24 February 2009

Rt Hon James Purnell MP

Secretary of State for Work and Pensions

Business Services Association Annual Lecture

Cabinet War Rooms

Tuesday, 24th February 2009

[Check against delivery]

The last few months have been the most economically and politically volatile I can remember. Last year, oil had hit nearly $150 a barrel. Now it stands nearer $40. Last year, inflation was soaring – now it’s heading down, and fast. Interest rates have fallen to the lowest level in the 315 year history of the Bank of England.

Globalisation has left the seminar room and entered our living rooms. Problems in the American mortgage market bring down British banks. People are worried about their jobs and supporting their families over coming months.

When facts change, policies need to move on too. Not everything will be different. We will remain a market economy. We should remain an open economy. We will return to being a growing economy.

But I believe that politics in the next few years can change.

And attitudes towards the interaction of the state, the business world and the individual already are changing – as bankers will readily attest.

For me, this time of change reaffirms my belief that we should be ideological about our goals – a fair society, based on social justice and individual aspiration.

But we should be ideologically neutral about means – indeed that we should use whatever methods are appropriate to achieve those goals, because it’s goals and results that matter in politics.

Today I want to talk more about the means – and in particular reflect on what in the past has been a tired debate on the relative merits of public versus private.

I want to make three key points.

First, that notwithstanding understandable concerns about the pressures facing our services, the public sector can, and does, do an excellent job each and every day.

Second, that despite this, it is in no one’s interests to assume that the public or private sector provision is somehow inherently better by definition, as an article of faith. Instead, we need to use the principles of benchmarking, contestability and accountability to ensure we get the best out of all the sectors – private, voluntary and public.

Third, that government cannot and should not pretend that it can solve the credit crunch by itself. That it will be up to all of us, and that an organisation such as the BSA and your members have a key role to play.

The public sector works

I firmly believe that there is what might be called a professional ethos in the public sector.

The notion that the public sector does empathy while the private sector does efficiency is as outdated as it is facile.

Over the last year, I have been able to see first hand the enormous dedication and effectiveness of Jobcentre Plus staff – providing support and guidance to thousands of people every day to help them get back to work.

While the economy was growing, they performed well, providing a world leading example of active intervention, of delivering practical and financial support for those seeking work.

Now that times are getting harder, their work is ever more important and they are rising to the challenge.
One of the major advantages of a well run, powerful machine like Jobcentre Plus is the speed with which its resources can be swung into action when the situation demands. And it is a powerful machine: On a typical working day, we are currently processing 20,000 benefit claims, conducting 45,000 adviser interviews and taking 60,000 phone calls. Clearly, numbers that are up steeply on a year ago.

It is a tribute to Jobcentre Plus and the people who work there that we are not reading any stories about call centres in crisis or offices in meltdown.

As the head of the Civil Service, Sir Gus O’Donnell, said “what other organisation, public or private, could cope so well with so substantial an increase in its workload over a period of just a few months. I am proud of the staff in my Department who are doing so well.”

The network of new jobcentres gives us the ability to get help to where it is needed. Even before people lose their jobs, a Rapid Response Service can help people find their next one, giving access to skills training, and on site jobs fairs for example.

And at the end of last year the Pre-Budget Report gave DWP an extra £1.3bn – reacting promptly to the economic climate and maintaining our service to give more help to jobseekers from the first day of their claim.

From April we are investing a further £500m to guarantee more support to every person looking for work for longer than six months. We will subsidise employers to take on people – with up to £2500 for recruitment and training.

We will give new training places to help unemployed people make the most of their chances of getting jobs from the 500,000 vacancies in the economy, and to make sure that people are prepared to take advantage of the recovery when it comes.

And we will help people set up companies, with advice and some initial funding.

A key principle of our work is that the longer a person claims the more support they will receive, and the more we will expect in return. And Jobcentre Plus is stepping up to deliver this support.

Over the last few years, DWP has an efficiency record that private companies might well be proud of. We had a gross reduction in staff numbers of 40,000 – or one third. We achieved savings of £1.5 billion. Our budget is falling in cash terms, as we achieve further efficiencies. The volume of claims we are dealing with each week has doubled. Yet we are meeting all our key output targets, including processing claims and seeing our customers for appointments.

The best of all worlds

So, there is professionalism in the public sector. But equally there is a genuine public service ethos to be found in the private sector too.

My department understands this as well as any in Government. Nearly a half of our budget is spent with outside organisations.

In employment, we spend well over £1bn a year on these contracts and will be increasing this in the future to help even more of the most vulnerable in our society back on the way to work.

It was because we strive to improve the way that we work with our partners that the department produced a new commissioning strategy, almost a year ago to this day. A strategy which sets out principles to rationalise and simplify the way we organise our employment support contracts – to make it easier for you, and better for us when we tender for services.

