"In December, I commissioned David Freud to conduct a review of progress on welfare reform, to analyse the future challenges we face and to make recommendations. David Freud has published his report today. Copies are available for Members at the Vote Office and on my department's website."The report is a substantial contribution to the debate and I should like to put on record on behalf of the Government, and I hope the whole House, my thanks to David Freud for his work. Freud has concluded that we have made strong progress in welfare reform over the past 10 years: nearly 1 million fewer people are on benefits; 2.5 million more are in work; 300,000 more lone parents are in work; and the numbers on incapacity benefit are falling for the first time. Freud has concluded that by any measure, the Government's programme of new deals had been a success. "Freud's view is that welfare policy now needs to focus on those furthest away from the job market, particularly those on incapacity benefit and lone parents, and that the new focus should be on job retention as well as job placement. Progress in all these areas is essential if we are to meet our aspiration of 80 per cent employment and to eliminate child poverty by 2020, ensuring not just a strong economy but a strong society."Freud has made four principal recommendations. First, in recognising the success of Jobcentre Plus in helping people to get back to work quickly, he believes that we should maintain Jobcentre Plus at the core of the system, but focus it on helping those who are unemployed for short periods, potentially expanding that approach over time so that Jobcentre Plus provides a one-stop front end for all benefits. "Secondly, Freud recommends that once claimants have been supported by Jobcentre Plus for a period of time, back-to-work support should be delivered through outcome-based, contracted support, drawing on the innovation of specialist providers from the private and voluntary sectors. The contracting regime would set a core standard that everyone would receive, but beyond that there would be freedom between the provider and the individual to do what works for them, rolling up the existing patchwork of public, private and voluntary provision in favour of a more flexible approach focused on the specific barriers facing the individual rather than the specific benefit which they are on. "Freud suggests that payments to providers could be made over a three-year period from when an individual client moved into work, with contracts offering rewards that are proportionate to the value to society and the taxpayer of moving into work. This approach would work as a public-private partnership to deliver up-front investment in order to realise savings over the life of the contract. Payments would create incentives to develop programmes across the full spectrum of clients to avoid cherry-picking of the easiest clients to help."Thirdly, in return for offering this extra help, Freud proposes that we should expect more work-related activity from those on benefit. The report suggests introducing stronger conditionality in line with jobseeker's allowance for lone parents with a youngest child aged 12, and, as wraparound childcare become available from 2010, to consider whether further reductions would be desirable. He also recommends over time, and as further help and support become available, extending the requirement to undertake work-related activity to those already on incapacity benefits who migrate to the new employment and support allowance."Finally, citing international evidence that complexity in the benefits system can act as a disincentive to entering work, today's report recommends that we should look in detail at the potential for greater simplification of the benefits system itself, moving towards a single system or, ideally, a single benefit."These recommendations represent the opportunity for a step change in the nature of our welfare system in Britain. As I have said before, the publication of today's report marks the start of the debate, not the end. The Government will be considering these proposals and will come back to the House with a fuller response later this year".
My Lords, that concludes the Statement.
My Lords, yet again, we find ourselves in a curious position. The Government, in the shape of the Prime Minister and the Chancellor of the Exchequer, chose to launch this report outside Parliament this morning. While I am grateful to the Minister of State for repeating the Statement in this House, he is doing so only as a result of what is now called an "urgent Question" in another place. The expression "kicking and screaming" comes to mind. This is odd when so much of it was leaked over the weekend.
Now that we have it, I too should like to thank David Freud for his useful contribution to the debate on welfare reform. But is not the report a very odd animal indeed? It is subtitled,
"An independent report to the Department for Work and Pensions".
Yet the last sentence of the foreword states:
"I would like to thank the Department and—
"my team within it for all of their help in preparing this report".
Just how independent is this report? Although it is obvious that the beginning of the report is pure government/DWP spin, are the three great ideas—I am afraid that I could not find a fourth—in the rest of the report those of the author or of the department?
I like to think that I am no conspiracy theorist, but I rather wonder whether a report commissioned in December and produced at the beginning of March, effectively 10 weeks' work at the maximum, really represents strategic thinking when compared with, say, the report of the noble Lord, Lord Turner, on pensions. That took from December 2002 to April 2004, and that was only the first report. The second one was not published until the following year. So my question on this report is: why the rush here? What is the next stage? I note that there is to be a government reply later. Will that response be in the form of a Green Paper or is this report just that, and to be followed by a White Paper?
