Social Security (Intensive Activity Period 50 to 59 Pilot) Regulations 2004

– in the House of Lords at 1:56 pm on 18th March 2004.

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Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

My Lords, these draft regulations are essential in supporting the Government's efforts to increase employment among older workers as well as addressing the pensions challenge.

Evidence shows that once people reach the age of 50 there is an increased risk of becoming unemployed while the likelihood of returning to paid work decreases. Many people over 50 feel that they do not have the opportunities that they need to continue to work or to return to work if they wish to.

Currently, there are 19 million people aged 50 and over in the UK of whom 9 million are aged 50 to state pension age. The employment rate for this age group, which represents almost a quarter of the working population, is significantly lower than for other workers. Current statistics show that people aged 50 to state pension age make up 17 per cent of the total number of people claiming jobseeker's allowance in the UK. I am sure noble Lords will agree that if someone does not work in those years and runs down whatever resources he or she has, he will go into pension and retirement that much poorer and with fewer resources. The greater the ability to keep people working for as long as they are able, the more comfortable their retirement will be.

Since 1997, the Government have introduced a number of measures specifically aimed at the over 50s age group, such as the New Deal 50 plus programme and working tax credits. That has increased the employment rate for the over 50s from 64 per cent in 1997 to 70 per cent in spring 2003, reducing the gap between their rate and the overall employment rate of 75 per cent.

The pensions Green Paper, Simplicity, Security and Choice: Working and Saving for Retirement, published in December 2002, recognises the huge wealth of skills and experience that many people over 50 possess and sets out a number of proposals aimed at tackling the relatively high inactivity of 1.4 million people in that age group.

As part of the package of proposals outlined in the pensions Green Paper, we propose a pilot study to trial mandating customers aged 50 to 59, who have been claiming JSA for 18 months, into the intensive activity period of their New Deal 25 plus programme. Customers or clients aged 25 to 49 are already required to participate in that because it offers them extensive help back into work. Customers aged 50 to 59 currently have voluntary access to this provision but only 12 per cent take up that opportunity. Therefore, what these measures would do is propose to extend the mandatory responsibilities up the age group to 59, not to 60, which is the point at which the pension guarantee element kicks in for men and women alike, if that is what they choose.

We know that nearly 174,000 people have already moved from the New Deal 25 Plus into work. Many people on the programme have also moved to unknown destinations, so this figure could be much higher. Over 19,000 people aged 50 to 59 have left the New Deal 25 Plus programme to go into work. Why then go for the intensive activity period? It offers individuals the chance to engage in a range of activities such as basic employability training, self employment support, education and training opportunities, and also benefit from flexible packages of support, which can combine work experience, work-focused training, and help with motivation and soft skills. Some 64,000 sustained jobs have been gained through the enhanced New Deal 25 Plus, of which 20 per cent have been gained by people who had participated in the IAP. By introducing this pilot, we can further increase the job prospects of those over 50.

However, evidence suggests that one reason for this lack of take up is due to so many individuals becoming demoralised about their chances of returning to work without support. There is a need to establish whether or not compulsion has a part to play and will result in more positive outcomes.

Previous pilots undertaken in 1998, though demonstrating an increase in the number of job outcomes, also showed an increased move on to other benefits, particularly incapacity benefit. A higher proportion of over-50s left for employment, compared with the voluntary programme, but the proportion leaving for other benefits was also higher compared with all leavers. It is difficult to determine the size of the employment effect precisely due to the large number of people leaving for unknown destinations. That is why we propose to run 14 pilots in a combination of seven incapacity benefit reform pilot sites and seven in non-incapacity benefit reform pilot sites. This will allow us to test the effectiveness of mandating participation and measure more rigorously the overall effects of the intensive activity period in this age group.

We propose to run the intensive activity period pilots for two years, and we will select customers to participate in the pilots on a 50:50 basis using a random assignment selection process. This will enable us to gain sufficient data comprehensively to evaluate the pilots, as direct comparisons will be made between those selected to participate and those who are not. We have designed an approach that is as robust as we can make it. The purpose of the evaluation will be to determine the impact of the initiative on individuals and its overall cost effectiveness. We aim to establish how many people have moved into work who otherwise would not have done so. We will also establish how many people move on to incapacity benefit as a result of this pilot, and we will assess whether the desired effect—that is, movement into work—is greater than the movement on to incapacity benefit. The full findings from this pilot study will be available in spring of 2008.

