equally,there are clearly some people who have managed to use Incapacity Beneitregistration as a way o avoiding the greater conditionality and lower cashamounts o Jobseekers Allowance,

Our welare system has tolerated this kind o abuse or too long, and theGovernment has done little to clamp down on those that exploit the system.In line with our principles, we will deal robustly with those who can work butwho reuse to do so, with tough but air sanctions and time limits meaningthat those who reuse to participate in our welare programmes or acceptreasonable job oers will lose their right to claim out o work beneits.


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Many countries have introduced new measures to reduce welare dependency

and to help jobseekers return to work. In the US, poverty, child poverty andwelare caseloads have all allen as a result o ederal and state welareprogrammes.28 The Australian welare-to-work providers have achieved aten percentage point increase in the likelihood o people who are out o workinding and keeping a job an impact which puts Australia right at the top othe OECD range.29These are the goals we want to achieve through our reormo the UKs welare system.

We have reviewed the progress made and the lessons to be learned rom themain examples in Australia, New Zealand, the Netherlands, Germany, andseveral states in the USA. No one model is directly transerable to the UK butthe best include three key areas o ocus that underpin our policy proposals.

4.1 Clear, rapid and universal assessmentof work readinessKey actors in successul international reorms have been the establishment oa clear outline o the return to work process, simpliication o the programmesand pathways provided to help individuals, and a ocus on rapidly engaging

people into the back to work process. Like the current system in the UK, manycountries started with a ragmented array o interventions and dierent rulesor dierent types o jobseeker. But, in countries with successul return to workprogrammes, these interventions have been reduced in number and have beenlinked to standardised systems o assessment.30

In Australia, a standard assessment is used. The Job Seeker ClassiicationInstrument (JSCI) was introduced in 1997 to assess all applicants or beneits,including the disabled and lone parents, within two days o their irst claim. The

JSCI score, which is updated regularly, determines what type o work (i any)would be suitable or each claimant and how much and how quickly they needhelp to ind a job. Claimants with no barriers to work are connected witha welare-to-work provider within two days.31

The City o New York introduced a standard skills assessment to determine

work readiness and the degree o intervention required, and rolled out thisassessment to the entire welare caseload over a two year period. This processis applied at the start o a claim and applicants immediately begin an intensiveour- and six-week back to work programme. Claimants are then reerred on toa welare-to-work provider.32 Universal assessments allow much better targetingo spending, ensuring that intensive assistance is oered to those that need itmost and at the appropriate times.

4.2 Strong linkage of benefits to work orwork-like activities: if you do not participateyou do not get benefitsThe United States and Australia have gone urthest in making explicit the linkbetween beneits and work or the able-bodied. Underlying these reorms aretwo key concepts: irst that work experience helps jobseekers become moreemployable; and second that beneits involve responsibilities or recipients.

In Australia, many able-bodied jobseekers are required to Work or the Doleby engaging in socially useul local work placements or six months, helping

them to ind work and also beneiting their communities.33 I they do notparticipate, their beneits are reduced.

In many states in the USA, including Caliornia, New York and Wisconsin,all able-bodied welare claimants are required to participate in work or work-related activities, and there have been dramatic alls in claims during the timethat these measures were in place.34

4. What succeeds? Best practice fromaround the world

28. Welfare Reform at 10: Analyzing Welfare Caseload Fluctuations, 19962002, Michael J. New, Center or Data Analysis Report #06-07, HeritageFoundation, 200629. What works and for whom: a review o f OECD countries experiences with active labour market policiesJohn Martin and David Grubb 2001 andCustomised Assistance, Job Search Training, Work for the Dole and Mutual Obligation-A Net Impact Study, DEWR April 200630. DEWR Net Impact Study April 2006, reports that Work or the Dole participants were 20 per cent more likely to gain employment aterparticipating in the programme.31. See www.workplace.gov.au or a ull overview o the Job Seeker Classiication Instrument

32. Welfare Reform in New York City during the Giuliani Administration: A Study of Programme Implementation, Urban Institute o WashingtonJuly 200233. Ibid.34. The Urban Institute series o reports dating rom 2001 proiles the TANF changes in thirteen states and reported TANF caseload alls o 33 percent rom 1996 to 1999 in New York State, 47 per cent between 1995 and 1999 in Caliornia and 59 per cent between 1997 and 1999 inWisconsin. Most TANF claimants were subject to new conditionality regimes rom 1997.


