28 February 2008

Rt Hon James Purnell MP

Secretary of State for Work and Pensions

Commissioning Strategy Launch

Wednesday, 28th February 2008

[Check against delivery]

It’s a pleasure to be here today to launch our new Commissioning Strategy.

I read in the CBI’s response to our interim report that your members “fully support” the need to help into sustainable employment “the long-term unemployed, those facing multiple disadvantage, those with poor basic skills.”

I was glad to hear it. Because I do too. I believe the welfare state has a simple mission: to improve life chances.  To give people the help they need to be independent.  That means work for those who can, and security and control over their lives for those we won’t expect to work.

In the last ten years, we’ve made great progress: We’ve shown full employment is achievable on the old definition – those who want work have been able to find it. We have the second highest employment rate of the OECD. We have a strong, flexible labour market fit to face the challenges to come. I am proud of these achievements.

Now we must go further. Like you, I believe we must tackle the challenge of persistent inactivity.  Work improves people’s health.  It improves their quality of life.  It gives their children a better chance in life.  We need to make the right to work real for those we have not yet reached.

David Freud, who we will hear from in a moment, set out a blueprint for a new way of working. His report provided a vision of a system where the expertise and innovation of private and voluntary sector providers could blend with the proven strengths of Job Centre Plus.

The private and voluntary sectors already play a role in delivering our work programmes.  But over the last ten years, Britain has been lost in a sterile debate between public and private.  It’s time to move on. The truth is that both public and private must play an important part.  The crucial question is how we get the best out of them, and the third sector.

Today’s strategy answers that question.

For me, the headline is that we will personalise the service to the individual by freeing up the provider.  Instead of following the diktat of Whitehall, providers will focus on the needs of the person in front of them.  Instead of receiving grants for service, they will be paid by results.  Instead of telling providers how to do their job, we will hold them accountable for what they do. 

This applies first to our own staff. Job Centre Plus is world class.  Policy makers around the world are copying our merger of job search and benefits advice.  Even the National Audit Office complimented them last week, saying 86 per cent of people who use the new Jobcentre Plus are fairly or very satisfied with the results. The DWP more widely is announcing today that against a backdrop of headcount reductions we have increased productivity by 11 per cent while improving our performance. The department is in good shape.

So, we will now free Job Centres up and trust their expertise.  Instead of the six current New Deals, we will have a single New Deal for JSA claimants.  We will slim down the rules which apply to our own staff, and create space for them to innovate.  90% of claimants come off benefit during their first year.

For those who haven’t found work, we will then assign them to specialist providers from the private and voluntary sectors.  This is where this Commissioning Strategy comes in.  I want to change the rules of engagement.  In the past, our contracts have been too small and we’ve told providers how to do their jobs. That removes the point of using specialists.  Instead, we will have a black box system – where we free them from direct control and allow them to innovate.  Because those at the front line know what needs doing.

Last week I announced that everyone who participates in flexible New Deal will be expected to take active steps to return to work. We will set as a minimum expectation four weeks of full time work or work-related activity. However we will be seeking bidders who will extend this principle for those claimants who will benefit.

Providers will be able to tailor their approaches to the needs of the individual. More than this, they will be encouraged to do so. Because it will work.

It will work because we are going to reward providers for their success. They will be rewarded not for getting people into a job, but for getting people into a sustainable job.

This freedom does not, however, come entirely for free. The price attached is contestability.

We will judge the success of our providers on what they deliver. We are committed to developing a mature market. Competition will drive innovation, improve value for money and enhance the effectiveness of all participants.

Good providers will have incentives to deliver, with longer contracts and a growing market, but in return we will set our expectations high.  Significantly, the strategy will seek to move towards a basis for joint commissioning of employment and skill provision, recognising the close link between the two and positioning us to respond accordingly.

And we also understand that to get the best out of the private and third sectors, we know we need a partnership for the long term.  So, let me be clear: their involvement is here to stay and is set to grow, as David Freud recommended. 

This is also a real opportunity for the third sector. We must work with providers who can deliver the best services to our customers.  In many cases those services will be highly specialised and will be delivered by high quality third sector organisations. 

I particularly welcome the endorsement that Acevo has given in their response to consultation – they call the strategy “a welcome initiative, and … believe there is scope for the DWP to be a leading department in this area across Government”.

Conclusion

So today marks the next step in our radical reforms of the welfare state, a new era in the provision of our services. Beveridge would be familiar with our goals, but not the methods by which we deliver them. The commissioning strategy means there will be diversity of supply to adapt our services to the diversity of demand amongst the unemployed.  There will be a clear purchaser provider split, and then clear roles for Job Centre Plus and specialist providers.

And the reason for all this? To change lives. The welfare state matters because life chances matter.  All of you, from whatever sector, help to change the course of individuals’ lives.  This new system will help us bring the best out of all of you.

Thank you.