NIACE and the Centre for Economic and Social Inclusion are delighted to announce a new strategic alliance today (MONDAY 2ND FEBRUARY 2015).
The new partnership will provide a groundbreaking offer across the employment and skills sectors, with a strong focus on the economic growth and social inclusion agendas of both organisations.
Both organisations seek to promote opportunity for individuals, business success and economic prosperity. The new strategic alliance will exert a strong influence on learning, skills and employment policy, strive to improve delivery of services that can help people succeed in the labour market, and continue to fight social exclusion across UK society.
Together, NIACE and Inclusion offer substantial expertise in both delivery and research across learning, skills and employment services. Through this alliance, they aim to develop new services to help people succeed in the labour market and which will help policy-makers tackle social exclusion, an agenda at the heart of both organisations’ core values.
The strategic alliance will focus on five key areas:
1. A united and powerful voice on employment, skills and lifelong learning – promoting social inclusion and economic growth
2. Integrated, practical research and policy development providing real benefit to people, employers and the local and national economy
3. A new national events, campaigning and public affairs function, bringing the benefits of better integrated employment and skills provision to citizens, institutions and to decision makers across the political spectrum
4. Improving how we deliver our services in cost-effective ways
5. Developing the options for closer working and potentially full merger later in 2015.
David Hughes, NIACE Chief Executive, said:
“I am delighted to announce the strategic alliance with Inclusion, with the full backing of both organisations’ Boards. NIACE and Inclusion have collaborated successfully in previous years, and we share ethos and values in tackling acute disadvantage and promoting people’s success and prosperity in the learning, skills and employment systems.
“There is widespread agreement that the fracture between the employment support and skills systems is a pressing challenge for the next parliament. Building on our 2015 Manifesto, this strategic alliance puts us in a fantastic position to tackle those challenges head on in a new, creative and sustainable partnership for the next five years and beyond.”
Dave Simmonds OBE, Centre for Economic and Social Inclusion Chief Executive, said:
“We are delighted to be forming a new strategic alliance with NIACE. We are convinced that together we can have a greater impact on policy and practice in learning, skills and employment. We want to create a powerful new voice for those that need high quality learning, support to find work, and have opportunities to progress in their careers.”
“Our strategic alliance will combine our expertise to offer more to our stakeholders. It will create exciting opportunities to deliver new services, more research and new ideas in the challenging times ahead. Together we will forge a partnership that will be firmly focused on improving skills and employment support for everyone, but especially for those who need it most.”
The Strategic Alliance will take effect from Monday 2nd February 2015.
Damon Gibbons of Centre for Responsible Credit, responds to ResPublica report on payday lending
This Monday saw the publication of a new report from ResPublica: ‘Climbing the credit ladder: short term loans as a path to long term credit’. The report was financed by the main payday lending trade association, the Consumer Finance Association (‘CFA’), and is co-authored by ResPublica staff and Professor John Gathergood from the University of Nottingham. It marks another stage in the CFA-led strategy to defend the payday lending industry by raising fears of a growth in illegal lending arising from supposed over-regulation.
Just two weeks ago the CFA published results from a YouGov survey of people who had been declined payday loans, which reported that four per cent of declined applicants had gone on to use an illegal lender. This figure is likely to be subject to a significant degree of sampling error but that was not mentioned in the CFA press release and the survey questions and raw data have not been published. There also appears to be some confusion as to the precise type of illegal lending that is being used, with the CFA also using the term ‘unlicensed’ lender, which may distinguish them in some way from the traditional image of ‘loan sharks’, operating with violence. Interestingly, some 76 per cent of respondents did not know whether the lender they subsequently used was licensed or not, which may also raise questions about respondents reporting on their experience accurately.
