The Queen's Speech placed welfare reform at the heart of the new Government's strategy for getting 'five million plus people languishing on benefits into work and out of poverty'. Subsequently, in his first major speech Iain Duncan Smith, the new Secretary of State for Work and Pensions, argued that the failures of the existing system were ‘trapping’ people in dependency. The New Deal employment programmes were deemed to have failed and the existing welfare system has become too complex and expensive, with large numbers of people ‘parked’ on disability benefits.
Over the next few years the reform process will include the simplification of the benefit and tax credits system; reassessment of the work capacity of some 2.4 million people claiming disability benefits; and increased sanctions for those refusing job offers. The Government will implement the Conservative’s ‘Work Programme’. Existing New Deals will be replaced by a single programme with private and third sector contractors paid for providing ‘targeted’ and ‘personalised’ support to the young and long term unemployed, lone parents and those on Employment Support Allowance. These providers will be paid according to their success in getting participants into sustained employment.
Despite the rhetoric there is much continuity with the reforms of the previous administration. The Labour Government was already committed to reassessing disability benefit claimants and had laid the ground for a simplified benefit system made up of Jobseekers and Employment Support Allowance. The Welfare Reform Act (2009) also allows for implementation of a new conditionality and sanction regime. Recent and planned reforms in DWP procurement also prefigure Government proposals: hardly surprising given their genesis in the report from Lord Freud in his earlier guise as an independent adviser.
There is continuity also in the common problems facing the new Government and which undermined the reform efforts of New Labour. There may be merit in encouraging part time work whilst receiving benefits, as envisaged by the Secretary of State, but as the previous Government discovered redesigning work incentives and tax credits is fraught with hard policy trade-offs. There is a danger, for example, that combining part time work with benefits will itself become a way of life and, as the experience with tax credits demonstrates, an improvement in incentives for one group, such as lone parents, is often offset by unintended disincentives for others, such as non-working partners. Targeting is inevitable in a means-tested social security system and the new administration may find that unravelling the Gordian knot of benefit complexity, whilst improving work incentives and reducing poverty, is more challenging than it appears.
Jobs may offer the best route out of poverty, at least for those who can work, but recent experience demonstrates that the quality of employment is critical. Some of the problems that the new Government attributes to the benefit system are rooted in the low wages and precarious nature of employment in many entry level jobs. New Labour’s achievement in reducing child poverty was partly undermined by an increase in child poverty amongst working families. Equally, many people return to claim benefits frequently because of the types of jobs available (which, by the way, Jobcentre Plus is under pressure to ensure they enter as swiftly as possible). In a study of JSA ‘repeaters’, undertaken for the DWP, researchers found, for example, that the problem for over 70% of them was the quality of jobs available, not their willingness to work. While the longer duration job outcome payments envisaged in the Work Programme may enable more benefit claimants to escape these ‘poverty traps’ , other policy changes, such as the promotion of a ‘living wage’ to which David Cameron has referred, also will be required.
Whether the new Government’s programme consolidates the existing reform trajectory, or takes a different direction, will become clearer over the next few months, as will the proposed Welfare Reform Bill expected in the autumn. It is already clear, however, that the Government will increase the speed and intensity of the reform process. This will be accelerated by the expenditure cuts likely to further target benefits and tax credits and squeeze the welfare to work delivery system over the course of the next Parliament
DWP Ministers may desire to rapid implementation but they should take time to test the assumptions which underpin the delivery of the proposed Work Programme. The NAO has just published a report on the Pathways Programme finding major flaws in its design and implementation. The contracting process, for example, induced providers to ‘bid low and promise high’ with much of their potential income tied to sustained job outcomes. Delivery and viability was undermined by complex handovers between Jobcentre Plus and private providers; unanticipated levels of disadvantage amongst entrants because of the new ‘work capacity assessment’, and the impact of the recession. These problems were exacerbated by the speed with which Ministers wanted the programme delivered and by weaknesses in the DWP procurement process. It is important that such mistakes are avoided when contracting for the Work Programme.
Meanwhile the Government will face a more immediate struggle to continue the reduction in JSA unemployment engineered in the run up to the election. A number of factors will contribute to the challenge including the ending of the Youth Guarantee and Future Jobs programme combined with the disruption in employment programme delivery associated with major recontracting exercises. Moreover, although employment will recover following the return of economic growth it will be some time before employers start to recruit again in large numbers. Any recovery now will be offset as the public sector halts recruitment and makes redundancies whilst absorbing the ‘swifter and deeper’ expenditure cuts to which the new Government is committed.
In this environment it will be vital for DWP Ministers to sustain the capacity of Jobcentre Plus and the welfare to work delivery system and avoid mistakes as occurred, for example, from the rapid and severe cuts in Jobcentre services and employment programmes between 1979 and 1981. These resulted from the expenditure cuts of the then newly elected Conservative Government and contributed to the entrenched long term unemployment and growth in economic inactivity that emerged in the mid-1980s.
Dan Finn is Professor of Social Inclusion at the University of Portsmouth
