Job Seeker's Allowance

– in the House of Commons at 3:31 pm on 24th October 1994.

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Photo of Peter Lilley Peter Lilley Secretary of State for Social Security 3:31 pm, 24th October 1994

With permission, Madam Speaker, I should like to make a statement about the White Paper on the job seeker's allowance which my right hon. Friend the Secretary of State for Employment and I published today. Our proposals have three main aims: to help people back into jobs; to improve incentives to work; and to streamline the system to give job seekers a better service.

The White Paper is a major step forward in creating a labour market in Britain which generates jobs. The Government's strategy is bearing fruit. Unemployment in Britain used to be higher than in Europe; now it is well below the European average. In Europe, unemployment has risen during the past year. In Britain, it has fallen. It has gone down by 400,000 since the recovery began. Every day 1,000 people leave unemployment. We are determined to reinforce that success.

The benefit system has a vital role to play in helping unemployed people into jobs. It should help the job seeker and motivate the jobshy. But the present system does not always do so. It contains disincentives to work. It is complex, costly and confusing for claimants. Above all, it was designed to support people out of work. But unemployed people want help back into work. That is what the job seeker's allowance will provide.

A central feature of the new system will be the job seeker's agreement. The Government already provide a wide range of programmes to keep people in touch with the world of work, to help them search effectively for jobs and to improve their skills.

Some 1.5 million opportunities on employment and training programmes are available for unemployed people this year. Now we will ensure that every job seeker can take full advantage of the help available. The Employment Service will spell out the help that the Government can provide. Job seekers will then be asked to consider the steps that they need to take to get a job. They will agree with the Employment Service a solid programme of action directed towards getting work, and they will commit themselves to follow it. The agreement will be the taxpayer's bargain with the job seeker—"We will support you in your efforts to get back to work. But you must also help yourself."

Equally important will be measures to improve incentives. The vast majority of unemployed people want to work. Until full-time work is available, part-time work can be very valuable. It is valuable in allowing people to keep in touch with the world of work and to maintain skills and work habits. It also acts as a stepping stone to a full-time job. I propose, therefore, to reinforce incentives to take part-time work.

At present, people whose partners are unemployed can be better off giving up work, too, because if they work 16 hours or more, the household will receive no benefit at all. I propose to change that. From April 1996, partners of people on job seeker's allowance or income support will be able to work up to 24 hours a week without losing benefit. We estimate that 20,000 households will gain as a direct result of that change.

At the moment, people working more than eight hours a week lose their national insurance credit, even though they may not be earning enough to pay for a contribution; yet even small jobs can help people stay in touch with the labour market. I shall change the rules, therefore, to allow everyone on job seeker's allowance to have a national insurance credit for work that they do.

In addition to those measures, we shall tackle a problem that has always defeated policy makers. At present, unemployed people who take part-time jobs can lose benefit almost pound for pound, yet if they could keep their part-time earnings on top of their benefit, they would have little incentive to go on to full-time work.

I propose to square that circle by introducing a back-to-work bonus. Job seekers and their partners will receive credits for part-time earnings which they can cash in when they move off benefit. For every £1 they earn above the earnings disregard, we shall set aside 50p, which they will receive as a lump sum bonus when they move off benefit into work. They will be able to build up a lump sum bonus of up to £1,000. We estimate that some 150,000 unemployed people a year will benefit from that. It will restore incentives to work part time, reward effort and honesty and be a stepping stone to full-time jobs.

The new allowance will provide financial help for unemployed people and their dependants according to their needs, and this will be paid as long as they need it. Those people who have paid national insurance contributions will receive a personal rate, irrespective of their capital or their partner's earnings for up to six months.

The present benefit system for unemployed people has grown up haphazardly over 80 years. We currently have two benefits for the unemployed—unemployment benefit and income support—and they overlap. Some people are entitled to both. Many switch between the two and the benefit levels leapfrog because they are uprated by different indices. Last year, single adults on unemployment benefit received 65p more than on income support; this year, they receive 25p less. The two benefits cover different periods. Unemployment benefit excludes Sunday; income support includes Sunday. It is time for reform. From April 1996, there will be one claim form, one set of rates and one set of rules.

The majority of unemployed people will receive the income-related element of the job seeker's allowance. Income support is the more modern benefit and its rules are aligned with those for other income-related benefits. Job seeker's allowance rules, therefore, will be broadly the same. However, they will be updated and clarified in some respects.

For example, the rule requiring job seekers to be available for work will be changed. It will specify that they must be available for at least 40 hours a week. They may, of course, take jobs offering fewer hours and they will be able to restrict their availability if they are disabled or ill or have caring responsibilities.

In the first 13 weeks of unemployment, job seekers may limit their search to their usual occupation. From then on, job seekers are required to broaden their horizons. To give people confidence to accept jobs in unfamiliar occupations, we introduced employment on trial. That allows people who have been unemployed for six months to try out an unfamiliar job without fear of losing benefit if they decide to leave after six weeks.

We intend to ease the rules further. People will be able to take a job on trial after just three months' unemployment and to leave it after four weeks. That should help more than 200,000 more people.

The job seeker's allowance will introduce straightforward rules for the treatment of earnings. Most single people will be able to earn up to £5 a week without losing benefit. Couples will be able to earn £10 even if only one is working. That will provide extra help for 70,000 people, and the back-to-work bonus will provide an additional incentive to earn more.

