14 March 2007

Jim Murphy MP

Minister of State for Employment and Welfare Reform

Making Welfare Reform Work

Wednesday, 14th March 2007

[Check against delivery]

In politics, we can often focus on process rather than purpose. Sometimes, we concentrate on means and lose sight of the ends we are seeking to achieve.

The title of this conference is “Making Welfare Reform Work”. But as we know, welfare reform is not a goal in itself. Welfare reform is just a means to an end.

The ‘end’ which we are aiming for, is a nation where everyone can fulfil their human potential and help make the UK a success.

So how will we measure whether welfare reform has ‘worked’?  

• We will reach 80% employment, giving more people than ever before the opportunity to reap the benefits that work can bring;
• child poverty will be eradicated;
• and rights and responsibilities will be balanced, meaning that we will achieve fairness for the taxpayer, and fairness for our welfare customers.  The electorate will give its continued consent to support those who need help to make steps back to work, and welcome investment in the welfare state as being the right thing to do in a progressive society.

Looking back at the last decade, we have made progress on all of these aims. Two and a half million more people in work; 700,000 children lifted out of poverty; and a progressive agreement to extend back to work support to sick and disabled people.

But we have not yet reached our goals. We know that there are still areas where more must be done.  

That’s why we asked David Freud to conduct a review of our welfare to work strategy. Whilst recognising the progress made, the report published last week makes clear that to reach 80% employment, we need to radically reform the way we operate. Programmes which were developed to deal with the problems of the day in 1997 – widespread unemployment and long-term youth unemployment – must necessarily adapt and evolve to meet the challenges we face today.

As the Secretary of State made clear last week, the report marked the beginning of the debate, not the end. All of us now need to consider carefully the recommendations within the report.

However, one thing is already very clear.  To reach our aspirations, we need to move beyond support for traditional groups and help those furthest from the labour market who often suffer not just one, but a combination of barriers to work.

Whilst we have improved the employment opportunities of those who face traditional labour market disadvantage more than anyone else, there are areas where we have yet to make a real difference to people’s lives.

It is unacceptable that it is still the case that poorer people are sometimes served by poorer public services. Poorer children consistently do less well than their counterparts at every level of their education. The poorest in our society have 10% fewer preventative medical consultations than the most prosperous. And a recent study by the LSE and the Department of Health, found that on average, GP consultations are longer the more prosperous the patient is.

Put simply, we have not yet done enough. It is a moral and economic imperative that we are not complacent and go much further. Whilst real progress has been made and the biggest improvements have been seen in the poorest areas, there is still not parity in service quality.

In the future, one of the ways which I believe we can seek to achieve our goals, is through choice.

Why? Firstly, because choice means the end – once and for all – to the concept of one-size-fits-all. Secondly, because choice means competition based on progressive values - driving up standards for everyone. And thirdly, most importantly, choice can empower.

Let me go through these in turn.

In the past, the welfare system has labelled people, not been sensitive to individual needs and been ill at ease to treat one person differently to another. But if we are to deliver for those who suffer not just one but multiple disadvantages in the labour market, we cannot treat people simply as ‘incapacity benefit claimants’ or ‘jobseekers allowance claimants’ or ‘lone parents’.  We need to treat every person as an individual. A person with their own ambitions; their own motivations; their own obstacles to overcome.

Last week I went to see a Condition Management Programme in South Wales, which is one programme on offer as part of the Pathways to work pilots.  Its success is dependent on the partnership between Jobcentre Plus Advisors and the Local Health Board. A few years ago, it would be unimaginable that a person could have the choice of cognitive behavioural therapy, as part of a back to work programme. But this is what some people need in order to re-enter the labour market, and the success of pathways shows it works.

Today, there are now around 30 different employment programmes, all designed to help different categories of benefit customer. Whilst this has resulted in a more tailored system than ever before, there are elements of complexity and fragmentation which can make it difficult for customers to navigate.

The Freud report recommends a contracting regime which sets a core standard that everyone receives, and beyond this, freedom between the provider and the individual to do what works for them.

And as John Hutton said yesterday at a conference on the future of the New Deal, it is time now, to look to shifting towards a more flexible New Deal. A New Deal which can provide better support tailored to the unique barriers faced by the individual – rather than support defined by the benefit or label which best fits.

On to my second point – that informed choice and competition based on progressive principles can drive up standards for all.

One of the reasons why public services are, at times, still failing the poorest, is because the methods of redress are more accessible to some in our society than others. Complaints procedures; the confidence of questioning officialdom can often be more easily executed by those with who understand the system, have a good education, and have the self-confidence to pursue their goals. These traits are much less likely to be common in those who suffer the most deprivation.  

Therefore, motivation to improve needs to be embedded within the system of public service delivery to create the right incentives for high performance for all, not the few. And crucially, it needs to be a system where opinion on service can be expressed through action as well as words – through choosing one service provider over another.  

