From the TUC

New Conservative welfare plans: an analysis

05 Oct 2009, by in Labour market, Politics, Society & Welfare

Today the Conservatives have published their plans to ‘Get Britain Working‘. They propose a new welfare to work scheme called the ‘Work Programme’, which will be funded by cutting the Future Jobs Fund and all of the New Deals and other existing welfare to work schemes and pilots. Interestingly – despite their stated aim of making sharp cuts in public spending as a means to reduce the deficit – the total cost of this completely privately delivered programme is projected to be more than Labour’s projected spend on welfare to work (although no comparisons are provided with existing skills budgets – and I would imagine this may hide a cut), hence a £600 million shortfall, which the Conservatives have pledged to fund by moving around 20% of current IB claimants onto JSA.

There are some important differences between the ‘Work Programme’ and the existing Government approach, and also some important questions about how it would work in practice, which I have outlined below:

  • The Conservatives commit to ensuring those who are hardest to help can access support straight away, and that young people will be referred after six months. The principle of ensuring that more people receive tailored support sooner is a good thing. But it is questionable whether, with a range of existing support programmes being cut (such as LinkUP, for those suffering from substance and alcohol misuse, and City Strategies, which bring together partners in local authorities with high worklessness to deliver city level responses) private providers in specific local areas would be able to deliver the full range of tailored help that is needed to adequately support all claimants.
  • Providing earlier support could also mean that more people will be mandated to participate in compulsory programmes at an earlier stage in their claims. At the moment, many programmes are voluntary (for example the New Deal for Lone Parents) or are not mandatory until 12 months have passed (such as Flexible New Deal). Particularly in the current economic climate, it would seem extremely unfair to impose mandatory participation upon all claimants when the key problem is likely to be a lack of jobs.
  • Unions will be very concerned at the implication that the entirety of welfare provision will be contracted out to the private sector, and that the Conservative proposals do not mention the role of Jobcentre Plus in service provision (update: it appears that the Conservatives are proposing to contract out welfare to work provision from six months as opposed to the current Government’ s policy of contracting out services one people have been unemployed for 12 months – this has obvious implications for the proposed role of Jobcentre Plus). The TUC continues to oppose the contracting out of welfare to work services, an approach which international evidence suggests delivers few real cost savings and leads to the ‘parking’ of those with the greatest support needs. This approach would also have significant implications for the availability of national level evaluation and outcome data.
  • The Conservatives propose that providers are paid by results, which sounds similar to the Government’s current contracting arrangements. But the document also talks of rewarding providers for job outcomes beyond 26 weeks, and of increasing contractor incentives to support those who are hardest to help. The aspiration to ensure that unemployed people can access sustainable jobs is a positive one, but some will question whether this model (particularly given the economic context) will be able to deliver it.
  • The plan recognises the problem of benefit cycling, but arguably comes to the wrong conclusion about how to end it. There is no mention of the ways in which many lower paid jobs need to change to ensure sustainable outcomes for people moving into work are possible – in fact the Conservatives highlight their commitment to delay the implementation of the Temporary Agency Workers Directive, a piece of legislation with potential to provide more job security to agency workers and to increase the chances of people being able to stay in work.
  • The proposals also specify that “anyone who has been through the system without finding work and has claimed JSA for longer than two of the previous three years will be required to join a mandatory long-term community work scheme as a condition of continuing to receive benefit support”. This is essentially a workfare scheme for long-term unemployed claimants, and goes beyond existing Government plans to pilot ‘work for your benefit’ schemes, which would only last for six months. The TUC continues to oppose workfare, highlighting that it prevents jobsearch, reduces opportunities for re-training and is not seen as credible by future employers, thereby generally having no impact on job outcomes, and in some cases making the chance of people moving into work less likely.
  • The proposals make no mention of wider measures which support unemployed people to move into work, for example there is no reference to childcare provision and how it would or would not be developed under a Conservative Government, and no mention of how budgets such as Access to Work, which provides support to employers seeking to make workplace adaptations to enable disabled people to move into jobs, would be changed. It could be presumed that this implies that programmes and budgets will be cut, making it harder for some groups to move back into jobs.
  • The funding shortfall for these proposals has recieved much media discussion today. I think it is fair to question assumptions about IB claimants. Government research suggests that incapacity benefit fraud (as in blatant misrepresentation of a condition or claiming of IB while being at work) is extremely low, with DWP estimating that in 2008/09 overpayments as a result of IB fraud were around 0.1%. Although it is acknowledged to be harder to qualify for Employment and Support Allowance (ESA – the new disability benefit that the Government introduced last year) than for IB (which may lead to people who are not fraudulently claiming IB being moved onto JSA instead of ESA as a result of the re-assessment) it seems very unlikely that as many as 20 per cent of IB claimants will be found to be work ready. In addition, in press statements today the Government have indicated that their budgets already include projected savings as a result of claimants moving to JSA from IB following new health assessments, further questioning whether Conservative funding projections are possible without penalising disabled people.