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4.3 Creation of a managed market for back towork employment servicesIn almost all the countries studied, successul labour market reormshave involved private or third sector organisations operating back towork programmes. In the Netherlands, over 600 private organisations help

jobseekers at a local or national level, while in Germany job seekers canchoose to register with a private provider i the government services haveailed to help them ind work ater six weeks.35

Again, the United States and Australia have gone urthest in outsourcing manyelements o the return to work process to third party welare-to-work providers(WTWPs). These private and not-or-proit organisations have provided skillsassessments, job search training, intensive and customised employmentassistance and provision o work placements. Contract structures and paymentarrangements vary but the best examples rom Australia use perormancebased payments, ensure eicient competition between WTWPs or contracts,allow jobseeker choice, and provide dynamic and transparent data on jobplacement perormance.

In contrast to the present Governments timid tinkering, we propose a

radical reorm agenda. In line with international experience o successulwelare-to-work programmes, our proposals or reorm in the UK will mean:

a new system o assessment;

new conditions or receiving out o work beneits; and

new help or people to get back into work through a network owelare-to-work providers.

The rules outlined below will mean that out o work beneit claims ollow a threeyear cycle. At the end o the three year period, claimants will be able to re-startthe assessment process, but subject to the restoration o sanctions i they choosenot to participate or choose to reuse reasonable job oers. Further details o howour reorms will apply to dierent groups are set out in Appendix A2.

5.1 The gatewayWe expect Jobcentre Plus to continue to be the irst port o call when someonehas lost their job or cannot work. It will continue to be the jobseekers gatewayto employment services. Jobcentre Plus will also continue to manage the beneitsystem and impose the sanctions regime (as opposed to providing specialistemployment services).

International evidence suggests that early intervention and assistance is crucial.Within 24 hours o a claim, Jobcentre Plus will provide an in-depth assessmentto evaluate claimants needs and capabilities. Using this inormation we candesign a package with the right balance o support and beneits to help theclaimant back into work.

5. How will the out of workbenefit system change?

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


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5.2 A profiling system to tailor supportEach claimant or out o work beneit aces dierent challenges, and our systemmust relect this. Not all people can or should be treated the same. Problemsencountered by someone well established in work, but who has been maderedundant, are very dierent to those o someone who has been receivingIncapacity Beneit or many years.

We intend to use a proiling system similar to the standard assessments usedin New York City or Australia to categorise each person looking or work, withinely graded levels o diiculty associated with placing them in work. Thecategorisation will be part o the initial assessment at Jobcentre Plus within 24hours o a beneit claim. At one end o the scale will be those deemed to bemost likely to be able to ind a new job, who will be given a period o up to sixmonths to do so beore they are reerred to a welare-to-work provider. At theother end o the scale will be those acing the most diicult challenges who willbe reerred immediately. Between these extremes, claimants with challenges ovarying degrees will be given varying lengths o time within which to ind worksupported only by Jobcentre Plus beore being reerred to a specialist welare-to-work provider.

This proiling tool will be rapidly extended to the entire stock o JSA and IBclaimants as they are brought into the new system.

The assessment will also be used to determine how much a welare-to-workprovider is paid when a particular claimant is ound a job. Claimants who havebeen assessed as more diicult to place will attract a higher success ee or thewelare-to-work provider than those who have been assessed as being easier toplace. This variable ee system is o the utmost importance it is the only wayo ensuring that the welare-to-work providers invest suicient resources in thepeople who need most help to get jobs, rather than just leaving them onbeneits and tackling the easier cases.

We will not prescribe the methods used by welare-to-work providers to helppeople back to work, because the international evidence suggests that the most

eective programmes allow independent providers room to innovate. The

welare-to-work providers will have a strong incentive to oer the best possibletailored support because they will be paid by results receiving ull paymentonly when they get people into jobs and keep them in jobs or a sustained period.

