Work in progress, by Mark Conrad

16 Aug 07
New Work and Pensions Secretary Peter Hain has thrown down the gauntlet in a green paper designed to get the long-term unemployed into jobs. But, as Mark Conrad reports, there are some tricky battles ahead

17 August 2007

New Work and Pensions Secretary Peter Hain has thrown down the gauntlet in a green paper designed to get the long-term unemployed into jobs. But, as Mark Conrad reports, there are some tricky battles ahead

'Gissa job!' Yosser Hughes, the tragic anti-hero from Boys from the blackstuff, summed up early 1980s Thatcherite Britain with his hopeless refrain. Forced into redundancy and single parenthood, Hughes' desperate search for work reflected the bleak outlook facing millions of unemployed people a generation ago.

Ostensibly, times have changed. Mass unemployment is a fading memory and the economy is ticking along. The UK's employment rate (74.5%) is higher than those of its European counterparts, and new welfare reform minister Caroline Flint told Public Finance that she can't get people into work quickly enough. There are 600,000 posts advertised in Jobcentre Plus offices at any one time.

Yet the UK's productivity remains low compared with its economic peers, such as Germany. And there are 3 million workless households, containing 1.7 million children: 15.8% of all homes. At the same time, income inequalities are widening, the Office for National Statistics revealed this summer. Child poverty rates increased in 2005/06 after a period of sustained decreases – not great news for a government aiming to eradicate the scourge by 2020.

New Work and Pensions Secretary Peter Hain says it is his 'mission' to eradicate poverty. He also told MPs recently: 'We have got four and half million people of working age on benefit and there are significant numbers of lone parents and… people with a disability who could work and ought, for their own wellbeing, to be encouraged to work in order to make the economy much more competitive.'

Consequently, Hain says he has embarked on a 'crusade' to overcome the barriers preventing people from moving into work and to help Prime Minister Gordon Brown achieve an 80% employment target (deemed to be 'full employment').

To assist ministers with these aims, countless white and green papers, government reviews, departmental strategies and think-tank proposals have piled up in Whitehall in recent years. The DWP published yet another Welfare Reform Act in May: the eleventh overhaul of welfare since 1997. Controversially, that redefined health conditions to encourage millions of Incapacity Benefit claimants into work.

But Britain is under new management and new governments are inclined to policy overhauls. So on July 18, Hain published his department's latest proposals. The green paper, In work, better off: the next steps to full employment, is widely believed to be the prime minister's blueprint for getting 2.3 million people off benefits and into jobs. Flint told PF: 'The purpose is to help families out of poverty, and we believe that work is the best route.'

The green paper, which is out for consultation until October, also includes plans to merge the government's New Deal programmes, which provide training, subsidised employment and voluntary work to unemployed groups such as lone parents, disabled people and youths. Hain says that an accompanying aim is to reduce the cost of welfare payments by £11bn annually, releasing cash for investment in frontline services.

But government initiatives have rarely delivered improved welfare outcomes during periods of fiscal restraint. The exception has been the regional Pathways to Work programme, which will shortly be rolled out nationally at a cost of £360m over two years.

Meanwhile, there are plans to slash the number of Jobcentre Plus staff delivering services to jobseekers, and the amount of cash available to provide them. The DWP, for example, is committed to 5% cuts in its annual resource budget until 2011. Hain warns that means 'significant extra pressures on Jobcentre Plus'.

A recent analysis by Dave Simmonds, director of the independent Centre for Economic and Social Inclusion, concludes that the government is already performing poorly against five out of seven long-term welfare targets: Brown's 80% employment aim; Jobcentre Plus's targets; the 70% employment rate for lone parents; closing the employment gap rate for the lowest qualified; and halving the child poverty rate by 2010. The two targets that the government is on course to meet, Simmonds says, are reducing the numbers on Incapacity Benefit by 1 million by 2016, and closing the employment rate gap for disadvantaged groups other than the lowest qualified.