Nevertheless, Monday’s report uses the four per cent figure (alongside lender estimates that the FCA’s proposed cap and increased regulation could result in as many as 50 per cent of current customers losing access to credit) as the basis of an argument in favour of retaining high cost short term lending. ResPublica and the CFA argue that although this sector must be ‘shorn of its negative aspects’, it should also be preserved to ‘provide a bulwark against illegal lending’. One of the main recommendations is for the Financial Conduct Authority (‘FCA’) to commission research to understand what happens to people when they are refused access to payday loans, including whether or not payday loans are ‘welfare enhancing’ because, it is argued, they prevent people from incurring higher charges (for example, by entering into an unauthorised overdraft) or resorting to illegal lenders.
ResPublica is of course coming rather late to this issue, and it is perhaps worth reminding them of the ‘negative aspects’ of payday lending which some of us have long played a part in highlighting and which we are only now beginning to get tackled. Despite a long campaign of denial by lenders and the CFA, and the initial reluctance of regulators to investigate, these are now all too apparent. We now know, without any equivocation, that lenders systematically fail to assess the affordability of loans; that business models are based on trapping people in ongoing ‘credit dependent’ relationships, requiring them to roll over borrowing or increase the level of their borrowing on a frequent basis; that the use of Continuous Payment Authority and a scandalous lack of care for the borrower leaves people in financial difficulties, without sufficient money for food or other basics; that default charges are excessive and punitive; and that lenders are guilty of intimidating collection practices and fail to provide effective assistance to people in debt.
Self regulation in every one of these respects has been an abject failure and regulators are only now putting in place the measures required to force the sector to clean up its act. Chief amongst these is the price cap, which offers the potential (if set at a low enough level) to ensure much greater responsibility in lending practice; end the exploitation of households in desperate financial positions and prevent lenders from profiteering from driving borrowers into default. A cap on the total cost of credit, combined with restrictions on rollover lending and repeat borrowing introduced in July 2014, are undoubtedly the correct tools for the job although the FCA has not been convincing about the level of the cap and why two rollovers remain permissible for a loan product which is marketed on the basis of meeting the need arising from small sum cash flow problems. The current rules appear to accept that many loans are simply unaffordable from the outset and allow the lenders to profit on this basis. The FCA has also failed to put forward effective measures to prevent repeated borrowing and the simultaneous use of multiple lenders.
The fear of reduced access to legal high cost lending and the supposed potential for this to result in greater illegal lending has been apparent as one of the the main reasons for the FCA’s over-cautious approach and the ResPublica/ CFA report plays to this. Yet, there is no evidence that illegal lending has increased during the period since the restrictions on rollover lending have been brought into effect and since the regulator has upped its game in scrutinising lending decisions. According to the ResPublica/ CFA report the number of payday loans made by CFA members peaked at around 1.2 million in the final quarter of 2012. This was prior to the introduction of restrictions on rollover lending, and it was not until October 2013 that the FCA set out its proposals in this respect and in relation to affordability assessments. Despite this, the number of payday loans issued by CFA members fell over the course of 2013 to around 800,000 per quarter as the industry responded to greater scrutiny and was put on notice by the FCA of forthcoming regulation. Despite this reduction in payday lending there is no evidence of an increase in illegal lending. In a recent response to a Parliamentary Question concerning the work of the Illegal Moneylending Team in England, the Department for Business, Innovation and Skills revealed that in 2012/13 the team conducted 522 investigations but this dropped dramatically to 399 last year – a fall of 23.5 per cent. This pattern appears to be similar to that experienced in Japan where the expansion of illegal money lending grew alongside the growth of legal high cost credit. Following the implementation of regulatory measures, including a tightening of its price cap, in 2010 the use of both legal and illegal money lenders has reduced.
Whilst we support the call for further research concerning what happens to people who arerefused payday and other high cost credit we need to ensure this is balanced by also looking at the long term outcomes for people who have been regular users. Far from protecting people from illegal lenders the expansion of high cost short term credit makes a bad situation worse for many borrowers; is likely to increase borrower desperation and could drive some to turn to illegal loan sharks. Prior research, focused on the door to door lending market, has indicated that over 50 per cent of people using illegal loan sharks have also got outstanding loans with high cost door to door money lending companies. It is therefore nonsense to suggest that illegal moneylending arises in response to a high cost legal lending ‘vacuum’ as some of the contributors to ResPublica’s report have previously suggested. If this were the case, then there would have been a collapse in illegal lending activity in recent years as a result of the payday sector’s expansion, but this has not been the case. During the years of payday lending’s expansion the number of investigations by the Illegal Moneylending Teams increased.