However, we will expect each employment programme to include a number ocore elements. These will include:

training to increase suitability or work;

personalised career and recruitment advice and support prior to entering theworkplace; and

sustained mentoring and development advice ater re-entering employment.

We see post-employment mentoring as a key part o the programme, andsomething which has been missing in this country. Such mentoring helpswhen problems arise at work which may be diicult or a new recruit to discusswith an employer a skill issue, or example. Reports rom welare-to-workproviders in other countries make clear that people are signiicantly more likelyto stay in work ater getting a job i they receive this type o post-employment

support.


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5.3 Conditions and sanctionsThe success o conditional beneit systems in other countries shows that usingconditions and sanctions helps to build the culture o work that people need toget back into the job market.

Under our proposals, there will be three main types o condition applied to thereceipt o out o work beneits.

Everyone reerred by Jobcentre Plus to a welare-to-work provider will beexpected to participate in a return to work programme. I they are not willingto participate, they will cease to be eligible to receive out o work beneits.I they ail to participate in any part o the programme without a reasonableexcuse, they will also be liable to lose some or all o their out o workbeneits during the period o non-participation.

Everyone who receives a reasonable job oer, as deined by the currentgovernment guidelines and conirmed in their initial assessment (and WorkCapability Assessment i relevant), will be expected to accept that oer. Ithey do not do so, they will lose one months out o work beneits. I theyreuse a second reasonable oer, they will lose three months out o work

beneits. I they reuse a third reasonable oer, they will be excluded romreceiving urther out o work beneits or a period o three years.

We will apply a time limit to the receipt o Jobseekers Allowance or long-termand repeat claimants. Our intention is that anyone who has been through thenew system without inding work and has claimed the allowance or longerthan two out o the previous three years will be required to join a mandatorylong-term community work scheme as a condition o continuing to receivebeneit support.

Depending on circumstances, the loss o out o work beneits would have

a signiicant impact on income. For a couple claiming JSA, they would orgo92.80 a week more than hal their total income, assuming they also claimhousing and council tax beneits. For parents on JSA or IB, they could losebetween a quarter and a third o their income i they ail to comply with theconditions o the welare programme.

In the case o parents who are subject to out o work beneit sanction, child- andamily-related entitlements such as child beneit and child tax credit will not beaected. The operation o conditionality or parents will speciically allow orspecial circumstances such as the need or childcare aced by individual parents.However, there must remain a clear inancial penalty in the orm o lost out owork beneits or wilul non-participation. We will consult on the current operationo hardship payments and on their interaction with the sanctions regime.


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5.4 Tackling long-term dependence on IncapacityBenefitWe want support or those who are incapacitated in some way to be designedaround what someone can do rather than what they cannot. Our aim is to helpas many as possible o those who have incapacities, but who are capable o atleast some work, into jobs.

We will require all current recipients o Incapacity Beneit to go through athorough Work Capability Assessment as soon as is practicable.

People whose disabilities make it impossible or them to work will continue to receiveunconditional support, but will be able to access support services on a voluntary basis.

People with a non-permanent condition will be asked to repeat the WorkCapability Assessment at regular intervals.

Those who are ound to be ully capable o working will be transerredimmediately onto Jobseekers Allowance and will be required to seek workin the normal way. For those making inappropriate use o Incapacity Beneit,this will lead to a beneit cut o around 20 a week.

Recipients o Incapacity Beneit who are ound to be partially incapacitated butcapable o preparation or work will be reerred to welare-to-work providers,but with additional support to relect their conditions.

5.5 Community work programmes for thelong-term unemployedIt is well established that the longer someone is out o the workplace the morediicult it is or them to go back. But the current system allows the long-termunemployed to continue to claim Jobseekers Allowance or most o their liveswithout participating in proper back to work schemes. 250,000 people havebeen on JSA or eighteen months out o the previous two years and 100,000people have claimed or six out o the previous seven years.36

We will not allow anyone claiming Jobseekers Allowance over a long period

to do nothing.