Many unemployed people receive substantial occupational pensions from their previous employer. It is right that larger occupational and personal pensions should reduce the amount of contributory benefit for people of any age. The present limit, however, is too severe, so I shall remove the arbitrary age threshold and raise the amount of pension that can be paid without affecting benefit from £35 to £50 a week.

The vast majority of unemployed people do genuinely look for work, but some do not. Those who fail to meet their obligations forfeit their right to benefit. That has always been the case in principle and the new rules will make it crystal clear. Those who pay taxes and national insurance should not have to subsidise people who make no attempt to get a job, but, of course, reduced payments will be available for those most vulnerable to hardship.

The benefit system must be capable of adapting to changing circumstances, but it is sensible to test the effect of changes before introducing them nationally. We can already pilot new employment services and training schemes. For example, the job interview guarantee scheme was tested on a pilot basis and it is now a successful national programme. The job seeker's allowance will provide new powers to use local pilots of benefit regulations, too.

We have no intention of reducing benefit rates, so the Bill will specifically rule out pilots involving reduced rates. Above all, we want to improve incentives to work. The power to test improvements on a pilot local basis will be invaluable.

The counterpart of making the system harder for the workshy is making it easier for the vast majority of genuine job seekers. We are already committed to giving a one-stop service for all benefits within the Benefits Agency. Now we can extend that principle to cover the services provided by two different Departments. Together, the Employment Service and the Benefits Agency will provide a one-stop service for job seekers, so job seekers will usually deal with a single office—the jobcentre.

The Organisation for Economic Co-operation and Development has recently confirmed that the Government's strategy has given Britain the best performing labour market in Europe. These proposals for job seekers will help Britain generate even more jobs. They will help unemployed people find work; they will strengthen Britain's economy; and they will give better value for taxpayers' money. They will be welcomed by all those who want to see a prosperous economy and want to help unemployed people achieve their main goal—a job. I commend these measures to the House.

Photo of Donald Dewar Donald Dewar , Glasgow Garscadden

Will the right hon. Gentleman accept that I should like to be enthusiastic about this package if I could? I accept that it is a step forward in some senses—at least it is not the usual dirge about the welfare system as a grudging safety net and there are some signs that the Government are trying to adopt a more sensible approach to encouraging people back to work.

The main feature of the package is the job seeker's allowance itself. Will the Secretary of State accept one simple fact? Will he accept that the result, which will be a harsh experience for many, will be that when those with a full contributions record lose work they will be guaranteed help for only six months instead of 12? Will he also accept that that is a unilateral and remarkable departure from the contract entered into between the contributor and the Government, involving 10 per cent. of gross earnings within the national insurance contributions band, and that the result will be a loss of half the principal benefit? What part of the citizens charter covers this particular happening? Is there a help line that people can phone to get an explanation? What insurance company would get away with such an increase in premiums and a reduction in benefit?

Will the Secretary of State confirm that, with regard to the job seeker's allowance, at any one time 250,000 people would be better off under the present arrangements? What is the so-called saving to the Treasury? How many people under the age of 25 does he estimate will have a cut in benefit, even when they have a full contributions record, because of the introduction of the distinction between those above and below 25, a distinction with which we are familiar in terms of income support and which is now to become part of the job seeker's allowance? Will the Secretary of State confirm that the present loss would be £9.55 a week? What does he imagine it will be in a year or two?

How many of the 90,000 who will not even qualify for means-tested job seeker's allowance will be women? Is not it true that only 43 per cent. of women who will qualify on their contributions are likely to be able to draw benefit of any kind once their six months' qualification has run out? How does the Secretary of State fit that in with the rhetoric that we have heard in the House about invalidity benefit?

We have been told that about 200,000 people will be evicted from invalidity benefit by the arrival of incapacity benefit. In fact, they will be shunted—that is perhaps the elegant way in which to put it—into the job seeker's allowance. How many of them does the right hon. Gentleman think will qualify for no benefit at all because they have, very properly, been thrifty and have accumulated savings?

I ask the right hon. Gentleman specifically about the job seeker's agreement which must be signed on this occasion. I stress, on behalf of my party, that of course I accept 100 per cent. that it is the duty of anyone who is unemployed and drawing benefit to co-operate with the authorities, to search for a job and to do everything possible to better his or her situation. There can be no dubiety about that. Can the Secretary of State, however, answer one simple question for starters? What power, which is not presently available, will be available as a result of the announcements he has made today in terms of the job seeker's agreement?

I ask that question because I recently read in the papers a quotation from the manager of a jobcentre. It happens to be in London, but it could be in any part of the country. He said: We already have back-to-work plans that a claimant must sign, so we are a bit puzzled about what all the fuss is about. It is important that we pin down exactly what the new powers that are being given are and what the new sanctions are, so that we can understand and form a judgment on them.

Do the new powers simply include, for example, the provision that someone who is seen to be in default of an undertaking, under the job start programme, for example, now has not one week's loss of benefit, but two weeks' and, on repetition, four weeks' loss of benefit, or is there something else that I have not noticed—other than, perhaps, what I have noticed about the hardship allowance? In certain circumstances, people can be left not with a reduced benefit, but with no benefit at all. Does the Secretary of State expect to see that in play over a period?