I have just mentioned the three great ideas. The first is contracting out what the report calls, "intensive individualised support". This, I suppose, is akin to a personal adviser in the Welfare Reform Bill, although I still have not established precisely whether that is so. However, the suggestion here is rather different in that it is proposed that the contracting-out will happen only after a period that is unspecified, so far as I can tell. This is indeed different from the situation in the Welfare Reform Bill. Do the Government intend to amend the Bill on Report?
Next is the somewhat obscurely worded,
"modelling outcome-based contracting for long-term worklessness".
I am on record many times as saying that I believe in the dignity and financial security of work, but I also believe that this is an imperative in itself and should not be driven by the Treasury's desire to save money, although if welfare-to-work is successful, savings will accrue. However, the prognosis is not good. According to recent figures, the New Deal for Young People has very unhappy outcomes. Nearly 50 per cent of young jobseekers who have left the programme end up back on benefits within the year, according to a Written Answer published on
That might be because of no real push. I agree with the report that the right to benefits should go with responsibilities. However, I believe that sanctions should be applied only by the state and not by private or third sector contractors. The House will know that we are having that discussion right now in the Welfare Reform Bill, where we have discovered that the Government have not made up their mind on this issue. This is of course of particular importance where lone parents are concerned. Do single parents not believe, quite rightly, that their first responsibility is to their children? The only way that I can see of sustaining those adults in employment is to make childcare and after-school activities much more widely available and, even more importantly, affordable, especially as the report recommends benefits being conditional for parents with progressively younger children. Otherwise, all that is left to the parent is part-time work, which does not suit every employer by any means, and often does not suit the lone parent either.
To my mind, the last great idea—of all benefits being combined into a single system—blows the Welfare Reform Bill right out of the water, as it does away with most premiums in a progressive manner. The only way I can see of achieving a single system is with a myriad of these premiums. Does a single system mean doing away with the distinction between income-based and National Insurance-based benefits? I am sure the Treasury would raise its eyebrows at that suggestion.
It may be that many of these questions will be answered by a careful study of the guts of the report, to which of course I am committed, but those pertaining to the Government's reactions to it are for now.
My Lords, I thank the Minister for repeating the Statement made in another place under extreme pressure from my honourable friend David Laws, without whom it would not have been made. If he had not demanded it, we would have ended up with the usual business of a series of leaks in the Sunday newspapers, a press conference and no Statement in either House of Parliament.
Tony was sitting on the sofa a few days before Christmas, scratching around for ideas for his legacy, so he asked David to come up with some ideas on the back of an envelope. Some of them were actually quite bright ideas; David Freud, like lots of other likely lads in the City, is a pretty bright kind of guy. I am afraid, though, that he leaves some pretty unhappy memories as the man who sold Eurotunnel, Euro Disney and Railtrack to an unsuspecting public, and I hope that on this occasion his ideas do not cost claimants or taxpayers so much.
The real question, as the noble Lord, Lord Skelmersdale, has said, is why on earth we are getting these proposals slap bang in the middle of the Welfare Reform Bill. The Bill has had 15 days of serious scrutiny in Committee in the Commons, and, as the Minister will know, we had the pleasure of eight and a half solid hours on Wednesday or Thursday, scrutinising, probing and discussing many of the ideas covered by this report. In particular, we discussed at length—and, I assure him, on Report we will be returning to it—the question of whether private contractors are allowed to sanction benefits. Why are we having this rabbit out of the hat in the middle of all that? Does this not just show what contempt the Prime Minister now holds Parliament in?
On the issue of getting more help for vulnerable groups, does the Minister agree with David Freud that intensive individualised support is expensive? Is he confident that there will be the resources to support the Freud strategy, including implementing the Layard proposals on mental health, which we strongly support from these Benches? Does he agree with Freud that the UK skill base remains mediocre by international standards? If so, what extra educational support will be available? Does he agree with David Freud on the scope for an expanded role for Jobcentre Plus—for example, delivering a one-stop shop for all benefits and credits?
On lone parents, we believe that the Government are right to consider bringing Britain more into line with other developed countries, but that must only be if there is special protection for parents with disabled children. It would be quite wrong to pressurise single mothers into work when proper childcare is not freely available. That would just store up serious social problems for the future.
