The response to secretary of state for work and pensions James Purnell’s white paper on welfare reform, presented to Parliament on 10 December last year, was swift and vicious. Conservative leader David Cameron described the proposal requiring lone parents with children of school age to work as “shameful” and “sick”. The TUC choked on what it saw as Draconian “workfare” – “remarkable for the dismay it provoked among unions; no welfare reform proposal in the past 11 years has aroused such hostility”, spluttered its 15-page retort. But the white paper and the subsequent bill, which is trundling its way through Parliament, are only the latest staging posts in a series of measures aimed at reforming and simplifying the welfare system, particularly for people who are long-term unemployed and claiming incapacity benefit. Flexible New Deal, a revamp of the government’s New Deal system for long-term unemployed people, is due to kick in this October, while the Employment Support Allowance is already in place.
Amid the din of political criticism, the responses to these changes that are yet to be heard are those of the employers – without whom any reform could not work in practice – and of the training and support professionals who work with long-term unemployed people. On the front line are the numerous training providers (from the private, public and third sectors) who are contracted to Jobcentre Plus (JCP) to help long-term unemployed people into work. Many are charitable organisations, and many are worried about the demands the government’s reforms will make of them.
Hamish Robertson is head of special projects at Careers Development Group (CDG). As a “prime contractor”, the group is responsible for New Deal delivery across a vast urban catchment area in the UK, helping long-term unemployed and disadvantaged people to learn skills ranging from CV-writing and interview techniques to more specific qualifications, such as the Construction Skills Certificate Scheme and English for Speakers of Other Languages. In January, CDG was going through the initial stages of the new competitive tender process for Flexible New Deal (FND). The group’s current contract gives it 70 per cent of its government funding based on the quality of its programme and the number of “customers” it takes on, while 30 per cent is “outcome-based”, meaning how many people get a job at the end of it. However, Robertson says: “On Flexible New Deal it is due to become 80 per cent outcome-based funding. It’s a massive change. Customers will now have to be in work for 13 weeks before those payments are made. So if we got someone into work for 12 weeks, and then they left, we would get virtually nothing. Then there is another milestone at 26 weeks that triggers payment.” All this must come without receiving additional funding for post-employment support.
In late February, the DWP seemed to backtrack slightly, writing to the FND bidders to suggest it may reduce the outcome weighting to 60 per cent. At the time PM went to press, no decision had been reached.
In some training centres, Robertson says, such a funding structure would result in resources being concentrated on those most likely to get work. “A cynical view involves a term that has been bandied around the industry: ‘parking and creaming’,” he explains. “In other words, you cream off all those customers who are closest to the labour market, and then you park the other ones as they are much more labour intensive.” While Roberston emphasises that CDG’s charity ethos is such that they wouldn’t consider doing this, he says that, because of the competitive tender process, they could well find themselves bidding against someone who would.
In light of the DWP’s February revisions, a Work and Pensions Committee report last week voiced similar concerns, stating: “We are not convinced that the current design of FND will discourage the creaming and parking of customers.”
It all seems a far cry from James Purnell’s pledge in the white paper to “personalise the support they [claimants] get to the barriers they face”. In fact, there’s a serious concern that the opposite may happen. PM spoke to several training providers across the UK. One, who wished to remain anonymous, said that “providers are forced to cherry-pick candidates to ensure they get results and payments, which defeats the whole purpose… a lot of effective organisations have been unable to compete”. Another, who works primarily with youth offenders, said she had been told by Jobcentre Plus colleagues that focusing on clients who were easier to help could indeed boost her funding.
An extra “incentive” also hangs above the provider’s head: if a customer remains with them for 12 months, then that year must include a four-week block of full-time work-related activity (which can be training, but has to be nine-to-five, for four weeks), that the provider must arrange - and pay for if it takes place on their premises.
If this sounds like a lot of “stick” for the training providers (not to mention the customers), then it’s all “carrot” for the employers. Benefits they can receive include wage assistance, or a “golden hello” payment, and they can even recruit people through an individualised assessment process and tailored pre-employment training.
Key to getting employers on board has been the launch of Local Employment Partnerships (LEP). Introduced in October 2007, these are agreements entered into between an employer and Jobcentre Plus. A dedicated account manager from JCP works with the employer to understand its recruitment and skills needs, and then looks to source and train JCP customers for its vacancies.
Tony Hyland, senior account manager at JCP, elaborates: “It’s a cradle-to-grave type service, from pre-employment training and support right through to post-employment support, and customised training. A good local employment partnership would comprise this sort of seamless package, so the employer knows exactly where to go for all of this help.”