I ask that question because if hon. Members, as they will, read the White Paper, they will see, for example, the power, carried forward to the JSA, but widened, to enable advisers to direct jobseekers to improve their employability through, for example, attending a course to improve jobseeking skills or motivation, or taking steps to present themselves acceptably to employers. If it is simply a matter of dress, deportment and drawing up a good curriculum vitae, or trying to motivate people, no one could object. I suspect, however, that there is a great deal more in the hidden agenda, and I ask the Secretary of State to spell that out.

Can the right hon. Gentleman tell us, for example, what is the significance of what has been widely reported, which is that the targets that have been set by the Employment Service performance agreements have now been put at the figure of 135,000 people to be referred for adjudication and, therefore, potentially for loss of benefit, which is more than double the performance in the previous year? Does that reflect a change in the rules and, if so, will the right hon. Gentleman spell it out, or is it simply a matter of his rigging the performance targets and leaving the unfortunate staff to do the job on the ground? It is important that he comes clean on exactly that point.

The back-to-work bonus is, of course, welcome in the sense that it is some attempt to provide an incentive for those who seek help. It is something of a compliment to the Commission on Social Justice that it should have been unveiled as a pre-emptive strike by the right hon. Gentleman. As I said earlier, it is certainly better than the rather dreary message we get, not so much from the right hon. Gentleman as from the Department of Employment, about safety net provision and leaving everyone else to exist in the marketplace. Does he accept that the fair description of it is that someone working part time will not get any jam today, may get half-rations on some indeterminate date, but may also find that the whole pot is confiscated by the Treasury?

Let us assume for a moment that a husband is working full time and is made redundant, the wife continues with a part-time job and rolls up only half her earnings, so that in effect she is already paying 50 per cent. tax. Can the Secretary of State say specifically that the wife can claim the allowance when she moves into a full-time job or can she also claim it when he moves into a full-time job? Or is that a choice between them? What will be the tax treatment of that rolled-up sum at the point when that person enters employment?

My next point will please the Secretary of State. Not everything in the report is bad. The fact that employment and child provision is now available after three months out of work instead of six is helpful. A salutary lesson—I hope that the Secretary of State will accept it—is that very often there are jobs that are not entirely suitable for those to whom they are offered, and that there are occasions on which people genuinely have good reasons for giving up work.

Will the Secretary of State tell us what has happened to the £200 grant, which we understand was being tested for the long-term unemployed? I did not hear anything about that in the statement and I am anxious to know whether it is operating and what results, if any, are emerging.

On sanctions—I think that this a helpful question to the Secretary of State, as it will allow him to clarify the situation—it has been widely reported in the press that certain categories of long-term unemployed will be required to work for benefit, and that a form of workfare is on the agenda. Indeed, that was the impression that I got genuinely from something that was said this morning on the radio by the Secretary of State for Employment. Can the Minister categorically deny that a compulsion to work or sacrifice benefit is on the agenda?

Labour believes that entitlement to benefit is, of course, something which carries duties and responsibilities. I hope, however, that the Secretary of State will recognise that, if the right opportunities are provided, the problem will be dealing with the rush, not finding the volunteers to come forward. Will he join me in expressing regret that the Government, who have talked about improving training, intend—I quote from a press report on an announcement from the Secretary of State for Employment— to shake up the main government scheme for training unemployed adults,"— training for work— by cutting its funding by a third"? Is that a very good way of encouraging people to have hope in unemployment?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

I am grateful to the hon. Member for Glasgow, Garscadden (Mr. Dewar) for his welcome, albeit a grudging one, for many aspects of the statement. We have had a debate over the past year or so on the reform of social security, ever since I called for such a debate in the Mais lecture. During that period, the whole climate of opinion has changed in this country from one in which many people said that there was no need to reform the social security system to one where most people accept that there is a need, and that the emphasis should be on restoring emphasis, targeting benefits to where they do most good and ensuring that the system does not outstrip the nation's ability to pay. The litmus test of whether the Labour party has moved along with that national debate or is still lagging behind is whether it will endorse on Second Reading the job seeker's allowance Bill.

The hon. Member for Garscadden claimed that the vast majority of people would suffer as a result of the reduction of the contributory element of the benefit to six months. In fact, two thirds of people get back to work within six months. We want, as a result of these measures, to increase that proportion, because the sooner that people get back to work the better it is for them, quite apart from the savings to the taxpayer.

As for changing the terms of the contributory benefits, it has been possible for Governments of all complexions to make changes in the terms of benefits over the years as long as good notice is given. That is what we are doing.

The hon. Gentleman asked whether I could confirm that 250,000 people would lose as a result of the changes. He ignores entirely the numbers, which I mentioned, who will gain as a result of the changes. As a result of the back-to-work benefit, about 150,000 people will benefit. As a result of the changed treatment of the disregard of earnings for couples, 70,000 will benefit. As a result of the increase in the partners' earnings rule to 24 hours, 20,000 will benefit. Therefore, many people will gain, quite apart from those who will gain from getting back to work earlier.

The hon. Gentleman asked specifically about the impact of the proposals on women. I will naturally look up the information and see whether we have any estimates broken down between sex and write to him. He may care to table a written question to ensure that the information has a wider circulation.