We will apply a time limit to the receipt o Jobseekers Allowance or long-termand repeat claimants. The exact criteria or the time limit will be subject toconsultation, but we envisage that anyone who has been through the newsystem and has claimed the allowance or longer than two out o the previousthree years will be required to join a community work scheme as a condition ocontinuing to receive beneit support.

The design o the community work scheme will build on successulinternational schemes like the Australian Work or the Dole programme.Participants will be required to spend most o their time in supervisedproductive work in their communities while still retaining access to back towork activities as designed by their welare-to-work provider.

Failure to participate in these community work programmes without certiiedsickness or other compassionate reasons or absence will lead to an immediateloss o out o work beneits on a pro-rata basis: as in any other orm oemployment, payment will depend on turning up or work. Participation willbe or one year, at the end o which participants will start a resh back to work

cycle with a resh assessment.

We envisage that the programme will be administered by a national networko private and non-proit organisations that will be paid on a per-claimantbasis. These may or may not be the same welare-to-work providers who aredelivering back to work services. We will consult with providers on the detailso how the scheme should operate.

36. Calculations based on igures in a speech by John Hutton, MP, then Secretary o State or Work and Pensions, 20th June, 2007


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5.6 Supporting lone parentsThe Government is in the process o signiicantly tightening the rules orlone parents.

We accept the widespread evidence that helping a household make thetransition rom worklessness to work has beneicial eects or both parentsand children alike.

Our Social Justice Policy Group recommended that all lone parents with childreno school age should be expected to return to part-time work. It proposed thatthose with children at primary school should be expected to work or at leasttwenty hours a week and that parents with children at secondary school shouldbe expected to work or at least 30 hours a week.

Both we and the Government have accepted the principle behind theserecommendations. By 2010 we will inherit a situation where lone parentswith children over the age o seven will have ceased to receive income support,and will have been transerred to Jobseekers Allowance. We will accept thisapproach, though we will make some reinements.

We will ensure that there are important saeguards to the conditionality appliedto those on Jobseekers Allowance. In particular, we will ensure that thedeinition o a reasonable job as applied to parents will relect the limitationsthat good parenting places on the ability to work.

We want to ensure that lone parents are encouraged to return to work, butnot orced into a position where they have to work hours that are completelyincompatible with good parenting.

In addition, our policy is to give all parents with children under the age oeighteen the right to seek lexible working rom their employers. Our childcarestrategy will also address the challenges aced by parents o school-age children.

This section describes how our proposals will work inancially and how we

will generate savings in the overall welare bill to release unds to spend onother commitments.

There are our particular areas that need to be addressed:

how we can aord to build a welare-to-work programme that goes so ar,in scale, beyond the current Governments limited plans;

how many additional job placements are we aiming to achieve, and whatkind o savings do we expect to be able to generate as a result;

who are the contractors who would take on this task, and are they suicientin number to be able to deal with the scale o the challenge; and

how can we be certain that the jobs exist or suicient numbers o thoseclaiming out o work beneits to be able to deliver a rapid reduction in thenumber o claimants?

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


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6.1 How can we afford a programme on the scalewe need?The Government is currently spending 695 million a year on welare-to-workprogrammes, and plans to increase this to a igure in excess o 1 billion by2010. Yet even an increase in spend at this level is not suicient to allowMinisters to build programmes to help the 2.6 million people currently claimingIncapacity Beneit.

The evidence provided in Chapter 2 also shows that current programmesare not substantial enough to have a lasting impact on levels o worklessness.

There are two key policy decisions that we have taken which will changenormal practice or return to work programmes in this country, and whichwill enable us to build something much broader in scale than the plans o thecurrent Government.

6.1.1 Payment by resultsThe irst is that we intend to pay the independent providers who take on thewelare-to-work task substantially or completely on the results they achieve.

This is established practice in countries like Australia, and it allows us tosynchronise outcome payments to the providers with the beneit paymentssaved once someone is back in work.

