27 January 2006
Work and Pensions Secretary John Hutton could reinvest £4bn–£7bn per year into the welfare system through savings and new tax income gleaned by reducing benefit claimants by 1 million – a target revealed in his long-awaited green paper this week.
Sources close to Hutton have told Public Finance that the expected savings and fiscal boost from new workers could underpin higher payments to people deemed long-term sick or disabled. This is the group Hutton is keen to insulate from his otherwise compulsory back-to-work agenda.
The cash could also be used to cover the cost of the roll-out of the successful Pathways to Work pilot schemes, which has paid 'employment credits' to those entering work. Hutton has committed £360m to PTW schemes by 2008.
Other cash will be used to cover incentive payments to GPs or other primary care trust staff who help to reduce future benefit claimants by helping people back to work – schemes that will underpin the PTW agenda.
As expected, Hutton published a wide-ranging series of proposals to 'improve workplace health' this week. Key targets include reducing the number of incapacity benefit claimants by 1 million over the next decade. IB is currently claimed by 2.7 million people at a cost of £12.5bn annually.
Hutton said his aims could be achieved by renaming IB employment and support allowance and splitting payments into two: a higher rate for the long-term sick or incapacitated and a lower payment for those with minor problems who can work.
Lower ESA claimants will be compelled to participate in the back-to-work schemes that have been successfully trialled under PTW. These include the use of counsellors to discuss work and training programmes and funding for new skills regimes. However, the green paper is not clear on the exact roles for such groups and Hutton's team this week confirmed they are still drafting detailed proposals.
The green paper has been given a cautious welcome from influential groups who feared Hutton could go further.
Kate Stanley, head of social policy at the Institute for Public Policy Research think-tank, said: 'These reforms must pave the way for a simplified benefit system…[with] tailored packages of support designed to meet individuals' needs.'
PFjan2006