Whilst accepting that the number of investigations conducted by formal teams is also influenced by their own capacity and the level of resources dedicated to detection, the reality is that the dynamic underpinning the use of illegal moneylenders is much more complex than the defendants of legal loan sharking are prepared to admit, and in most working class communities it is heavily associated with wider social problems, including drug and alcohol abuse. Despite all the claims made by the defendants of high cost credit providers of their desire to prevent illegal loan sharking not one of them has considered it sufficiently important to research an alternative to the pro-market ‘credit vacuum’ theory and the ResPublica/ CFA report does not even consider this to be a possibility.
Similarly, the claim put forward by Respublica and the CFA that payday loans are ‘welfare enhancing’ needs to be treated with considerable scepticism. Although it is true that a payday loan can appear to be a better option in some circumstances than an unauthorised overdraft (see our earlier report from 2010), whether this is actually the case or not depends on the specific financial situation of the borrower; the particular charging policies of the bank; whether the loan is rolled over; and what happens in terms of other, often severely, welfare limiting decisions that have to be made in order to repay the payday loan and its accrued interest and other charges later. A similar set of factors needs to be considered when assessing whether or not taking out a high cost loan is ‘better’ than going into arrears with a household bill or other credit agreement. We need to develop a consistent approach for measuring the relative welfare impacts for households of using, or not using, payday loans. On developing this methodology, the ResPublica/ CFA report is completely silent. We argue that looking at only the immediate short term implications of whether a bill was paid or an unauthorised overdraft fee is incurred is misleading: the longer term consequences of using payday loans need to be factored in. And the costs of those are likely to be borne by more than just payday borrowers themselves. The widespread social costs associated with long term use include physical and mental health problems arising from cold homes, poor diets and increasingly hungry mouths as well as missed rent, Council tax and utility bill payments. A complete analysis of these social costs of high cost credit (not just payday lending) is urgently needed but ResPublica and the CFA are silent about any of them.
More fundamentally still, the Respublica/ CFA report falls into the trap of accepting the wider consumer credit market as it is. This is highly regressive in its pricing structure, with the poorest borrowers segmented into a group which must meet the full costs of its own risk, and with banks and credit card providers also guilty of many of the same predatory practices as payday firms. Creating a ‘ladder’ to these other forms of lending, through increased data sharing as is proposed in the Respublica/ CFA report, is not a real solution to the problems faced by low income consumers: who are systematically ripped off by the entire system. Indeed, many will already have considerable outstanding credit card and overdraft debts. Why is a 'ladder' back to these desired when they have in fact contributed to people having to turn to higher cost lenders in the first place?
It is time to recognise that data sharing is the bedrock on which the segmentation of the market and continued targeting of the poorest consumers with more ‘innovative’ high cost and exploitative products takes place. Payday loans are simply the latest in a long line of products designed to rip off those who are already in financial difficulties and who are unable to make ends meet due to inadequate incomes and rising cost of living. Regulating payday is needed, but unless a fundamental shift in the way the financial services system operates takes place there will be other products to perform the same role along shortly.
A new approach is needed: one which limits the extent of risk based pricing and recognises the fundamental need (and possible ‘right’) of all sections of society to access small sum credit at an affordable price. To start to achieve that the regulator should begin by extending the proposed total cost cap to all sections of the consumer credit market. That would begin to counter the constant churning of credit agreements and long term charging of interest on interest which serves little real economic purpose and creates major hardship for households. The FCA also needs to put an end to banks profiteering from default and overdraft charges, which payday lenders are so keen to compare themselves with.
