29 June 2007
One in ten people in Britain are shut out of the labour market for reasons that are individual, complex and highly local. The solution is not David Freud's mega-contracts, but drastic devolution of welfare services
In Britain, 3 million working-age people are out of the labour market. That's more than the entire workforce of Ireland or Lithuania. If a European Union member state were without a single job, imagine what efforts would be put into solving its economic and social problems. The need to help our own workless nation is hard to avoid.
This problem is the flipside of success. A generation of supply-side reform and sustained growth has transformed the mainstream labour market. In 1993, 24 million Britons worked and millions were on the dole. Today, 29 million have jobs and official mass unemployment is history.
But that means we now understand better the quarter of working-age people who do not work — and in particular the one in ten who are decisively excluded from the labour market. Most of them claim incapacity benefit. Some are lone parents on benefit — which we know furthers child poverty. Others are young people leaving care, ex-offenders, or addicts.
There is a consensus that new measures are needed to help these people back into the mainstream. And the starting point for reform needs to be a clear understanding both of what the real labour market is for them, and what stops them participating in it.
Recent government-sponsored reports have recognised the need for local tailoring, personalisation and joining up across agencies. Lord Leitch's review of the UK's long-term skills needs, for example, recommended local employment and skills boards. David Freud's report for the Department for Work and Pensions on the future of welfare-to-work emphasised the need for tailored solutions, sustainable employment and incentives and rewards for providers. And initiatives such as the City Strategy are already piloting a devolved model of service provision.
However, there is a clear tension between this and Freud's call for welfare delivery to be contracted out to the private sector in regional mega-deals.
Private and third-sector provision is a good delivery solution. But contracting on that scale makes financial sense only in Whitehall and Canary Wharf. Yes, well-capitalised providers could fill gaps left by a tight government budget, and their bankers would need fat revenue streams to service debt packages. But in the low-employment estates in the shadow of the Docklands towers, needy people would lose out.
Clients, not financing structures, must drive policy. Regional contractors would still need a web of local subcontractors, with all the bureaucracy, top-down targets and contractual wrangles that implies.
We would argue that this is the opposite of what is needed. Solutions require local flexibility, democratic accountability and links between housing or health bodies.
The needs of the people excluded from the labour market are incredibly diverse and personal: individuals' skills, attitudes and anxieties are at stake. Often there are complex problems: health and housing, transport difficulties, peer pressure and family attitudes all interact.
At the same time, labour markets, and so labour market exclusion, are very local. In prosperous counties, there are seaside towns where fewer than half the workforce has a job. There are estates in thriving cities where three-quarters of the working-age population are unoccupied. In places like these, generations of top-down national initiatives roll along the highway, while in side streets fathers hand worklessness on to their sons.
That means standardised national policies are of little use. Agencies working to serve this client group need to tailor their action to the individuals. And the complexity of the issues means many separate agencies need to work together.
The time has come to consider a drastic devolution of welfare-to-work policy to a level where we could really start to help the people for whom jobs are today the stuff of fantasy. Under such a devolved model, different agencies would be able to come together at the right geography, with local democratic accountability and full control over their budgets. They could rewrite the standard national rulebook so workless people could access the advice, support and training they need in a way that is led by their needs — and those of local employers.
This could include providing advice in the home or GP surgery; training based on needs, not targets; support that lasts after someone finds a job; links between jobs, transport and housing; public bodies that talk to each other and don't drop people down the gaps in between.
Commissioning public services requires an accountable client with the right scale, geography and user focus. In the case of welfare-to-work, that means arrangements mapping on to the real labour market — cities, counties, urban catchments. Build those, and we have the chance of reform that will improve many lives.
But devolution must be driven by the needs of the workless, not by the financing structures of the providers.
Paul Raynes is the programme director of the Local Government Association. The LGA is holding its annual conference in Birmingham on July 3–5