Of course our provider organisations do not do so merely out of the kindness of their hearts – but in my visits to programmes up and down the country, it is clear that those working every day to support and guide people back to work are not doing so merely to protect their bottom line. Public service ethos is not a monopoly of public sector organisations.

And more widely as a department, we spend about £4bn a year, or more than half of our annual running costs, on contracts with commercial suppliers. Our buildings, our IT, our print services, and record storage are just some of the areas of our business where the principle of contestability and competitive neutrality has allowed us to ensure value for money, to improve performance, and to innovate in the way we do our business.

Perhaps most importantly of all, these improvements have enabled us to provide the best possible service for our customers, and they have allowed us to continue and expand programs that otherwise would have been at risk due to financial pressures on central Government.

At a time when the economic situation makes the government finances ever more constrained, we must continue to find the best, most efficient way to deliver what we do. So that we can continue to focus our energy and money at those who need it most.

The current climate also makes it ever more important that we press on with our welfare reform programme too. When it becomes harder to find a job, it is only right that we do ever more to help people in their efforts. We will not repeat the mistakes of the past when people were shuffled onto inactive benefits and left to fend for themselves.

A whole generation is still feeling the effects of such a short-sighted approach in previous recessions.

Our proposals to help more people, including lone parents and problem drug users, are being debated today during their committee stage in the House of Commons.

Some have suggested that now is not the time to press on with these vital reforms but I think they are wrong. Now more than ever we require consensus around the need to provide real help for people to find their way back to work.

And the private sector will play a critical role in delivering these reforms, as they have done to date. I want to make sure that we continue to get the best out of the sector, which is why last summer I launched the so called ‘right to bid’.

We have introduced a mechanism which complements the traditional tendering process – this means that where an external organisation believes they can improve the service that we provide, they can make a case for bidding to deliver it.

There is no such thing as an exclusive market on good ideas – especially in the realm of provision of welfare to work programmes, the experience, knowledge and inspiration of private companies is too good a resource to overlook.

Since the right to bid went live at the beginning of the year, we have received over 30 bids for ways to improve our provision, and are in the process of evaluating them.

A challenge to the audience

The right to bid is an example of what I believe can cut through the old, and misguided, dichotomy – the notion that we must choose between the state or the private sector. The hangover from the 70s that the state and the private sector somehow represent alternative, diametrically opposed poles when meeting social needs.

According to this argument, ‘more public’ means ‘less private’. That the state prevents the private sector from doing what it does best. Or that if the state would only withdraw, the private sector would be able to take its place.

I not only disagree with this view, but believe it profoundly misunderstands – and simplifies – the nature of the relationship you are forging with government.

The fact that 30% of the business undertaken by BSA members comes from public sector organisations gives the lie to the notion that each sector can somehow operate in hermetically sealed isolation.

Over the coming years we want to grow considerably the market for supporting people off benefit and into sustainable work – through our alphabet soup of reforms: FND, IDEAS, Invest to Save, ESF provision, Gregg pilots etc.    

I want yet more major organisations with a track record of effective management and delivery of services to get involved in delivering welfare to work programmes in the future.

We are holding a series of meetings around the country, beginning this week, to promote market interest in welfare to work delivery, and I would urge those of you with an interest in this area to get involved, to understand more about what we can offer each other in the future. More importantly what we can together offer to help transform people’s lives.

One way that many companies have already got involved is by recognising the mutual interest that government and business has in tackling the current rise in unemployment.

Several of you in the room represent companies that took part in the recent National Employment Partnership meeting with the Prime Minister.

Yet more of you have already signed up to our successful Local Employment Partnership initiatives. More than 20,000 employers already work with us to recruit staff, resulting in nearly 120,000 people getting in to work to date – often those who are sometimes known as the harder to help – people with multiple barriers to getting back to work, people whose lives have been improved dramatically as a result of the work they have secured through the partnerships.

This is of enormous benefit for those who get a job, of course. But equally Local Employment Partnerships benefit the employers too – making recruitment easier, increasing pre-employment training, and offering ongoing support for their new staff.

I urge those of you from companies that have yet to take this step to talk to your colleagues and to us, to see the advantages that taking part in the scheme can bring to your businesses as well as to the country as a whole – and sign up to a partnership too.

As you get more involved, I would also encourage you to become yet more engaged.

One of the enormous benefits of an organisation such as the BSA is that you can collectively state your case, challenge government to improve and respond to your concerns.

By so doing, we can continue to improve the relationship that we have, building on the success that has already been achieved by the partnership between the public and private sectors. To continue to ensure that the services we provide together to the businesses and people of this country are as efficient and as effective as they possibly can be.

Thank you