We recognise, however, that selecting people to participate in the pilot via random assignment may be perceived as exclusive, given that a lot of people now go on to it voluntarily. With this in mind, customers who are not selected via the random assignment selection process will still have the option to access the provision on a voluntary basis. By ensuring the pilots are run in this way, I am satisfied they are compatible with the European Convention of Human Rights.

The pilots will be implemented in two stages, which is why there are two sets of regulations. One group of offices is starting in April 2004 and the other in January 2005. The reason for this is that there are three areas with existing pilots, and we must prevent contamination of the evaluation evidence. This has required two separate statutory instruments, because an individual set of pilot regulations can have effect for only 12 months at a time. They are identical apart from their coming-into-force dates and the Jobcentre Plus offices listed on the schedules. We also intend to renew them both in 12 months' time, so that the pilots can run for their full planned period of two years. We must stagger them, so that an existing set of pilots will have completed its course before we introduce the new ones in these other areas.

The Social Security Advisory Committee has approved both sets of regulations. Subject to the agreement of your Lordships' House, these regulations will enable the Government to impose sanctions on people claiming jobseeker's allowance, who, having been selected to participate in the pilot, fail to comply with the requirement to participate, or to accept a place on the intensive activity period. We have also acknowledged the concerns regularly expressed by the committee regarding the extent to which there may be an increase in hardship. The sanctions in these pilots are the same as those for existing clients aged 25 to 49 who are already required to participate in the intensive activity period.

It is important to remember that jobseekers always have the opportunity to explain their actions in advance of a sanctions decision, that we train our decision makers to be experienced and impartial, and that decisions carry a right of appeal. Jobseekers can also claim reduced-rate hardship payments during a sanction period; from the outset for the defined vulnerable group, which comprises about £23 on an otherwise unsanctioned benefit of about £217, if they are a couple with three children.

Finally, the effect of any sanction can be avoided altogether by participating in the intensive activity period and thus receiving a full training allowance. The Government want to increase employment among older workers, and this issue remains a key priority as part of the pensions challenge. People cannot work for 20 years and then from 50 to 65 in the twilight period of benefits and then have possibly a further 25 years as a pensioner also on a modest income without having acquired any savings, or any second pension in the process. We need to ensure that people take the opportunity as far as possible once we have screened them for health issues, to re-enter and re-engage in the labour market. The findings from these pilots will inform the Government of the viability of a national rollout. By introducing these pilots, we are helping those who are most disadvantaged. I beg to move.

Moved, That the regulations laid before the House on 12 February be approved [10th Report from the Joint Committee].—(Baroness Hollis of Heigham.)

Photo of Lord Higgins Lord Higgins Conservative 2:00 pm, 18th March 2004

My Lords, I am again grateful to the noble Baroness for the explanations of these regulations. I am in sympathy with her last point, the case for people working beyond the age of 59. However, the reaction to some of these proposals from people who had senior positions in business and then became redundant, when they were asked to go out doing relatively menial jobs, was rather unsatisfactory. On the other hand, I remember well from my experience of officials in the Treasury that a number of people retired and then came back with what were known as "retreads". That worked extraordinarily well.

My first question is a technical one. The noble Baroness did not say that she was going to take both these regulations and those following, but I understand from what she said that that is so. The relationship between the two regulations is rather strange. As I understand it, the present situation is that no regulation can last for more than 12 months. Therefore, we have two regulations, one for one lot of 12 months and one for the following lot of 12 months. I may have misunderstood that—

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

My Lords, I am so sorry; obviously I gave an incomplete explanation. Had we not had some existing pilots running, there would have been one set of regulations covering all of the areas for 12 months, and we would have come back in 12 months' time to renew the regulations for a further 12 months. Because some of the areas that we want to go into are currently running some pilots that will not expire for a further three months, we need to break the range of pilots into a two-stage process over the course of this year. Both will be renewed, all being well, the following year, should Parliament agree.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, I was going to say that I understand that, but actually I do not. I looked at the explanation that was given in another place when this matter was debated. It seems to me that the purpose of the 12-month rule is to prevent the regulations being extended beyond 12 months. However, to do two lots of 12 months at the same time seems to me to get round that arrangement. My understanding is that the first regulations that we are discussing cover one 12-month period, and then the other covers a further 12-month period. Fine, I will need to think and read carefully what the Minister has just said, and if need be I will come back to her on that point.

I am not unsympathetic to the idea of encouraging people to work longer, but my second point is that one is encouraging them by imposing sanctions. Also, the pilot will be carried out in what the noble Baroness described as a random manner. I am somewhat doubtful—no doubt the noble Baroness has taken legal advice—as to whether random imposition of sanctions is compatible with the ECHR. Perhaps we need to consider that point.