What exactly does
"as wraparound childcare becomes available from 2010"
mean? Noble Lords may not have noticed that the report then suggests that the age of 12, the age above which there would be pressure on single mothers to go to work, could be reduced further. We would need a great deal of convincing on that.
I see that the Freud report recommends that we should look in detail at the potential for greater simplification of the benefits system. We certainly support that. Gordon Brown, the king of means testing, has woven such a tangled web of tax credits and means tests that many poor people now face higher effective top tax rates than the super-rich. What greater disincentive to work could there be than that?
My Lords, I thank the noble Lords, Lord Skelmersdale and Lord Oakeshott, for their responses to the Statement. I shall deal with each of the points they have raised.
With regard to process, it is not right to say that the Government were under "extreme pressure" to bring forward a Statement in another place. We accept that the process has not perhaps been quite as it might, but no courtesy was intended in another place, and certainly not in your Lordships' House.
I'm so sorry—no discourtesy was intended. I hope noble Lords will recognise that through the passage of the Welfare Reform Bill we have done our best to share information on an open basis and engage with noble Lords across the piece. That is our approach generally to welfare reform.
The noble Lord, Lord Skelmersdale, asked: why the rush? There is nothing sinister about all this. The report was intended to be a contribution to the Prime Minister's policy review, Pathways to the Future, and the timescale in which it has been delivered is entirely consistent with that.
On the issue of contracting out and whether we need to amend the Welfare Reform Bill because of these proposals, there is, as the Statement indicates, no particular issue arising from the report that we are looking to amend in the Bill. The report has a lot in it, and the Government need to consider it in some detail. We will come forward with a response during the course of this year.
The noble Lord, Lord Skelmersdale, and, I think, the noble Lord, Lord Oakeshott, talked about private sector sanction in our debates on the Welfare Reform Bill. As we have set out in those debates, any private contractor allowed to take sanctioning decisions will be subject to all the same checks and balances as Jobcentre Plus, including independent appeal rights, but we have not made any decisions about contracting out decision-making for sanction, as noble Lords will be aware.
The New Deal was challenged as not having delivered. As the report itself makes clear, the New Deal has been a success story: over 1 million into work through the New Deal for the unemployed; 480,000 lone parents have been assisted, a programme that more than pays for itself; and Pathways to Work has delivered 9 percentage points more people into jobs. But we need to build on the success of that programme, which is what the Freud report is largely about.
The noble Lord, Lord Oakeshott, asked what wraparound childcare was. As noble Lords will be aware, the proposal is to have childcare from eight in the morning until six in the evening right across the country. It is important, particularly if the measures for lone parents are to be taken forward, that we break down the barriers that prevent lone parents who want to work and have a right to do so from getting into work. Making sure that childcare is available and affordable is key, and we need to ensure that we deliver on that.
The issue of simplification of the benefit system was raised by both noble Lords. The noble Lord, Lord Skelmersdale, raised some particularly pointed issues about some of the ramifications if we were to have a single benefit system. Whatever the challenges, we should recognise that it is appropriate to simplify where we can along the way. There is a Benefit Simplification Unit, which we recently debated when discussing the uprating Statement. The employment and support allowance itself is a simplification measure which is dealt with in the Welfare Reform Bill, as is the local housing allowance. We always need to keep these matters under review. However, with benefit systems, as with tax systems, there is often a trade-off between that which is simpler and that which is fairer. That should always be borne in mind in this debate.
Benefit simplification does not render the Welfare Reform Bill redundant, as I have just outlined. The employment and support allowance is one simplification measure—a step along the way to that—but no one is suggesting that there is a magic wand to combine all the benefit system into one simplified and single benefit in the very short term, if it could ever be achieved.
The noble Lord, Lord Oakeshott, talked about resources. Freud's proposal is to have these contractual arrangements as a public-private partnership which would encourage investment at the front to generate the savings along the way. That would clearly be one way to address resources. However, it is important that resources are there to make a reality of that. The noble Lord is quite right that if we are to give focused individualised support to individuals, the best way to get people back into work, it will be expensive. It has ramifications. However, the benefits of doing so are right not only for the individual and their family, as it is the best way out of poverty; it has benefits for the state as well. It is better to have people who are in work and paying tax rather than people who are out of work and receiving benefits. Those are the issues that need to be looked at.