Ultimately, we need to recognise that there is no ‘market based solution’ capable of delivering a fair credit deal for lower income households. Offering credit to people whose disposable incomes are too low or who are already over-indebted but who nevertheless have ongoing cash flow or investment needs will need to be subsidised in some way – either by the taxpayer; by better off consumers of financial services; or by employers paying decent wages and offering more secure employment. Politicians and regulators should ignore the arguments of the legal loan shark firms and their apologists and focus instead on how to create a genuinely progressive financial services system as part of a wider strategy for national renewal in response to our ongoing personal debt crisis.
Damon Gibbons, 5th November 2014
There are more clues emerging about where we are in the recovery as far as job-filling is concerned. The Bank of England has been looking at trends in job to job moves. So has the Office for National Statistics, in its October Economic Review. The Bank looked at the headlines, while the ONS has dug more deeply.
The headline finding is that the proportion of those in employment who move to new jobs each quarter is still well below pre-recession levels. In the last three months before the recession began, 2.6% of people in jobs moved to new jobs. In the latest quarter, 2.2% did. While this is a substantial recovery from the pit of the recession, when the proportion of those moving to new jobs fell to 1.7%, it still remains well below where it was.
To put this another way, the proportion of workers moving jobs fell by 35% in the recession. It has since recovered, but remains 15% below pre-recession levels.
Chart 1 shows the trends in the rate at which people find new jobs for those who were already in work, were unemployed (looking for work and available for work) or were inactive (not looking for work and/ or not available for work). I have put these on a common scale with the pre-recession job-finding rate at 100, so the lines represent the per cent of the Jan-Mar 2008 rates for all three groups.
The recession collapse in the rate for those moving from one job to another was larger than the change for those moving from unemployment or from inactivity into work. Perhaps unsurprisingly, all the trends share in both the recession and the recovery, with the timing of changes very similar.
The rates for the inactive are rather more jumpy (technically, volatile) than the others, which could be randomness as well as different changes affecting different groups that are inactive, such as students, the long term sick, and returners from caring for family.
However, when we go a little more deeply into the figures, the relationship between the job-finding rates for the employed and the unemployed look remarkably stable over the period since 2003 (the period ONS give us the figures).
Chart 2 shows the job-finding rates for employed (along the bottom) and for the unemployed (up the side), with the line representing the path over time. Starting from the top right of the chart (2003), job-finding rates slide down towards the bottom left (i.e. rates fell for both the employed and the unemployed), recover slightly, slide again (the recession) and then recover.
A number of things stand out from this.
First, the data is almost a straight line – with a coefficient of determination of 0.97. This is almost a perfect fit, and shows that the changes over the recession are consistent with those both before and after.
Secondly, it is clear that the decline in job-finding rates began well before the recession, with rates falling between 2004 and 2006 before seeing a mini-recovery in 2007-8. Some have attributed the fall in job-finding rates among the unemployed as being due to issues inside Jobcentre Plus at the time, followed by a re-imposition of the full JSA regime with tighter conditionality.
However the third thing that stands out is that the falls in job-finding rates are remarkably similar between those in-work and those unemployed. Does the parallel fall in job to job moves disprove the theory that changes for the unemployed were being driven by Jobcentre Plus? Possibly, but some of those job to job moves may actually be people moving through unemployment (as they are only surveyed every three months).
Fourthly, finally, looking across the whole period, it is striking that job finding rates have only regained half of the ground lost on the boom years of the early 2000s. In terms of job-finding, we are still a long way from recovery.
Given that the job-finding rates for the employed and the unemployed are closely linked (and those for the inactive slightly less so), are they linked closely to other economic indicators, and what does this mean for economic management and for expectations for programmes? Watch this space…
But, these figures are not the highest published working age figure - that would be 75.9% in Summer-Autumn 1974. Even leading up to the 2008 recession, the employment rate peaked at 74.9%.
So, the latest 'records' are about two percentage points below those before the recession.