To get the government back on track and find cheaper ways of assisting the long-term unemployed, Hain's predecessor, John Hutton, commissioned investment banker David Freud to produce a business model. Freud's proposal, published in March, was to contract out these more challenging jobseeker services to the private and voluntary sector on a payment-by-results basis.

In effect, that meant the part-privatisation of Jobcentre Plus: a controversial proposal opposed by civil service trade unions. A streamlined Jobcentre Plus, Freud argued, should deal only with short-term benefit claimants. Private or voluntary sector organisations should take over provision of specialist services for groups prone to long-term claims, such as single parents, those with minor disabilities deemed able to work, those with poor literacy and numeracy skills and people from ethnic minorities particularly affected by unemployment. The contractors' fees would be linked to the savings made in benefit payments.

Freud also suggested a dramatic change to child support for single parents: reducing the age at which payments are made for the youngest child. The aim would be to hit single parents in the pocket, encouraging them to seek work sooner.

Hain's green paper is, in part, a response to Freud's report. Ministers accepted his plan to place new requirements on single parents and to end payments for the youngest child after 12 from next year, instead of 16, and after seven by 2010. To do this, Flint says she will move parents from Income Support to Jobseeker's Allowance, which requires claimants to seek work or face sanctions such as benefit withdrawal.

That sparked angry responses from parent groups and anti-poverty activists. Kate Green, chief executive of the Child Poverty Action Group, says: 'Forcing lone parents to face benefit sanctions when their children are at primary school is outrageous. Taking money away from families that are already poor will worsen poverty for many children and put their health and wellbeing at risk.'

But Flint denies that she is guiding Whitehall back to the dark days of the 1990s, when attacks on lone parents were de rigueur. Most single parents want to work, she says. The employment rate for lone parents has risen from 38% in 1993 to 56.5% last year – no mean feat considering the enormous difficulties they face in finding work that is flexible enough to meet care requirements and pays more than they receive in state support.

Flint reiterates that children of unemployed lone parents are five times more likely to live in poverty than those with parents in full-time work. But she adds that while parents would be required to seek work actively, they would not be forced into unsuitable roles.

'We're at the right point to consider our relationship with lone parents and the mix of rights and responsibilities that applies to us as policy makers and also to individuals to help themselves,' she argues.

'I've seen headlines about people being forced into work, but we need to have a debate about the way in which the Jobseeker's Allowance regime is applied. Yes, it's an increased level of conditionality, but it's actually about trying to encourage people to help themselves by looking for work.'

Not quite. Hain and Flint intend to contract out responsibility for jobseeker services for people who have been on JSA for 12 months (or less) to organisations that will provide tailored support to individuals. But in line with New Labour's 'something for something' approach to welfare, there are elements of compulsion involved. Three months into JSA claims, recipients will have to widen their job search criteria in terms of both the nature and location of any potential work.

After six months, they will have their skills assessed and could be asked to undertake training. After a year, Hain intends to ask some claimants to undertake mandatory work trials, effectively forcing them into the employment market.

Lobby groups such as One Parent Families and mental health charities baulk at the prospect. But Flint says that there's already a mandatory option in the current New Deal programmes.

She stresses that only a few claimants 'wilfully not engaging' in job searches would be required to undertake mandatory placements. Official figures support that claim. Around 80% of claimants leave JSA within six months, and that figure is 90% by 12 months. In addition, some lone parents are currently on JSA by choice and volunteer for work trials, which have generally been successful.

Flint claims her proposals would improve the current New Deal for Lone Parents, where she believes that 'the numbers coming forward [to seek work] are not high enough'.

Of course, the proposed New Deal overhauls go further than rationalising the programme for lone parents. To accommodate Freud's plan, Gordon Brown has endorsed the merger of disparate programmes into a unified and personalised 'Flexible New Deal'. It is under this banner that the government intends to contract out services for the long-term unemployed.