With regard to the invalidity benefit changes, we expect some people who would previously have received invalidity benefit to be found capable of work under the more objective test introduced by incapacity benefit. They will be helped back to work through the new job seeker's allowance. That is what it is there for, and that is what they need.

The hon. Member for Garscadden accepted that it is the duty of people to co-operate with the benefits system and to seek work. That is the underlying philosophy of the allowance. He asked what power we would have that we do not have now. We will have the power to make the job seeker's agreement a requirement of benefit. The present back-to-work plans are not a requirement of benefit. Therefore, there is not a commitment on the part of the person drawing them up to follow them. There is no obligation to review them and ensure that people have followed them. The new agreement will change the nature of the allowance into a contract between the job seeker and the taxpayer which is in both parties' interests.

The hon. Member for Garscadden asked whether I expected the new sanction, which will mean that able-bodied people with no dependants and no caring responsibilities can lose all benefit, to apply often. I do not believe that it will apply often, any more than it did when we changed the rules on income support affecting able-bodied new age travellers and others. It will have a healthy effect on those who were inclined to malinger and who thought that they had a right to payment from the taxpayer indefinitely without making an effort.

I am glad that the hon. Gentleman's welcome became warmer as his comments progressed and that he offered an unequivocal welcome to the back-to-work bonus. However, he promptly became equivocal once more. The fact is that it is unequivocally better than the present system. People will have an incentive to do part-time work and they will be helped to take the further step into full-time work after that. It would be deplorable if the hon. Gentleman wanted to return to the old system. The tax treatment of the back-to-work bonus is very much a matter for my right hon. and learned Friend the Chancellor of the Exchequer.

I am glad that the hon. Member for Garscadden welcomed employment on trial. He asked what became of the job finder's grant. That was something we promised to pilot in our manifesto and I am pleased to say that it is being piloted at the moment. The only reason I did not mention it in my statement was that there were so many good things to include that there was no room for that as well. It is also something which we have already announced.

The hon. Member asked whether the measures would be a step towards American-style workfare. Under present arrangements, we have the power to require job seekers to make an effort to seek work, to train and thereby to maintain contact with the world of work. That is right; taxpayers expect something in return and there is nothing wrong in principle with requiring greater effort on any front from those seeking work.

The difficulty is one of practice that has always ruled out the kind of workfare programme which the hon. Member for Garscadden seems to reject. We believe that jobs come from business being profitable. It has not been possible for the Government to provide millions of jobs to operate such a system.

We will certainly require more effort from people to maintain contact with the world of work and, where appropriate, to take steps to get back to work and to improve their training and, if need be, to undertake tasks of benefit to the community. That is something which taxpayers will whole-heartedly welcome, as they will welcome the whole bunch of measures that I have included in the job seeker's allowance.

Several hon. Members:

rose

Madam Speaker:

Order. After those initial exchanges, which have taken almost 30 minutes, many hon. Members wish to ask questions. I ask Back Benchers and Front-Bench spokesmen to co-operate and to ask brisk questions and give brisk answers from now on.

Photo of Mrs Marion Roe Mrs Marion Roe , Broxbourne

What action does my right hon. Friend propose to take to ensure that the two agencies involved in implementing the scheme—the Benefits Agency and the Employment Service—liaise and co-operate to guarantee an effective and efficient service for their clients?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

My hon. Friend highlights a very important aspect of the reforms, which is the improvement of the service to clients and the streamlining of the delivery of what has been a confusing mixture of benefits. We have established close working arrangements and a working party between the two Departments, which has been developing plans to bring together delivery, which will involve Benefits Agency staff working alongside Employment Service staff. The claimant will receive at one place—the jobcentre—all the help that he needs, and there will be direct links to the Benefits Agency for related benefits such as sickness benefits, and so on. It will be an improvement in the service that we provide to job seekers. The House will think that that is right and proper.

Photo of Mr David Chidgey Mr David Chidgey Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Employment)

I am sure that the Secretary of State will agree that the requirement for the unemployed actively to seek work is not in dispute. However, I hope that he will also agree that little in today's statement will increase the chances of the long-term unemployed gaining and keeping worthwhile jobs. Does he agree that policies such as the benefit transfer programme, which turns welfare benefits into job subsidies, will tackle and finish off the long-term unemployment problem?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

We will, of course, examine any constructive proposals that are put forward from any quarter in the spirit that I mentioned in my original Mais lecture, but there are measures in the statement that will help the long-term unemployed. I have just mentioned the job finder's grant, which has been piloted and which is specifically aimed at those who have been unemployed for a long time, who face costs of going back to work and who will, therefore, possibly be helped by a lump sum towards doing so.

The back-to-work bonus will likewise help those who have been unemployed for more than three months, including those who have been unemployed for longer periods. Our philosophy is to try to get people hack to work as early as possible after they become unemployed and not to allow them to languish for long periods in unemployment, if that is at all possible. That is a much more constructive philosophy.