I hope that I have dealt with each of the points raised by the noble Lords, Lord Oakeshott and Lord Skelmersdale. If I have failed to do so, I am sure that they will seek the opportunity to raise further points.
My Lords, I have a few comments and queries about the aspect of the report dealing with lone parents. The push of the report, which is to encourage lone parents back into the labour market, is absolutely right. I was struck by the fact that the best predictor of outcomes for a girl child of a lone parent—she does not become pregnant, she stays on at school, she gets decent results and goes into a job—is that her mother is in work. The best predictor for a boy child—he does not truant, he does not get into trouble with the law, he stays on at school and gets results—is if he is in contact with his natural father. Whatever the technical or legal relationship of the parent, it is absolutely right to ensure that fathers do not walk away from their responsibilities, especially to boy children. Those moves are to be welcomed.
We also know that the most successful new deals are with those who volunteer—the lone parents who are not required to come, who are the youngest, have the youngest children and are closest to the labour market. Once lone parents have been out of the labour market for 10 years or more, it is very difficult to get them back in. The question is: why? My criticism of the Freud report is that I am not sure that it addresses properly the stumbling blocks to lone parents re-entering the labour market after 10 or more years out of it.
As we all agree, skills are the first problem. Perhaps half of the lone parents out of the labour market for that length of time effectively have the literacy level of a 10 or 11 year-old or are even functionally illiterate. Equally significant is the health problem. Alan Marsh and Richard Dorsett of the Policy Studies Institute have said that before we can get welfare to work, we have to have welfare to health because, on average, lone parents are twice as likely to smoke as non-lone parents and are associated with respiratory illness and asthma, and 75 per cent of their children in turn have respiratory problems. Lone parents may have poor mental health or depression and may be overweight.
Also associated with the problem is the isolation and the lack of a knowledge network, which has also not been addressed properly. Finally and above all, there must be childcare that is trustworthy. Wraparound childcare sounds fine, but unless a lone parent can find childcare that fits with the job that she can get, she will not re-enter the labour market. That childcare is most likely to be offered by her own parent—a grandparent—not necessarily by child minders who are reluctant to work the unsocial hours that are the only hours available for many lone parents in part-time jobs.
I do not think that the analogy with Europe is helpful because lone parents do relatively well in the labour market in Europe. They live in extended homes where other family members pick up the childcare and share that responsibility. In Britain, living in homes on their own, there is no one to whom they can turn for that help and support, which is why, unlike in Europe, lone parents have lower participation rates in the labour market than married women. Therefore, I gently suggest to my noble friend that it is still a very male report—heavy on condition and rather weak on the understanding of what holds lone parents back from the labour market.
We need more of three things. We all agree that we need the health and skill strategy. Secondly, we need to develop the concept of mini-jobs. We know that the best predictor of a lone parent going into work is that she held a mini-job the year before. What do we do? We make sure that if she does, we take 100 per cent of her money away. We must rethink our attitudes to earnings disregarding mini-jobs. Finally, we need to rethink our attitude to childcare and go for the childcare that the lone parent trusts, which means that she is confident to go into work knowing whether or not the child is poorly, comfortable or had a bad day at school. A granny is there to cope if a granny so wishes to do it. Grandparents must become entitled to the childcare tax credit. If we address those three things, lots of the problems of conditionality will disappear. If we do not, the problems of conditionality will remain and too often we will be kicking lone parents, who do a very difficult job in a very difficult climate, back into a labour market without the support that they need.
My Lords, I agree with pretty much everything my noble friend said. If this process is going to help lone parents back into work, it has to address each of the barriers with which they are presented. Skills is clearly one and my noble friend Lord Leitch came forward with proposals to deal with that problem. Poor health, isolation and problems with childcare are others. These things can be seen as a collection of disadvantages for people who suffer them. It is important that what is provided is good quality and can be relied on.
Childcare provided by grandparents is something that we have touched on from time to time. The difficulty with my noble friend's specific proposal is that you get into the arena of commercialising family arrangements. Once you go down that path, you generate some difficult issues.