And it’s a juicy carrot, agrees Toni Morris-Ditty, regional director for London at Travelodge, one of the early signatories to the LEP. “We get candidates [who are] screened against our specified criteria, who also undertake a three-week training course that we vetted and signed off,” she says. “All we have to do is guarantee an interview.”
The success of this has been quite staggering: “We have recruited 440 people from the scheme to work at 38 newly opened hotels, which is 77 per cent of our intake. The other 23 per cent was from internal progression. Overall, the LEP pretty much manned all our new openings in 2008.”
Several supermarket chains have also been advocates. Felix Gummer, Tesco’s corporate affairs manager for Wales and the west of England, says that the LEP is becoming increasingly important to Tesco’s employment strategy for new stores: “It isn’t only about taking people off long-term benefits; it’s also about recruiting as many local people as possible. We want our stores to be community stores.”
The test will be whether those who have been unemployed for so long can stay in work. All the LEP employers who spoke to PM had a positive experience. “The individuals who’ve joined us have been enormously enthusiastic about the opportunity they’ve been given,” says Peter Absalom, staff resourcing manager at King’s College Hospital NHS Foundation Trust. “They view employment in a different way to those who haven’t been unemployed.” This is true of training too, says Travelodge’s Morris-Ditty: “These people are coming with few skills, which means that we can train them. We’re not having to take away bad habits.” In just over a year, this has seen some people move from the LEP onto Travelodge’s management-development programme.
The LEP provides a clue about the wider labour-market changes that the welfare reforms hope to create. In January John Philpott, the CIPD’s chief economist, gave evidence to the same government work and pensions select committee hearing as James Purnell. Philpott says the government’s priority is to increase the number of people in sustainable employment, rather than simply get people into work: “The idea is not to force people into jobs, but rather to require them to do things to help them get into work.”
From making a claim at a job centre, claimants must follow personalised back-to-work action plans and attend skills training if appropriate; if the 12-month mark is passed, the Flexible New Deal kicks in, and all the support and training that comes with it.
Asked by the committee whether increased sanctions were unfair at a time when competition for jobs was so high, Purnell had answered: “If what we were doing was saying ‘we will take your benefits away if you do not get a job’, then yes. But that is not what we are doing. We are saying we will provide extra support for people and we expect people to take it up.”
Philpott interprets the reforms as measures to improve the quality and effectiveness of the labour supply, “because when the upturn comes you’ll get all these people moving back into work, without the big build-up of long-term unemployed”.
Despite the most recent labour market survey showing there are jobs available – the JCP receives 10,000 new jobs a day – most will go to skilled workers who have been out of work for a short period. For the government’s solution to long-term unemployment to work, it will require employers to get on board, not only with LEPs, but also with the ideological argument for investing in the UK’s untapped talent. The thrust of this welfare reform feels more like an aggressive shove to some of the training providers: if willing employers can’t be found, the funding arrangements could see them going bust, which is not a viable option.
For jobseekers, too, 2009 must be a worrying year. The DWP insists the incentives to work, through the minimum wage and working tax credits, are now, for most people, greater than those to stay on benefits. But for the hardest to help, those long-term unemployed and previous incapacity claimants, whom these reforms purport to focus on, it can still seem preferable to stay on benefits. Business in the Community’s recent report, Making work work, argued that not only do many people remain financially better off on benefits, but also incentives need to be weighed against the fear of losing regular jobseekers’ allowance and housing benefits.
For skilled, newly unemployed jobseekers, the outlook is also unclear. According to a DWP spokesperson: “Up to the first 13 weeks of their claim, some customers can agree with their adviser to be available only for vacancies in their normal line of work. After this point, it is generally the case that customers have to be available for any type of employment.” Forcing people away from where their skills lie during a recession arguably helps little other than the employment figures.
But, for employers, the reforms, with the support of such initiatives as LEPs, may be sounding more attractive. An “employable local labour force” has not been an overly used phrase in recent years and when the upturn comes it will bring with it the same old problems of skills shortages and the need to rely on migrant workers to plug the gaps – unless, as these reforms aim to do, British unemployed people are made work-ready in the meantime.
The welfare reforms
How it was
The benefits system comprised a variety of benefits including Income Support (IS), Jobseekers Allowance (JSA), and Incapacity Benefit (IB).
IB paid to people who are too sick or disabled to work; IS given to those on low income, consisting of personal allowances, premiums and payments to cover certain housing costs.