Photo of Mr Peter Thurnham Mr Peter Thurnham , Bolton North East

I welcome my right hon. Friend's excellent proposals. May I contrast his positive reforms with the utter waffle in the report of the Commission on Social Justice, which apparently even includes a recommendation that everybody should have a sabbatical year? Would not that be equivalent to a 15 per cent. compulsory unemployment rate?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

I have had time so far only to peruse the proposals from the Commission on Social Justice, and I will look closer at them. I do not exclude the possibility that there will be constructive proposals within the report, although, in the first 13 pages, I found 18 spending proposals and no savings proposals to offset them. I, therefore, believe that we should pursue our strategy of focusing benefits where they can do most good and look for ways of restoring incentives and not extending the benefit system through high-spending policies and new programmes to add to those that we already have in our budget, which amounts to over £80 billion a year.

Photo of Frank Field Frank Field Chair, Social Security Committee, Chair, Social Security Committee

Will the Secretary of State give a clear undertaking that the new job seeker's allowance will be non-means tested? His statement about partners' earnings suggested that it will be. If he believes that the new benefit, which cuts the unemployment rate in half, will be popular, will he undertake that the first pilot will be carried out in St. Albans?

Hon. Members:

Yes?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

I will come to that point. The job seeker's allowance will have two components. It will have an income-related element which will be available as long as people have need, and that clearly will be related to people's means. The other aspect, the six-month personal allowance, will be based on the contributory principle and will, as at present, be unrelated to people's capital or to whether their partner is at work. It will be abated in the case of occupational pensions, as it is at present, but I am raising the amount that people can keep before that abatement applies from £35 to £50 per week, and abolishing the arbitrary age limit. That is an important development, and it is probably a move in the direction that the hon. Gentleman would wish.

The piloting powers will relate to changes in the regulations. The basic benefit structure is to be introduced from April 1996. Once it is bedded down, we want to have the opportunity to test reforms, and any reforms that we introduce will, by definition, be attempts to improve it. I am sure, therefore, that I will be bidding to have improvements tested in St. Albans, against similar bids which will undoubtedly come in from Birkenhead.

Photo of Mr Ralph Howell Mr Ralph Howell , North Norfolk

May I say how much I approve of many of the measures contained in the statement? However, I consider it to be a half-measure, rather than the major reform that is required to solve the awful problem of unemployment.

Can my right hon. Friend tell the House how much he thinks the measure will save, or will it cost more? It seems that the training and extra £10 are based very much on the North Norfolk action scheme, which is costing something like £70 a week more than the benefit that was paid earlier. Why is not the measure based on the workstart programmes which have been so successful in Kent and south London where a payment is made to an employer who takes an unemployed person off the register and real work is provided, rather than work for charities?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

My hon. Friend sought a pilot scheme in his constituency, the North Norfolk action scheme, which he has been following closely and has praised. We are seeking to learn from that and the other pilot schemes mentioned by my hon. Friend to ensure that there are genuine savings from them. That illustrates the benefit of being able to run pilot schemes, which we already can for employment services. However, I am taking additional powers to pilot changes in the benefit regulations, other than any reduction in the basic rate of benefit, which we do not propose and therefore would not seek powers to test. I am grateful to my hon. Friend for his welcome. I hope that, as a result of the experience in his constituency and elsewhere, we will learn that we can build on the changes that we have announced today to go somewhat further in the direction that he would wish.

Photo of Mr Greville Janner Mr Greville Janner , Leicester West

The Secretary of State said in his statement that the Government's strategy is to generate more jobs and that it is "bearing fruit". As he has taken the lead over the Employment Secretary in what is obviously an employment matter, can he answer this extraordinary conundrum: why has the Government's successful strategy resulted in an alleged reduction in the number of unemployed people but a fall in the number of people who are in jobs?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

The hon. and learned Member is wrong about that. According to the labour force survey, which is the best founded survey, there has been an increase in the number of jobs, particularly full-time jobs, recently. The hon. and learned Member casts doubt on whether our policies are "bearing fruit". If he visits his constituency, he will find that there are 842 fewer unemployed people now than there were one year ago—a drop of 12 per cent.

Photo of Mr David Shaw Mr David Shaw , Dover

Will my right hon. Friend accept the congratulations of my constituents who have long felt that the benefit system encourages problems, rather than solves them? The job seeker's allowance will go a long way to helping people to solve problems and reduce their dependency on benefit. Can he comment on how the job seeker's allowance will compare to a statutory minimum wage? Will it incentivise people or will it discourage them from getting off the unemployment lists?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

My hon. Friend is right—this is a problem-solving measure. It is a measure introduced by a Government who are determined to create jobs. That is why we are not going down the road of introducing policies that would destroy jobs. Undoubtedly—this has been confirmed only hours ago by the Commission on Social Justice—a minimum wage can destroy jobs. That is why we are not going down that route, and I am surprised that any hon. Members in the House would want to do so.

Photo of Mr George Foulkes Mr George Foulkes , Carrick, Cumnock and Doon Valley

Is it not revealing that all the fine words ever said by this Minister and others from that Dispatch Box never turn into reality in my constituency and in others? Will the Secretary of State comment on the case of a fisherman desperate to return to work who gets a job working fewer than eight hours a week going out in boats? He has found the few hours' work that he can. Why does he no longer receive national insurance credits? How will it encourage people to go back to work when people such as my constituent lose national insurance credits when they take up a very small part-time job?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

I think that the hon. Member must have misheard what I said. We are improving the position. At present, if one of the hon. Gentleman's constituents works as a fisherman for an eight-and-a-half hour trip a week he will lose national insurance credits. Hereafter, he will keep them under the arrangements that I have announced today. So we are dealing with the very problem that the hon. Gentleman has highlighted. At the same time, I should say that the arrangements for share fishermen will be broadly carried over into the new system.