My Lords, of course I agree, but a commercial arrangement between a person and their parent to care for a grandchild is different. If you want good quality childcare, that must operate across the piece whether that childcare is provided by an external provider, such as a school, or by a grandparent. Processes are needed to ensure that it is quality childcare. That takes you into a difficult arena, as I am sure my noble friend would recognise. However, I stress that we need to recognise the series of barriers that potentially prevent lone parents and others from entering the job market. It is their right to work and we need to remove those barriers so that they can accomplish what they want.
In terms of comparisons with the rest of the world, our current conditionality for lone parents is significantly out of line with what happens elsewhere. What is proposed by Freud would move us closer to that norm.
My Lords, having listened to the Statement from my noble friend, I am bound to wonder whether we are yet again wielding a sledgehammer to crack the proverbial nut. Everyone in your Lordships' House fully supports all practical and constructive measures to get not just lone parents but everyone who is eligible, old enough and fit enough, to work and contribute to our economy. As I understand the statistics, the aim is to secure 80 per cent employment in a number of target groups who are currently on welfare. My information is that 70 per cent of lone parents with children over 11 are already in the labour market. I understand that one-quarter of the remainder with children over 11 who are on income support are actually caring for a disabled child or relatives with a disability. The remaining 15 per cent are precluded from work because they are themselves disabled, although they have children over the age of 11.
After we had listened to the report trailed over the weekend and published today, there was an expectation in this House that we would have had some real constructive proposals so that the issues could be addressed. Speaking for myself, I am better informed—but within the overall context of what we need to do for lone parents who are on benefits to get them back into the labour market, I am none the wiser. The Statement hardly addresses the social and employment barriers that prohibit people who genuinely want to work from doing so.
My Lords, I am sorry to interrupt the noble Lord, but I wonder whether he is aware of the guidance given in the Companion about discussion on a Statement. It says:
"Ministerial statements are made for the information of the House and although brief comments and questions from all quarters of the House are allowed, statements should not be made the occasion for an immediate debate".
Could I kindly ask the noble Lord to take note of that?
My Lords, I thank the noble Countess for drawing the matter to my attention and indicate that note has been taken.
To many, it seems that the report and the Statement are weighted towards penalties rather than incentives. To help lone parents into work, it is absolutely important that the facilities—
My Lords, I am sorry to interrupt the noble Lord, but we have had two noble Lords making statements when we are allowed only 20 minutes. Other people are waiting to ask questions of the Minister—not to make statements. Could the noble Lord ask his question so that other noble Lords may join in?
My Lords, I understand my noble friend's concerns and his desire to get to the nub of these issues. The Statement was simply a repeat of the Statement made in another place, which outlined what was in the Freud report, and was not intended to go further than that today. I repeat the final paragraph of the Statement, which says:
"As I have said before, the publication of today's report marks the start of the debate not the end. The Government will be considering these proposals carefully, and will come back to this House with a fuller response later this year".
My noble friend referred to a sledgehammer to crack a nut. In spite of all that has gone on in welfare reform and the progress that has been made, we still have well over 2 million people stuck on incapacity benefits for more than a year, 500,000 lone parents with school-age children out of work and on benefits, and one-third of JSA claimants who have spent more time on benefits than in work. So there are still some real issues to address, and we believe that the Freud report is a contribution to addressing them. But we need to come back, and will come back, with our detailed comments and thoughts on these proposals.
My Lords, I have but one short question. Employment is down to employers and the provision of appropriate part-time employment, to which my noble friend Lady Hollis referred, is dependent on employers being willing to offer it. Are steps being taken to recruit employers to this objective?
My Lords, my noble friend makes a very important point—that to get people into work, we need to have jobs and to have employers who want to encourage people into those jobs. We are benefiting from the economic success of this Government. We are now in the 58th or 59th period of successive growth, which is why we have so many more people in work. But we need to ensure that jobs are available for the people whom we seek to help into work, which is why the proposals from Freud are quite important.
As we have said in debating the Welfare Reform Bill, the Government are engaged in a range of initiatives to ensure that employers—or to encourage them to—support what we are trying to do. It is the job of personal advisers to get people in front of employers for interviews. A key thing about the Freud proposals is that we do not just stop at getting people into work. People will potentially mentor individuals over a three-year period so that they are helped to stay in work and to progress through work. That is an innovative and important component of this.
