18 April 2008
A former social security secretary has endorsed the ideas behind the government's welfare reform programme and called for services to be contracted out to independent providers.
Peter Lilley, who was social security secretary from 1992 until the Conservatives lost power in 1997, has backed government welfare adviser David Freud's central idea to overhaul the welfare system, which he maintains will shift the numbers claiming benefits and save almost £1bn a year.
In a report for Policy Exchange, the Right-of-centre think-tank, Lilley examined contracted-out welfare services in five international settings: Australia, Germany, the Netherlands, Denmark and Wisconsin in the US. In all cases, contracting out had helped to reduce unemployment and cut the benefits bill, he found.
Lilley said: 'There can be little doubt in the light of foreign experience that it is right to seek to harness the profit motive to help people from welfare to work. But it will meet with resistance from those with vested interests in the status quo. That includes not only the public sector trade unions but some of the welfare lobbies who are more interested in seeking compensation for their client group than helping people leave it.'
The April 14 report did highlight some problems, with contractors in some cases focusing on the jobseekers who were easiest to deal with while delaying or ignoring the more challenging cases.
Oliver Marc Hartwich, Policy Exchange's chief economist, who worked with Lilley on the analysis, added that the results in other countries were encouraging. 'Contracting out offers a good solution if we are going to ever see a substantial fall in the numbers unemployed or on Incapacity Benefit,' he said.
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