Photo of Mr David Nicholson Mr David Nicholson , Taunton

There will be a widespread welcome for these measures as a way of removing obstacles and providing incentives to move people from benefit into work.

Will my right hon. Friend confirm that his Department has tested and will test the practical working of the schemes among new age travellers and others who may evade the full rigours of our social security benefits and employment placing system? In particular, will he consider providing some flexibility to enable people who are on benefit to obtain relevant training which may facilitate their eventual movement into employment?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

My hon. Friend will doubtless welcome the fact that the age-old midsummer ritual in which my Department went out to raves and places such as Stonehenge, Glastonbury and so on and set up stalls to hand out benefits to people no longer takes place. We have changed the rules so that able-bodied people who have no dependants will lose benefit entirely if they are not actively seeking work and do not even pretend actively to seek work or to be available for work. We are trying to tighten up the measures that record where people have claimed when they are moving about the country. On all those fronts, we are making progress in dealing with exploitation of the benefits system by those who choose a non-conventional life style, about which otherwise I have no feelings at all.

Photo of George Mudie George Mudie Opposition Whip (Commons)

The Secretary of State suggests that the changes will be of benefit to the unemployed, yet on two occasions he has been asked to state the costs. May I ask him specifically whether the so-called generous measures will cost the Department money or save the Treasury money?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

The hon. Gentleman is still stuck in the past in the debate on social security. We have seen a substantial increase in social security spending in this country and others over the years.

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

Not primarily because of unemployment but because of the growth of dependency, the growth of old age and other factors. We should seek ways of concentrating that huge sum of money—£85 billion—where it can do most good. It costs every working person £15 every working day simply to finance social security. We should not measure the charitableness of our nation by how much extra money we can spend on top of that sum. The measure that I have announced today will save £200 million in a full year in the direct budget. To the extent that the measures are successful in getting people back to work earlier, which is what we want to see, the savings will be much greater still. I hope that those savings will be positively received by everyone. Surely no one wants to spend money on supporting people out of work. We always want to help people back into work.

Photo of Mr Alan Howarth Mr Alan Howarth , Stratford-on-Avon

May I welcome what I understood to be my right hon. Friend's intention to proceed with great caution in requiring unemployed people to take part in workfare schemes? Has he studied the American experience, which shows that compulsory schemes yielded few or no benefits at considerable costs? Does he accept that the voluntary schemes, such as those in Massachusetts, produced better results? If any additional public funding were to be available here to support workfare schemes, the money might be better spent on education, training and child care. If we are to reduce dependence, what really matters is the availability and accessibility of adequately paid jobs.

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

We will obviously proceed cautiously in all those aspects of the new allowance that I discussed, especially when applying the pilot powers that we will gain under the benefit to test the new measures. I take my hon. Friend's point. We would be unwise slavishly to follow policies in the United States, which tend to be set in an entirely different framework, relate almost exclusively to single parents and are not geared to the needs of this country. We have the long-standing power to require people to take work when it is available and is offered to them, which is absolutely right and proper. The Government do not have the ability to create the millions of extra jobs that we want—no Government do. Such jobs can come only from a more vibrant economy and labour market, and the measures will help to achieve those.

Photo of Gerry Sutcliffe Gerry Sutcliffe , Bradford South

When making such a statement, is not the Minister embarrassed at the scale of the piecemeal effect that it will have? In areas such as my constituency, we must create 1,000 jobs a year just to stand still. This is only a small measure. When will the Government start to consider the need for full employment and how will the measure create that employment on its own? People want real jobs and real prospects. The manufacturing base of the country has been lost, especially in areas such as Bradford. How will the measure help people in Bradford to seek work?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

The measures that we have announced today are a further important step and addition to the strategy that we have been putting in place for some years to give this country the most successful labour market of any country in western Europe. Our youth unemployment is substantially lower than that of the rest of Europe at about 13 per cent.—it is half as high again in Europe as a whole and it is 23 per cent. in France and 35 per cent. in Spain. Why are we more successful than those countries, which allegedly have better training and education? I point to the minimum wage and the social chapter. If anyone is serious about improving employment prospects in this country, he or she cannot simultaneously advocate the minimum wage and the social chapter.

Photo of Mr Nigel Forman Mr Nigel Forman , Carshalton and Wallington

Is my right hon. Friend aware that many of us on the Conservative Benches believe that, in an increasingly flexible and insecure labour market such as that which we have today, it is sensible to have a flexible and responsive social security and employment benefit system to respond to that situation? In that context, why, even with the benefits of computerisation, does it seem to take so long between the announcement of such timely and sensible decisions and their implementation? I noted two cases—the partners' earnings rules and uniform claim forms and rules—whose implementation will be delayed until April 1996. Is not it possible to speed things up a little?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

My hon. Friend makes a good point about needing a flexible system to respond to a rapidly changing labour market. That is why we are having a pilot scheme. In future, we want to be in a position to respond.