That means the providers pay most, or all, o the upront costs o delivering theprogramme. They start to recoup their money when they get someone back into work.They are only paid in ull once someone is ully established back in the workplace.

So, in a typical contract, we would expect to make stage payments to a providerover the course o a year or so ater someone is back in work. I they lose their job,the payments stop. Again this is established international practice.

6.1.2 Amending accounting rulesThe second element o the change is to alter the current way that governmentruns its inances. At the moment, Treasury rules insist that the cost o welare-to-work programmes is met out o the annual departmental budget orthe Department or Work and Pensions. When those budgets run out, thoseprogrammes end. We have been inormed privately by some o the Governmentsexisting providers or the New Deal programme that they have been told onoccasions to stop working as they have got too many people back into workand the budgets have run out.

This will always limit the size o programmes according to the Departmentor Work and Pensions regular annual budget.

Treasury rules mean that programmes which would deliver lower beneitexpenditure and would save money or the Government are not allowed.They stipulate that money saved rom what is called Annually ManagedExpenditure the regular bill or beneit and other payments cannot beused to top up return to work programme costs.

The limit prevents investments that would save money. Given that the average

annual saving rom getting someone rom Incapacity Beneit into work is morethan 5,000, the scope or encouraging up-ront investment by independentproviders through paying them out o beneits saved is huge.

The Governments ailure to implement the recommendation rom their ownadviser, David Freud, that welare-to-work should be delivered on a paymentby results basis is a key reason why the Government has not introduced returnto work programmes or most o the 2.6 million people in receipt o IncapacityBeneit. This is why David Freud has publicly criticised the current accountinglimitations.


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6.1.3 Items of additional expenditureThere are two areas o expenditure within our plans which will all outsidethe basic contract structure with the return to work providers.

The irst is the additional cost o assessments or people currently onIncapacity Beneit.

The second is the cost o the community work programmes or long-termand repeat claimants. International evidence suggests that these can deliveredat an annual cost o between 1,000 and 1,500 per participant.37 The irstprogrammes will commence around two years ater the introduction o thenew system.

In total these costs amount to substantially less than hal the plannedDepartment or Work and Pensions departmental expenditure o over 1bn ayear by 2010 on welare-to-work programmes such as the New Deal, once theexisting programmes have been merged with the new payment by resultsstructure. This is because it will no longer be necessary to und programmeslike the New Deal rom departmental budgets, as their work will have beensubsumed into our new return to work arrangements. As a result, their budgets

will be reed up or other purposes.

6.2 How much difference can we make and howmuch will it save?The obvious and immediate question about a programme o this kind is howmany people it will be able to move o out o work beneits into work andas a result how much money will be saved.

We share the Governments long-term target o an 80 per cent employment rateor people o working age.

However, the Governments current targets or individual beneit claimantgroups are wholly unattainable with current programmes. The Governmentsaudited inancial projections are based on the assumption that its own targetswill be missed.

An example o this is the goal o moving one million people o IncapacityBeneit by 2016. In 2006 Ministers set a target o reducing the number oclaimants by one million over the subsequent decade. By late 2007 they hadmanaged only a reduction o 60,000.38 At that rate o progress, it will take untilaround 2040 or them to hit the one million target, 24 years behind schedule.

Our radical programme will increase the rate at which those who can workre-enter the workplace.

We will reduce drop out rates, and through post-employment mentoring willreduce the recycling o claimants through Government programmes.

We expect to see an initial, one-o reduction in the number o out o workbeneit claimants as a result o the introduction o tougher sanctions andconditions.

37. For example see http://www.annualreport.dewrsb.gov.au/2004/part2es/1403.htm or the costs o the Australian Work or the Dole scheme. 38. Department o Work and Pensions, Work and Pensions Longitudinal Study, IB/SDA claimants Feb 2006, May 2007 .


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Evaluation o welare-to-work programmes around the world suggest that

an eicient system o payment by results combined with tough conditionscan produce signiicantly improved employment outcomes. For example,participants in the Job Search Training and Customised Assistance programmesin Australia had employment rates ater twelve months that were more thanten percentage points higher than a control group o non-participants.

The success rates o their programmes are set out below.