But this part of the plan has already hit a snag: political nervousness over Freud's privatisation blueprint. He proposed creating a multibillion-pound jobseekers' market, using 11 regional 'mega-contractors' to co-ordinate specialist support across England, Scotland and Wales by providing services directly or

sub-contracting to smaller groups.

John Hutton welcomed the plan but moved departments before publishing his response. However, Flint told PF: 'Both Peter Hain and myself have some concerns about regional monopolies and I think that my predecessor, Jim Murphy, also had some.

'Is it [Freud's model] so big that it becomes unwieldy? What if things go wrong – how do we make sure we're getting the results that we want? If we're not getting the results that we want, how do you change over if you've only got one big contractor?'

A leaked letter, sent to Hutton by former chief secretary to the Treasury Stephen Timms in March, also indicated that Brown was nervous about the cost of Freud's proposals, which would require significant investment.

Philip Hammond, Conservative Party shadow work and pensions secretary, told PF that he would have 'no hesitation' in implementing Freud's invest-to-save blueprint. The Tories have long called for the privatisation of Jobcentre Plus and a move to contracting based on payment by results.

Hammond says that his party would go even further and get private contractors to 'work harder for their bread' by setting tougher targets and making them assume a larger share of the risk for any project failures. 'But on Freud, we're saying to the government “get on with it”. However, somewhere along the line, perhaps because of the change of prime minister, departmental caution has kicked in,' he adds.

Many welfare experts, however, support the Brownite camp's decision to back away from monopolistic providers. Professor Dan Finn from the University of Portsmouth argues that: 'Some common sense has broken out about the nature of the Freud proposals. If you're going to engage with a range of providers, then let's get them focused on the long-term unemployed and not caught up in a massive contracting-out plan and then have to live with the huge sub-contracting, governance and accountability problems that would come with monopolistic prime contractors.'

Flint indicates that she and Hain could still opt for a contracting model that would allow larger firms to utilise their economies of scale – perhaps with several regional contractors sub-contracting down to local level. She also wants break, or early termination, clauses inserted into long-term contracts so that Whitehall or local authorities can react to poor performance.

That could placate the likes of the Local Government Association, which has called for the devolution of welfare-to-work responsibilities to sub-regional level. The LGA has been rewarded through the rollout of 15 Cities Strategy projects. These bring together councils, local employers, training bodies and jobcentres to tackle persistent urban unemployment and break up local pockets of deprivation.

Flint says the green paper recognises 'that for some areas greater flexibility and devolution of decision-making could work well'.

Paul Raynes, welfare programme director at the LGA, claims that embedded unemployment problems can't be solved at national or regional level because they misunderstand the contribution other problems can have at council ward level, such as education, skills, housing and transport.

The LGA believes that deciding labour market policies at a local level could create a million new jobs. While that might be ambitious, the government has built on the fledgling Local Employment Partnerships by signing a 'jobs pledge' under which 30 large employers have promised to make 250,000 posts available to local benefit claimants.

However, as Simmonds points out: 'As with Freud's proposals, Brown is going to need some convincing that the economics of a localist strategy work.'

Neil Bentley, director of public services at the CBI business lobby, also warns that potential providers need swift clarification of their future role. Since Hain and Flint have backed away from Freud's model, a 'large degree of nervousness' has developed, he claims.

According to Finn, one thing that Whitehall must clarify is the mechanism by which ministers will regulate contracts. Problems will emerge with these contracts, he says – not least with prime contractors 'skimming' cash by receiving a contract price and then urging sub-contractors to deal with difficult jobseekers for much less. Some New Deal prime contractors have been accused of doing just that.

Summing up the situation for many unemployed groups, Hammond says: 'We've got to stop marginalising the UK's potential workforce and, yes, we've got to recognise that many of these problems go back to the big economic changes that took place in the 1980s,' when the Thatcherite wing of his party controlled policy.

Which brings us back to Boys from the blackstuff. Yosser Hughes's demise impoverished his children. Failure to secure adequate work for millions of single parents, older people and benefit claimants over the next decade could do the same for hundreds of thousands of families.


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