The new allowance will be introduced in April 1996. All those other measures are being introduced as part of the new allowance. Why does it take so long? First, we have to obtain parliamentary approval. The measure is likely to go through the normal processes and I suppose that we will not have approval until next summer. Then we must introduce the regulations, under the primary powers, and the organisational changes to bring together Benefits Agency and Employment Service staff. We are developing plans to do so and we will have to develop the necessary computerisation. It would be virtually impossible to introduce the system before April 1996, but once it is in place we will be able to make changes in the regulations much more rapidly, within the primary legislative structure and subject to the approval of the House.

Photo of Malcolm Chisholm Malcolm Chisholm , Edinburgh Leith

Will there be anything in the legislation about job seekers from other European Union countries? May I tell the Secretary of State that I was horrified at my surgery on Saturday when a young Spanish woman told me that she had recently lost her job and was being denied income support in spite of actively seeking further employment?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

There are no specific changes in the White Paper relating to people from other countries in the European Community; it relates purely to our domestic situation. We will of course continue to have reciprocal arrangements with other countries, both in the European Community and in the wider ambit of European co-operation involving other countries, specifically to help people who wish to seek work across international boundaries. Those will continue as at present.

I should be happy to look into the case that arose at the hon. Gentleman's surgery to see whether the treatment is appropriate.

Photo of Jacqui Lait Jacqui Lait , Hastings and Rye

May I welcome the back-to-work incentives in my right hon. Friend's statement, and ask how many people he expects to benefit from the 24-hours relaxation of the rules for national insurance credits and from the back-to-work bonus? In the brief time at his disposal, has my right hon. Friend discovered anything in the Commission on Social Justice that matches those back-to-work incentives?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

We believe that some 150,000 people will gain from the back-to-work bonus, and that that could be more if more people respond positively to the existence of the bonus. Some 20,000 people should gain from the change in the partners' earnings rule; again, that could be more if people respond positively. Some 70,000 people will gain from the £10 disregard for couples where only one of them is working and, again, that could be more if people respond by working and declaring their earnings in those circumstances.

It would not be fair of me to make a comprehensive judgment on the proposals announced by the Borrie commission today, but I have not so far been able to see in any of the reports that have come through or from my own perusal of the document anything as comprehensive or as positive as we have been able to announce today. The commission is rather stronger on analysis than on diagnosis and proposals for the future.

Photo of Dennis Skinner Dennis Skinner Member, Labour Party National Executive Committee

Is the Secretary of State aware that his announcement is nothing short of an insult to the intelligence of more than 4 million people in Britain who do not have a job—never mind the fiddled figures—and to the 30,000 miners who were chucked on the scrapheap by the Government? They are not workshy—they had their jobs taken away from them. It is an insult to the shipyard and textile workers and to one third of those in our manufacturing base who have lost their jobs. We are faced with a Government who are backed by Tory Members who line their pockets with five, six and seven other jobs, and the Secretary of State accuses people who want to work of being workshy. They ought to be ashamed of themselves. Why don't they get out of the road?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

The hon. Gentleman does not seem entirely to support the proposals which I made earlier, but he will find them of benefit to his constituents. We have put in place special measures in mining areas and, as one would expect, miners—being the aristocrats of labour—have often been extremely successful in getting jobs elsewhere. They are certainly not workshy. I know that, and I said that the majority of people in this country are not workshy. The minority who are will benefit from the motivation that the measures which we have introduced today will give them to find work. That is only right and proper and is part of their contract with the taxpayer.

As for fraud and abuse, the biggest fraud with which I have had to deal since I have been in office was the £500 million hole left in pension funds by the socialist millionaire Robert Maxwell.

Photo of Mr Patrick Nicholls Mr Patrick Nicholls , Teignbridge

In complimenting my right hon. Friend on the proposals that he announced today, may I suggest that the White Paper might give an opportunity to address a situation where somebody who is unemployed and is actively seeking work is using his spare time to undertake a course of study? What can happen—it varies from locality to locality—is that the mere fact that someone is doing a course of study is held to be in some way incompatible with his being available for work. Surely there is nothing incompatible when a person says that if a job is available, he will take it, but that, in the meanwhile, he would like to use his time constructively to get himself back to a better-paid job, where we can tax him more and raise money to apply to what we would want. Surely the White Paper at the very least gives us an opportunity to look at that situation.

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

We will, of course, look closely at those rules, but, broadly speaking, the intention is to carry over much of the way in which people are treated at present into the new system. We will look closely at how that is done to ensure that we can still keep to the principle that people must be available for work without inhibiting unnecessarily their ability to acquire skills, to study and to develop their employability.

Photo of Mr Barry Jones Mr Barry Jones , Alyn and Deeside

How many of our people in Britain are unemployed and how many of those are long-term unemployed?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

My right hon. Friend the Secretary of State for Employment reminds me that the figures are 2.6 million and 1 million respectively. Either way, I can tell the hon. Member that it is too many. The intention of the measures I have announced is to reduce the number of unemployed people, but particularly to reduce the number of long-term unemployed people, because the longer people are unemployed, the more demoralising it is for them and the more their motivation is reduced; their skills get stale and they become potentially less attractive to employers. That is why we want to get those people speedily back to work through the job seeker's agreement and the measures that will be spelled out in it.