More generally, in the light of the previous debate, I have some doubts about the efficiency of the whole series of pilots. In the previous debate, the noble Baroness sought to offload the responsibility on to the Department for Education and Skills.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

No, my Lords, I was merely responding to the noble Lord's inquiry as to why we had failed to produce robust pilots within the Department for Work and Pensions. I said that it was not the responsibility of our department. I should not want to be seen to be casting aspersions on any other department.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, it is very difficult to interpret the remarks of the noble Baroness other than as saying that the previous pilot introduced by the Department for Work and Pensions did not work. It is important that we get the technical aspects of these pilots right, because the previous pilot clearly wasted a lot of government time and money because it was not properly designed. We must hope that this pilot will be better designed. I imagine that the Government are using consultants for these pilots. Can she confirm that the consultants employed on the pilot we are now discussing are not the same as those who failed to act efficiently at the Department for Education and Skills?

More generally, on the substance of the matter, some independent research was carried out four years into the scheme that concluded that few clients progressed to take up specific 25 Plus opportunities—that is to say, subsidised employment or full-time education or training. Nor did many progress to follow-through. Most participants left the 25 Plus scheme at the initial advisory stage and a majority simply returned to JSA, which does not suggest that the system overall is working well.

Apparently, there were 360,000 starts in the pre-April New Deal 25 Plus programme, but only about 17 per cent entered unsubsidised jobs. With regard to the enhanced New Deal for Young People and Long-Term Unemployed People aged 25 Plus to the end of December 2003, only 24 per cent entered unsubsidised jobs, which raises the question whether those schemes are working cost-effectively. In particular, what do they cost compared with the cost of those individuals being on benefits?

As has already been said, we are up against time, but I hope that the noble Baroness can cover those points. I shall seek to work out her explanation of why we need two orders.

Photo of Baroness Barker Baroness Barker Social Services, Non-Departmental & Cross-Departmental Responsibilities

My Lords, I, too, thank the Minister for introducing the order. As I read it, I was reminded of a meeting I attended about two years ago. I went to see the work of an employment agency in the East End of London called Wise Owls. It is an employment agency for people aged 45 and over. I listened as the man who runs that small organisation talked with great passion and conviction about its work. He firmly said three things.

The first was that the biggest hurdle of all that the people who came to him looking for employment had to get over was to get employers to see them. Once they did, their chances of getting a job were good, but their chances of getting employers to see them were low.

His second point was that he was adamant in his belief that training was not what was needed and that it was insulting and demeaning to many people to assume that the reason that they could not get a job was because they needed training. He made the valid point that many people who were being asked to go on computer skills training courses were the people who, for the previous 20 years, had written and developed the programmes to which they were being sent. Training was not a problem, the problem was simple ageism on the part of employers.

The third thing that he said was that it does not matter how much legislation one puts in place to overcome discrimination, it will never work until there is an economic driver to do so. The moment that there is a skills shortage, ageist assumptions will disappear.

As I thought about that and read the order, one particular matter came to my mind. Is the order or is it not another example of ageism in legislation? As I read it, it was not clear to me to what extent the order has been changed to meet the needs of people aged 50 to 59 and to what extent there has been a simple read-across from programmes for people of a younger age group. Young people may well need entirely different support to help them cope with unemployment.

The noble Baroness talked at length about personal support, self-employment support and motivational skills support but, as the noble Lord, Lord Higgins, said, citing the report, people who had been in senior positions in work were being offered employment opportunities and training that they found simply demeaning. When the pilot is evaluated, will the evaluation be confined to the number of people who find themselves in work or will it tell us about the types of employment that people find? Frankly, I can understand that someone who has held a senior level of employment who is asked to work at McDonald's may well consider that more of an addition to his problems than a solution.

I, too, want to focus on the question of sanctions. Does the noble Baroness believe that sanctions will work in the same way for this age group as they do for a much younger age group? Does the department consider that someone who is 54 years old and has some savings in the bank will feel the same about the same level of sanctions as someone who is 23 and has nothing?

I also want to know whether the health-related needs of some people in that age group have been taken into account; whether the department has considered the huge contribution that men and women in that age group make towards caring, and the effect of that. People in that age group care for both very elderly relatives and children.

Finally, I must tell the noble Baroness that I wonder whether the total effect of the orders will be that we knock back people who are already feeling vulnerable because of their age and impose sanctions on them when there are no such sanctions against employers who were ageist in their recruitment.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions) 2:15 pm, 18th March 2004

My Lords, again, I am grateful to noble Lords. First, I shall turn to the points made by the noble Lord, Lord Higgins. In our debate on the previous regulation, I should have said that I appreciate the thoughtful and informed tone and contributions of opposition Members, because, if I may be so impertinent as to say so, they are asking exactly the sort of questions that we as a society need to ensure that we address in the right way.