The Australian Experience

Research by the OECD has ound that targeted interventions and monitoringhave achieved similar levels o additionality in countries such as theNetherlands.39

We have built our model around the experience o what has worked inother countries.

Existing welare-to-work programmes in the UK, or example the New Deal

or Young People, achieve a maximum additionality o seven per cent.40Butthis is deceptive because, at present, there are no mandatory welare-to-workprogrammes or existing recipients o incapacity beneit. Those that do existonly apply to claimants o jobseekers allowance, who are closest to the labourmarket, and should thereore be easiest to get back into work. As a result othis, additionality igures in the UK represent a success rate well below thecomparable igures being achieved in Australia and elsewhere.

To achieve our goals, we have to do two things. We have to increase the rate osuccess o getting conventional jobseekers back into work to the kind o levelsbeing achieved in Australia. In addition, we have to bring the existing recipientso Incapacity Beneit into the net, and bring their employment rate up to thelevels being achieved in other countries as well.

To illustrate the potential savings rom a successul programme, David Freudsreport indicated that the average saving to the Exchequer o moving someoneo out o work beneits is 5,000, even beore taking into account anyadditional tax revenues. On that basis, and once initial payments have beenmade to the welare-to-work provider, each increase in work placements o100,000 would generate overall ongoing savings to the Exchequer o 500

million per annum.

As an indicator o the potential o getting this right, achieving the long-termgoal o getting 80 per cent o people into employment would involve gettingan additional 2.3 million people into work.41The Social Justice Policy Groupestimated that ull savings rom successul welare reorm could be 8 billionper year.42

39. What works and for whom, a review of OECD countries experiences with active labour market policies, Martin and Grubb, 2001. 40. Institute or Fiscal Studies, Long-Term Effects Of A Mandatory Multistage Program: The New Deal For Young People In The UK, Giacomo DeGiorgi, page 1, 2007.41. Department or Work and Pensions, In work better off: next steps to full employment, July 2006, p8.42. Social Justice Policy Group, Breakthrough Britain, July 2007

Programme Total

participants to

FYE June 2005

Employment

rate 12

months ater

programme

commencement

(per cent)

Control

group (non-

participant)

employment

rate ater 12

months

(per cent)

Percentage

point

improvement

over control

group

(per cent)

Weighted

average

(per cent)

Job SearchTraining

Customised

Assistance

Work or theDole

MutualObligation

Total

144,300

298,900

81,900

148,900

58.9

46

39.4

46.6

47.7

35.9

32.1

38.4

11.2

10.1

7.3

8.2

2.4

4.6

0.9

1.7

9.6


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In the medium term, international experience shows that radical welare reorm

signiicantly reduces beneit rolls. For example in the Australian Job Networkscheme, between 39 per cent and 66 per cent o participants ound jobs,depending on the type o scheme and category o participant. The IntensiveAssistance scheme or participants whose proile closely resembles UKIncapacity Beneit claimants had a success rate o 45 per cent.43

By contrast, the Governments target or reductions in Incapacity Beneitclaimants represents a reduction o 120,000 claimants per year between nowand 2016. By the end o a ive year Parliament, that represents a reduction o600,000, or just twelve per cent o the nearly ive million people who arecurrently out o work and on beneits.

Even hitting the Governments own target or Incapacity Beneit would beequivalent to a cumulative saving o 3 billion a year by the end o a ive yearParliament. This alone would be suicient to meet our commitment to eliminatethe couple penalty in the tax credit system.

6.3 Does the private sector have the capacity todeliver a programme of this kind?There is already a well established international welare-to-work industry, withparticipants in the United Kingdom ranging rom large private sector providersthrough to smaller third sector groups such as Tomorrows People.

The development o some o the current Governments programmes hasestablished many businesses in the United Kingdom, though most remain on arelatively small scale by comparison with the bigger international programmes.However, we know rom discussions with several o the major internationalproviders that there is a clear willingness to invest in the UK.

Our plan is to build a programme based around the concept set out by DavidFreud in his report.