Several hon. Members:

rose

Madam Speaker:

Order. I shall attempt to call those hon. Members who have been standing up to ask a question because they have been waiting for a long time, but I plead again for brisk answers to questions. We have taken almost an hour on this statement and we will be coming back to it at some time in the future.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

Does my right hon. Friend agree that the key factor about the job seeker's agreement is simplicity? Will he confirm that the allowances will all be claimed on one form and from one location, which is what I and others have recommended for some considerable time? That will benefit those who most need to know about it.

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

Yes, I can confirm my hon. Friend's point.

Photo of Mr Derek Enright Mr Derek Enright , Hemsworth

Does the Secretary of State agree that his statement proffers no solution—which is more quality jobs—but essentially props up employers of slave labour, who pay cheap wages and provide rotten conditions? Does he therefore agree that he is, essentially, subsidising the inefficient and the unimaginative?

Madam Speaker:

Thank you.

Photo of Bernard Jenkin Bernard Jenkin , Colchester North

I thank my right hon. Friend for his imaginative proposal, which will be welcomed by the British public, principally for two reasons, which I shall cite briefly. They will welcome it, first, because it unequivocally links the business of being unemployed with the business of looking for a job and, secondly, because it does not increase the burden on the working taxpayer, who is already paying £15 a day towards the cost of our social security system. Most people believe that that is too much.

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

I entirely endorse the points that my hon. Friend has made with considerable clarity. I could not have put it better myself.

Photo of Paul Flynn Paul Flynn , Newport West

Does the Minister agree that his statement means that we will have a benefits system that has more in common with the handout principle of the Poor Law than the principle of a national insurance scheme of benefit? Surely the reason why income support payments and unemployment benefits are the same or less than they were 15 years ago is the salami cuts made to those benefits, which have been imposed while the amount available for contribution has increased. Will he answer this simple question: how many people will lose out?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

The hon. Member epitomises the backward-looking tendency in the Labour party, always harking back to the 19th century and never looking forward to the 21st century. I hope that the proposals will put us in a position to have a much better working labour market in future than we have had in the past. I would hope that, if he cannot, at least his party will endorse them.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown , Cirencester and Tewkesbury

Does my right hon. Friend agree that the vast bulk of the unemployed want work and, therefore, welcome the proposals in the job seeker's agreement? Will he also confirm that there is a direction for people who disobey the agreement? Will the White Paper address the problem of the small number of people who breach that direction and will the job seeker's allowance be put at risk thereby?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

I can confirm that there will be a direction to people to undertake specific courses of action that will increase their chances of getting work. Should they refuse to do so, they would, of course, suffer sanctions, though I would hope that they would generally do what is in their own interest.

Photo of Eric Illsley Eric Illsley , Barnsley Central

Will the Secretary of State accept that the problem, particularly in areas such as mine, is the lack of any jobs, not just suitable ones, for the long-term unemployed? Many of my constituents, such as the 14 per cent. unemployed and the 30 per cent. of males who are economically inactive, will regard the tightening of the test—the agreement is merely restating the availability for work test—as an insult. Can the Secretary of State also tell us how many Department of Employment staff will be made redundant as a consequence of combining the two agencies to provide the new job seeker's allowance?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

I appreciate that unemployment is higher in some areas of the country than others and that it is therefore much more difficult and disheartening. None the less, even in those areas, a considerable number of people get back to work and we must give every help to others to do likewise. In the region in which the hon. Gentleman's constituency is situated, the reduction in unemployment over the past eight years has been about one third. That may still leave a way to go in his constituency and others, but this measure will help achieve that.

Photo of Nigel Waterson Nigel Waterson , Eastbourne

Does my right hon. Friend accept that many people will welcome the extension of the employment on trial scheme? I have met people in my constituency who are not workshy, but genuinely apprehensive about some of the jobs for which they are sent for interviews.

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

That is very much the purpose behind the employment on trial measures, which have been successful as implemented so far. We are easing them in in a way that will help some 200,000 extra people try out jobs. I hope that, in most cases, they will choose to stay with them, but in some cases they will find that they are not suitable and will suffer no penalty as a result of leaving after four weeks.

Photo of Mr Tony Banks Mr Tony Banks , Newham North West

As the Secretary of State has made a number of references to the workshy, what is his estimate of the current number of workshy among those who are unemployed?

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

I believe that the vast majority are keen on getting back to work and all the evidence that I have is to that effect. But we all know that a minority of workshy people exists. There is no point in trying to put a number on it because if one sends out a questionnaire people will not list themselves as workshy—[Interruption.] The hon. Gentleman might do so, but others would not be so frank. A significant minority still needs motivating in this way and it is in their interest to receive this kind of help and encouragement.

Photo of Peter Hain Peter Hain , Neath

Having admitted savings or cuts of more than £200 million, why does not the Secretary of State call this the job fleecer's allowance? It fleeces the unemployed of the right to benefit, just as his economic policies fleece them of the right to work.

Photo of Peter Lilley Peter Lilley Secretary of State for Social Security

Success in this area must ultimately result in less spending on unemployment, not more. Our objective is to ensure that spending is well focused where it can do most good but, above all, to ensure that people get back to work as rapidly as possible.