Let me have yet another go at explaining why there are two sets of regulations. The reason that there are two sets of regulations before us today is not that they run for a year and then another year; it is because we cannot do the whole bundle at once. The reason that we cannot do the whole bundle at once for the first year, as we would otherwise, is that some of the areas currently have other pilots under way that would contaminate the results.

We must therefore have one set and, three months or so later, the second set. In an ideal world, spring cleaned with no other pilots, there would be one set of pilots and one regulation. Then we will come back in a year's time—as the noble Lord rightly said, pilots run for one year—to renew the regulations for both sets of territories: those contaminated, in statistical terms, by existing pilots and those that were not. Subject to parliamentary approval, we will seek to roll them both forward for another year. That is the explanation.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, now I think I understand it. But there is a 12-month rule that says that the order should not run for more than 12 months. I thought that the Government were proposing to break the rule by having a cap of 24 months. No, apparently they are breaking the 12-month rule by running it for 15 months.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

No, my Lords. Let us say that there are eight pilot areas where the order will commence on date X and conclude 12 months later. There may be another 12 pilots that start three or four months later. They will also run for 12 months. Then, if Parliament so wishes, they will both be renewed.

The reason that we would seek to renew them is for the very real reason that was discussed for the previous set of regulations, which is that you need results to show the longer term outcomes of your intervention. It is not just that people go through the gate, which itself can be a six-month programme; they then need to go into work that is sustainable and then we need to see what the outcomes are. I genuinely believe that we could not have robust findings after 12 months. That is why we need the pilots for two years, because it would not be right and decent to seek to roll that out nationally if we were not confident that that was the right approach.

Are these regulations compatible with the ECHR? I am assured by our solicitors that they are. Are they the same consultants? No, they are not. What goes on in that second stage? About three-quarters of people on jobseeker's allowance find work within six months; most of the rest find work within 12 months; those who have not returned to work within 12 months have found it difficult to re-enter the labour market. After 18 months you are often working with clients who have become detached from the labour market and possibly—perhaps for reasons of fear of discrimination by employers—have given up hope of re-entering the labour market. The regulations are an effort to intervene in order to rebuild people's attachment to the labour market and to extend it, as at present is compulsory for those up to the age of 49, to those between the ages of 50 and 59.

Why are we doing this? Because we think that people of 50 to 59 have much to contribute to society. It is in their interests and in the interests of society and employers. What will the cost be? The pilot will cost £3,172,000. It is expected to break even and produce a net reduction in benefit expenditure savings of £136,000 by December 2006, but we will conduct a full cost/benefit analysis which looks at wages, national insurance, tax, levels of pay and so on, over and beyond the mere benefit savings.

The noble Baroness, Lady Barker, was right to say that is not just a problem of what people come into the labour market with, but the attitudes of employers towards them. That is absolutely right. There are real issues here. It is precisely the concern that employers may discriminate against people, unseen and unheard, that explains why the Government have introduced their age positive programme to challenge employer practices and to promote the business case for recruiting and retraining older workers as part of an age diverse workforce. We are campaigning through employer champions, events, advertising, trade and press coverage, awards initiatives and so on. I am happy to write to the noble Baroness because that is a question that I pursued. If one is dealing with a mindset in which employers remain discriminatory it is very difficult for people over 50 to break back into the labour market. The age positive campaign, together with our codes of practice and the proposals in the Budget 2004 of our new profile campaigns on that, seek to address—I agree with the noble Baroness—what could be a real deterrent to older people.

The final question raised by noble Lords comes back to sanctions. Will sanctions work? I can put it negatively. We know that the voluntary arrangement does not work because only 12 per cent of people have gone on to the voluntary programme. We know that for people under the age of 50 the mandatory programme has not only worked but has been cost effective—or valuable—in terms of job outcomes. What we see in these pilots is whether the same mandatory approach improves the job prospects and employability of older people. If it does, that is very important. The noble Baroness will know as well as any of us that since the 1950s and 1960s the employment rate of those over 50 has been declining. We have to seek to reverse that, particularly as people are living longer, and to seek to avoid them entering their old age in the poverty that comes from having lived a long period of their lives on benefit. I believe that that should work. If it does not, the Government will have to reconsider their policies. The point about pilots is precisely so that we get a learning loop as we proceed. I hope that on this basis your Lordships will accept these regulations.

On Question, Motion agreed to.