This will involve responsibility or return to work provision being contracted

to an organisation or range o organisations in dierent geographic areas o the

country. We will consult on the best contracting model based on internationaland domestic experience, and a series o pilots will inorm the model that isrolled out nationally.

International experience suggests a number o important lessons or the designo contracting or return to work schemes on a payment by results basis.

First, as well as competition or contracts, competition between providerswithin contracts can be an important driver o good perormance. It also createsthe potential or credible alternative bidders when contracts come up orrenewal. Participant choice can also be an important driver o providerperormance.

Second, the Australian star rating system provides a good model or monitoringprovider perormance. The system has been eective in driving up perormanceand inorming the choice o prime contractor when contracts are renewed.

Third, smaller specialist providers can play a crucial role in helping some othe hardest to reach groups. Maintaining productive relationships betweendierent types o provider and ensuring that claimants are reerred to the

provider whose expertise most closely matches their needs are importanteatures o a successul system.

Securing the uture o these smaller, largely third sector providers, within theoverall structure o a system o payment by results, will be a key criterion orus in shaping the new generation o contracts.

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


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7. Questions for consultation

6.4 Can the labour market absorb a programmeon this scale?Over the last ten years in the United Kingdom total employment has increasedby 2.7 million. At the same time the Government admits that at least 1.4 millionmigrant workers have ound employment in the UK. There has beenconsiderable conusion about what proportion o the growth in employmentcan be accounted or by migrant workers but even these most conservativeGovernment statistics show the igure to be at least 50 per cent and possiblyas much as 80 per cent.44

While there are clear doubts about the employment outlook or the immediateuture, oicial igures rom the Oice o National Statistics continue to predictnet immigration into the United Kingdom each year running at 190,000 perannum.45 These are people looking to live and work in Britain.

Our goal is to control the number o migrants coming to Britain while at thesame time looking to move people o out o work beneits and back into theworkplace. In this context, our plans are perectly containable within currentemployment trends in the United Kingdom.

Furthermore, in the event o an economic downturn and a rise inunemployment, these reorms will help the unemployed to ind those

jobs that are available.

Over the next ew months we intend to consult widely on the proposals

outlined in this Green Paper. There are a number o issues in particularwhich we intend to discuss with relevant groups and individuals:

the sanctions and conditionality set out in this document;

the rules or lone parents;

the contracting structure or the new return to work providers;

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

the scope and detail o the community work programmes.

44. Statistics Commission, Foreign Workers in the UK briefing note , December 200745. Oice or National Statistics, Long-term assumptions for UK population projections, 27 September 2007


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JSA and the New DealThere are currently around 800,000 people on Jobseekers Allowance (JSA). Thebasic rate o JSA or a single person aged 25 or over is 59.15 per week, risingto 92.80 or a couple.

To claim JSA a person needs to be actively seeking work. In the irst instance,a claimant has to call Jobcentre Plus to book an appointment. They then attendtheir local Jobcentre Plus to draw up a Jobseekers Agreement. The claimant isexpected to take steps each week to ind work or improve their chances ogetting work (or both). Claimants will normally be expected to take at leastthree steps each week while they are getting JSA. This could include drawingup a CV or contacting employers or work.

Claimants must visit their local Jobcentre Plus at least every two weeks. Duringthe visit they will have to sign a declaration to say that they have been activelyseeking work, that they are still available or work, and that there has been nochange in circumstance which might aect their entitlement. They will discusswhat opportunities are available or work. I claimants do not visit their

Jobcentre Plus when asked to do so they risk losing their beneit. However,only around 12,000 people are sanctioned each year, and the majority o these

sanctions last or just two weeks.46

JSA claimants may lose their beneit i they break any o the eligibility conditions.This could include:

not making yoursel available or work

not actively look or work and training, or

not having a current Jobseekers Agreement.

I a young person have been claiming JSA or over six months, or someoneover 25 has been claiming or over eighteen months they will be reerred ontothe New Deal programme to help them get back to work.

Incapacity BenefitIncapacity Beneit (IB) customers make up the largest group people on outo work beneits in Britain, with 2.6 million people o working age currentlyreceiving IB. This number has grown signiicantly since the 1970s. It is paidto those who cannot work because o illness or disability.