Government has a key role in regulating this competition to ensure that our objectives are delivered. One of the differences between the private and public sectors is that the private sector can choose its customers, whereas the public sector should never choose.  But with the right incentive structures in place, no-one would be left behind. Indeed, the most disadvantaged could reap the benefits.  As the Freud report recommends – I quote – “To ensure that everyone was supported, including those who required the most intensive help, the contracts would need to offer rewards that are proportionate to the value of society and the taxpayer of moving into work.”

But the real reward of choice, is that it offers empowerment.

Extending choice to all has always been at the heart of Labour’s agenda. When Aneurin Bevan published the NHS Bill in 1946, he deliberately placed power in the hands of the patient rather than GPs when he prevented the buying and selling of GPs patient rolls. It was controversial at the time, but he believed this to be crucial as a safeguard against poor service. 

Nearly two decades later, in 1965, on the introduction of comprehensive education and the abolition of the 11-Plus Tony Crosland, the Secretary of State for Education and Science, published a circular, which pronounced that “parents must have the final decision.”

In the areas of health and education, this Government has made great strides forward - from academies and trust schools to new independent treatment and diagnostic centres. In the context of employment support though, sometimes we have been too slow in turning this philosophy into a reality.

I believe that part of the reason for this, is the more complex relationship that people have with the welfare state – one of mutual obligation, as opposed to being simply clients of services as people often are in other sectors.

Of course, in welfare provision there are a core set of responsibilities placed on an individual in return for receipt of benefit. When support to get back to work is refused, penalties must be applied. It has to be the case, that the choice of last resort is between complying with conditionality; or losing benefit.

For some for whom benefit dependency has become the norm, greater conditionality and not choice should be the offer from the state. But the behaviour of the minority should not restrict choice for the majority.

Choice in public service is not a new phenomenon. We have to make a decision. Do we: 

• carry on as we are, and tolerate a system where only the most articulate exercise choice;
• abolish choice altogether;
• or extend choice further?

I believe there can only be one answer.

Some of the opponents of choice, suggest that people are not interested in choice in the public sector, they just want a good service; or that the better off will do well out of choice, whereas the poorest will lose out. I refute both of those points.

People do want choice in public services - a report by the Audit Commission in 2004 shows that this is overwhelmingly the case. It also shows that the most disadvantaged in our society are the strongest advocates of choice.

And on the accusation that the poor would lose out with choice, I would argue that it is well within our power to prevent that happening, and to ensure that the poorest can be better served through choice in the public sector.  

Four decades ago, Crosland was emphatic that, “…parents from less educated homes in particular should have a full explanation of the opportunities open to their children.”

The same principle must be followed today.

As the Freud report states: “For choice to be real, it also needs to be informed.” Choice Advisers in schools and hospitals are in place for that very reason. Ensuring that welfare customers are fully informed of their options is an essential precondition of choice in welfare. But if effectively in place, this could extend consumer power to the most disadvantaged in society and give them the influence they deserve over the services they use.

I believe therefore the case for choice is clear. But it is also clear that the success of the infrastructure of choice – the incentives, process for informed decision making, and effective monitoring and regulation – are absolutely fundamental to making choice work for the poorest.

That is why we need to examine carefully the best way forward to determine exactly what works.

Up to now, the full impact of customer choice and competition has never been tested, as mandatory customers have been allocated placements in Employment Zones. But today I am pleased to announce that from April 23rd, all customers in multiple provider zones will be able to choose who they will go to for their employment support provision. Jobcentre Plus will outline their options, and distribute material from each provider which sets out what each do. Customers will have time to consider the different alternatives, before they choose who to go to.

This breaks new ground in furthering choice in welfare. For the first time ever, jobseekers allowance claimants will be able to make an informed choice about which provider will be most effective in getting them back to work.

These rights are matched with responsibilities. Our customers must take up this support on offer or risk losing their benefit. But given that we know the vast majority of our customers want to return to work, we believe that offering a choice of provision to help them overcome their own barriers, can only be beneficial the individual, their family, and society as a whole.

To conclude then, I believe that to make welfare work, we have to help those most disengaged with the labour market back to work. This will not be easy. We need to open the door of opportunity to people who may not be aware that that door even exists.

To do this, our services must be driven at least in part by the customer. The state should not simply act as advocates for their interests – individuals should be empowered to shape outcomes.

I am not advocating choice for the sake of choice – we know that in welfare there must be boundaries. But in optimising choice where we can, I believe we have a key lever through which we can support the hardest to help, back to work.

Ten years ago, no-one would have imagined the level of choice in education and health services that people can exercise today. Ten years on, I hope that we will look back at the welfare state and appreciate the wealth of provision on offer, and the benefits that choice can bring to every single member of our society.