JSA split in two: “contribution-based” JSA, if the claimant had been credited with class 1 National Insurance (NI) contributions in the relevant tax years. The other, based on people’s income and savings, was
“income-based” JSA.
People were able to qualify for contributory JSA or ESA after having worked for 12 weeks on the minimum wage, or four weeks at a higher pay rate.
New Deal programmes segmented into specific groups: young people, 25-plus, 50-plus, and disabled people. Some individuals with additional barriers to work were fast-tracked to this extra support. Voluntary New Deal programmes for lone parents and partners were available from day one of claim.
Sanctions for jobseekers who failed to attend appointments or work programmes could include claim terminations – however, jobseekers were able to return shortly after to start a new JSA claim.
Pre-employment skills and support provision carried out by private-, public- and third-sector contractors. Funding based on process rather than results.
Initial interview at Jobcentre Plus gauged the skills and employment needs of the jobseeker.
Lone parents with youngest child up to 16 able to claim IS. All lone parents required to attend work-focused interviews and complete an action plan, with no further requirements, but they could volunteer for support under the New Deal for Lone Parents.
How it will be
A streamlined system, which will comprise simply JSA and Employment and Support Allowance (ESA – introduced Oct 2008).
People who used to apply for IS and/or IB apply for either JSA or ESA.
ESA is split into the “work-related activity group” for those people who have limited capability for work (who will be helped with work-related activity, such as training, and a personalised back-to-work action plan) and the “support group” for those people who aren’t able to undertake work-related activities (they can access support on a voluntary basis).
JSA will be split three ways: the “work-ready group” who must be available for, and actively seek, work; a “progression to work group” (including parents with younger children) who must undertake work-related activities; and a “no conditionality group” (including parents with children under one year old and carers) who can access benefit without having to meet the above conditions.
From 2010, people will qualify for contributory JSA or ESA benefits after having worked for a minimum of 26 weeks in one of the previous two tax years. Protections and exemptions for self-employed and vulnerable groups will be maintained.
Flexible New Deal (FND) will be introduced in October 2009. FND will establish a new, unified approach for all jobseekers, whatever their age, skills or barriers to work. The level of support that customers receive and the additional requirements placed upon them to find work will increase the longer they remain unemployed and seeking work.
New legislation for a jobseeker ignoring a mandatory appointment will see them lose no less than one full week of JSA, and two weeks’ JSA for a second offence. Benefit fraud will incur a “one-strike”, four-week suspension of benefits after the first benefit fraud offence.
Increased competition encouraged from contracts, with funding based on results rather than processes.
From 2010, people with obvious skills needs can immediately be referred to the Adult Advancement and Careers Service, which will conduct an in-depth skills health check.
From October 2010, lone parents with a youngest child aged seven or over will no longer receive IS, and instead must apply for either JSA or ESA. People with children aged between one and seven will be in the “progression to work group” and will not be forced to apply for specific jobs or attend job interviews.
The rise (and fall?) of the ‘benefits culture’
While unemployment figures are going up in the current recession, many people can and do find new work relatively quickly – the Department for Work and Pensions is keen to point out that 92 per cent of claimants find work within a year. But the hardest people to help – the post-12-month, long-term unemployed, and the huge number previously on incapacity benefit – must be assisted if the situation is to change.
The concept of a benefits culture, an imbalance of the give and take between individual and state, is not new. William Beveridge’s original 1942 report, which gave rise to the welfare state as we know it, outlined the founding principle that: “the state, in organising security, should not stifle incentive, opportunity, responsibility; in establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family”.
Skip forward to the early-mid 1980s, and the unemployment figures in the UK reached the highest recorded since the welfare state was formed. In February-April 1982 the total spilled over the three million mark – more than 11 per cent of the economically active population – and peaked at 3.278 million in March-May 1984. On top of that, in 1983 the number of people claiming incapacity benefit was 740,000.
Another skip through time takes us to February 2001, when the claimant count fell below one million for the first time since the early 1970s (and continued to drop until the credit crunch began to take hold). A victory for New Labour’s New Deal strategy was predictably claimed. However, while unemployment fell, so incapacity benefit claimants rose, to reach 2.6 million by 2008 – more than three times the 1983 figure. The number of economically inactive people has actually increased since those oft-decried early 1980s.
James Purnell’s white paper – Raising expectations and increasing support: reforming for the future – is a statement of purpose as well as containing practical policies to “deepen and widen” the obligation to work. The benefits culture, it argues, will be replaced by one where “no one should be left behind”: or, to put it another way, where there’ll be nowhere left to hide.