There are three rates o IB, which vary according to how long the person hasspent on the beneit, including any time spent on Statutory Sick Pay:

the short-term lower rate (currently 59.20 a week) or the irst 28weeks o incapacity

the short-term higher rate (currently 70.05 a week) rom 29 to 52weeks o incapacity

the long-term rate (currently 78.50 a week) ater 52 weeks

Existing Incapacity Beneit recipients are not currently required to participatein any back to work programmes.

Appendices

A1 Main out of work benefits

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


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Employment and Support AllowanceThe new employment and support allowance (ESA) will replace IB or newcustomers in 2008. The ESA has three components. The basic beneit will beset at the level o JSA. A new personal capability assessment process will assessnot only disability or illness but also potential capacity or work. Claimantswill be divided into two groups: those exempt rom work, who will receive thesupport element o the ESA, and those who are deemed capable o work, whowill move on to the employment element o the allowance and to participatein preparation or work activities. I they ail to ully participate in the processthey will receive a lower level o beneit under the Governments plans.

Income support for lone parentsIncome support is a means-tested beneit paid to those with low incomes.Lone parents are currently entitled to claim income support until their youngestchild is sixteen, at which point they move onto JSA.

Recipients are required to attend a work ocused interview (WFI) at the starto their claim in order to receive the beneit, a ollow up WFI at six months,then regular (usually annual) WFIs subsequently. However they are notrequired to take any action beyond the WFI. Failure to turn up to a WFIcan result in sanctions.

From 2008 parents whose youngest child is aged eleven or over will haveto claim JSA instead o income support. The government plans to lower theage o the youngest child to seven in 2010.


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Immediate Initialassessmentwithin 24 hours

Lowassessmentscore (i.e.not hard tohelp) leads tosix monthssupported jobsearch withJobcentre Plus

Initialassessmentwithin 24 hours

Highassessmentscore (i.e. hardto help) leadsto immediatereerral to WTWPon a payment byresults basis


WorkCapabilityAssessment(WCA) withinthree months

ReferraltoWTWPater WCA ona payment byresults basis


WCAwithinthree months

Optionalreferralto WTWP atany point ona payment byresults basis

12 to 24 months Reassessmentofneeds

Continuedinvestmentby WTWP ona payment byresults basis

Reassessmentofneeds


Reassessmentofneeds


Optionalcontinuedinvestmentby WTWP ona payment byresults basis

6 months ReferraltoWTWPon a payment byresults basis

Continuedinvestmentby WTWP ona payment by

results basis

Continuedinvestmentby WTWP ona payment by

results basis

Optionalcontinuedinvestmentby WTWP on

a payment byresults basis

Claimant type JSA, closest to

labour market

JSA, urthest rom

labour market,

e.g. severe skill

needs

Employment

Allowance/IB

Support

Allowance/IB

Appendices

A2 The assessment, conditionality,sanction and support system

Promoted by Alan Mabbutt on behal o the Conservative Party, both at 30 Millbank, London SW1P 4DPPrinted by TPF Group, Avro House, Harlequin Avenue, Brentord TW8 9EW.

2 years + claimso beneftwithin 3 yearperiod

Communityworkschemeforlong-term JSA claimants

Clockstartswithinitialassessment

Lastsforoneyear

NocommunityworkbutWCAreassessment and continued support

Sanctions Benetsanctionsfornon-participationat all stages, or i turn downreasonable job ofer 1st: one month 2nd: three months 3rd: up to three years

Sanctionfornon-attendanceatcompulsory work schemes is pro-ratabenet loss

EAclaimantsbrought intothe sanctionsregime, butwith maximumsanction lengtho three months

Denitionofreasonable jobdepends onWCA

Nosanctions,but regular WCAto reassess workcapability

Claimant type JSA, closest to

labour market

JSA, urthest rom

labour market,

e.g. severe skill

needs

Employment

Allowance/IB

Support

Allowance/IB


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Documents

Welfare Policy Paper