As well as the ‘Work Programme’, the Conservatives propose a number of supplementary programmes: ‘Work For Yourself’ (encouraging self-employment); ‘Work Together (encouraging local volunteering opportunities); ‘Work Clubs’ (enabling local community groups to access Government funding to deliver job clubs) and ‘Youth Action for Work’ (which is focused on skills and apprenticeships).

It is proposed that ‘Work for Yourself’ will provide claimants with mentors and access to a business loan to enable a move into self-employment as a way to come off benefits. Given the high rate of small business failures, it could be argued that this approach will lead to more claimants working their way into debt rather than providing sustainable jobs – particularly as for the first six months it is proposed that they will only continue receiving their benefits ‘subject to a means test’. On the other hand there are some good examples of voluntary organisations providing support to enable unemployed workers to become self-employed, so with the right levels of support and investment it is clear that for some people this can be a route into the labour market.

It’s hard to see how the ‘Work Clubs’ and ‘Work Together’ programmes are significantly different from existing provision (although there is a greater focus on voluntary and community sector delivery than at present), where Jobcentre Plus and organisations such as Time Bank already provide access to such services, and the proposed new budgets that the Conservative plans allocate are very small. But ‘Youth Action for Work’ is a departure, as it involves cutting the entire Future Jobs Fund, which guarantees 100,000 real jobs for young people paid at the minimum wage. Instead the Conservatives are proposing:

  • 100,000 apprenticeships and other training places
  • Up to 100,000 ‘work pairing’ places, which will involve linking teenagers with sole traders for six-months of ‘one to one mentoring’
  • An extra 50,000 FE places for each of two years

Extra training places are hard to object to, although it appears that the money will come from cutting the Train to Gain programme, which has recently seem high levels of employer take up and is supported by unions. The current Government is already committed to increasing the numbers of apprenticeships, and at present we know that the problem is encouraging employer take up, rather than a lack of ambition to expand the programme. The Conservatives propose providing employers with financial incentives to take on apprentices, but in the current climate it still seems unlikely that these relatively small payments would encourage employers to take apprentices on. It could therefore be that the apprenticeships pledge would be hard for a Conservative Government to deliver on.

There are also suggestions that apprenticeship training requirements could be handled directly by employers and that regulations surrounding apprenticeships could be reduced. This will be of concern to unions who seek to ensure that apprentices are provided with meaningful opportunities and accredited training. ‘Work Pairing’ (which will require sole traders to pay young people their benefits + £1 an hour for additional hours worked – a rate of around £2.50 an hour for a young person working 35 hours a week, significantly below the minimum wage) and other proposals to reduce reliance on ‘paper qualifications’ will also be of concern, suggesting that the quality of training provided to young people could see significant declines.

Overall, a key problem with this programme is that it is wholly supply side focused, with no discussion of the role of Government in creating and maintaining demand. David Blanchflower has already discussed the impact that Conservative economic policies could have on unemployment levels. Although the current Government has spent years focusing on supply side labour market programmes, there has been some recent recognition of the important role that demand side interventions, such as Job Guarantees, can play in giving unemployed people the best possible chance of moving back into work. Even more importantly the current Government has put in place a fiscal stimulus package, which the Conservatives opposed, that has arguably prevented unemployment from rising even more sharply than it has done. Perhaps it will therefore be Conservative economic policy, more than any changes to welfare programmes, which have the greatest impacts on the chances unemployed people face in future years.

Colleagues and I will continue to discuss these proposals over future months – in the mean time please let us know about your views.

2 Responses to New Conservative welfare plans: an analysis

  1. Government emphasises similarities with Conservative welfare policy | ToUChstone blog: A public policy blog from the TUC
    Oct 6th 2009, 11:10 am

    […] on 6 Oct 09 by Nicola Smith In an fairly depressing development the Government has responded to yesterday’s Conservative welfare plans by announcing its own commitment to introduce mandatory work for benefits for people who have been […]

  2. Conservative unemployment analysis: an update | ToUChstone blog: A public policy blog from the TUC
    Oct 16th 2009, 5:59 pm

    […] by considering rates of annual change is a standard approach – elsewhere in ‘Get Britain Working‘ more straightforward analysis is used, for example a chart considering regional unemployment […]