My Lords, can the Minister confirm that children need their parents as much as parents need to go out to work, and that there should be an allowance for quality time for parents with their children? If children are to be looked after by somebody else from eight in the morning until six in the evening, parents working those sorts of hours will be too tired to look after their children properly. Consideration must be given to having part-time work, too. A parent is just as important as having someone in a job.
In addition, who is going to employ those people who have fluctuating symptoms? In talking to people, I have not yet found an employer who is prepared to take on somebody who might come in on Monday and Tuesday on one week and then say, "I'm sorry, I can't work for you for the next few weeks". The ME community in particular—and I know, too, of the interest taken by the noble Baroness, Lady Meacher, in mental health patients—is getting very frightened about what is being said. The Minister's speeches were criticised on the internet over the weekend, because people are worried about what is going to happen to them. Could the Minister give some confirmation that those people are not going to be pressurised?
My Lords, on the first point, the conditionality that might be developed under these proposals, like conditionality with the JSA, would or could envisage that there would be part-time work. There is no suggestion that everyone will be forced into 12 hours of nightshift work, or anything of that nature. It needs to be sensitive and sensible—otherwise it is not going to work.
Issues about how this affects people with mental health problems and fluctuating symptoms have run right through the debate that we have had on welfare reform. It is a huge and important debate, and we need to ensure that the support is there to help people towards work and eventually into it. But it will not be easy. There is no silver bullet that will produce that result; it needs investment and people working alongside individuals and employers—and that is part of what comes out of this review.
My Lords, I am sure that the Minister will agree that it is no good trying to solve the problems of one generation by simply passing the problems to the next. As my noble friend Lord Skelmersdale said, the main responsibility of lone parents is to their children. The age group of 11 to 16 is a vulnerable one, when too many good children are drawn like magnets to gangs and bad company, and the last thing that we want is more children hanging around on street corners. Can the Minister assure the House that as well as appropriate childcare—and I absolutely agree with the noble Baroness, Lady Hollis—there will also be appropriate activities for that 11-to- 16 age group after school, such as sport, that will keep them engaged and involved?
My Lords, as I understand it, the eight-till-six wrap-around childcare will include after-school clubs and the opportunity to participate in sports and other activities. I cannot from the Dispatch Box list all the things and opportunities that will be available more generally. However, the noble Baroness is right: unless there are opportunities for people within that age group and others to be engaged, this measure will not work as it should.
My Lords, my noble friend the Minister mentioned that today is the start of the debate, but does he accept that Mr Freud's recommendations that there should be more extensive use of private enterprise and voluntary sector welfare providers bear a close resemblance to the Wisconsin model, with which the Government were familiar nearly 10 years ago, and which then, as now, has significant merits in comparison to our traditional state bureaucratic model? Will he, however, take this opportunity to confirm that the Government have no intention whatever of emulating the excessively harsh, indeed cruel, withdrawal of benefits under the American system?
Do the Government accept that the principal lesson of Wisconsin is that it is essential that all the components of support are in place for those people who find it very hard to get and hold down a job? Skills training, retraining and the childcare that has been mentioned should be available, as should assistance with substance abuse and other health problems, and with disability and housing problems. It is particularly important that assistance is given with transport problems. Welfare providers will need to have the resources to provide a coherent pattern of support. If one of those elements of support is missing, the chances that the person trying to hold down a job will succeed in doing so for more than a short time are poor. They need to be able to access this range of support at least through a single gateway. What particular help have the Government in mind to give to lone parents who have been out of the labour market for a very long time and for whom the transition to work will effectively be just as difficult whether their youngest child is 12 or 16? Finally, is it envisaged that there will be discretion so that welfare providers, looking at all the circumstances of a particular family, could say—
My Lords, I am nearly finished. Given all the circumstances of a particular family, would welfare providers have discretion to say, "Yes, we must allow these people a little longer"? While the Government's ambition that a very high proportion of people should be in work is admirable, we do not want to be a world leader in fractured families and neglected teenagers.
My Lords, I am afraid that time is up so I shall have to respond to my noble friend's questions in more detail in writing. However, I emphasise that we are at the start of this debate. We need to examine the report's proposals and report back as we committed to do. My noble friend's general point about making sure that there is a holistic approach to deal with people's barriers to work is absolutely right. This is about targeted individual support over an extensive period, which is so important.