Why are employment rate records being claimed? The answer is that what is meant by 'working age' changed in 2010 when women's state pension age started being raised towards 65 - a process that will not be complete until 2018 - after which pension ages will rise for both men and women.
Before the recession, employment rates were calculated on the state pension age that was current at the time - 60 for women and 65 for men. Since 2010, figures have been published on the basis that retirement is at 65 - so is automatically lowered because women's state pension age is not 65 yet.
Chart 1: Employment rates on age definition used up to 2010 and currently
We estimate that around 1 percentage point of the recent employment and inactivity rate rise is due to state pension reform, not any other part of welfare reform. There is another 1 percentage point rise in employment rates, and fall in inactivity rates, 'baked in' due to further pension reforms.
In 1995, legislation was passed to equalise state pension ages at 65 between 2010 and 2020. This process started on time, and was in train before the 2010 election. The Coalition Government legislated to speed up the change so that pension ages will be equalised at 65 in 2018, and then pension ages will start to rise to 66 in 2020.
This means that we are half way through the process of equalising pensions at 65 by 2018.
Chart 2 shows the gap in employment rates between the 16-64 working age measure and the current pension age measure. Before the implementation of pension reform, employment rates on a 16-64 base average 2 percentage points below those on a current pension age (then 59/64) basis. As pension reform has come into force, the employment rate gap fell to 1 percentage point.
Chart 2: Gap between 16-64 and 16-current State Pension Age employment rates
Chart 3 shows the position for economic inactivity (retired people are included as economically inactive). It shows the other side of the coin to that for employment rates. We can conclude that 1 percentage point of the fall in 16-64 inactivity rates is due to pension reform, and there is another 1 percentage point to come when pension equalisation is completed in 2018.
Chart 3: Gap between 16-64 and 16-current State Pension Age inactivity rates
So, is it fair for the Government to claim employment rate and inactivity rate records? It is clear that the previous Government's record should be judged against the working age measure then in force, including the start of implementing pension reform, while this Government's record should be judged against the (moving) current state pension age.
Therefore, we haven't yet achieved record employment rates. We are not far off, but not there yet. If Pension Reform (implemented by Labour and accelerated by the Coalition) is part of welfare reform, then these changes are due to welfare reform, but this isn't the message given by the media - it's about being tough on all working age claimants.
The benefit cap has always been a solution looking for a problem, and today’s headlines suggest that Policy Exchange want to widen that search.
The cap isn’t cutting benefit spending. The latest government figures suggest that the cap has reduced welfare spending (excluding pensions) by around 0.08%. Policy Exchange’s proposals would save the same again. Both of these figures are so far within the margin of error for forecasting as to be basically meaningless. And even these savings are likely to be over-stated, as money taken away in benefits is often replaced with discretionary housing support (funds that will all but run out next year).
Nor does the cap seem to be leading to more families finding work or moving home: the same government data shows that as many new households become subject to the cap as leave it each month (although you wouldn’t guess that from the press release).
The cap is, however, having a huge impact on those households subject to it, and the 100,000 children who live in them. We have done extensive research on the cap, interviewing those affected both before and after its implementation in London and the South East. We’ve found that the overwhelming response of families has been to cut back, to go without (on food and heating), to run up debts and – often – to fall back on discretionary support from the public purse or charities and faith groups. Many have looked for work, far fewer have found it – not surprising, given that two thirds of families affected are headed by lone parents, many with pre-school children.
Where parents have found work, it’s often been no mean feat – with older children left looking after younger ones, and parents taking anything going if it adds up to enough to re-start their benefits. Indeed our work for Brent Council has shown that where households do successfully escape the cap, their income from benefits increases - by on average £200 per week. Again this isn’t surprising, given that the cap is being driven mainly by sky-high rents rather than ‘out of work’ benefits.
The cap, then, isn’t about jobs or finance. It’s about ‘fairness’. As the Chancellor put it, announcing the cap (much to DWP’s surprise) at the Conservative Conference in 2010:
“A maximum limit on benefits for those out of work, set at the level that the average working family earns. Money to families who need it - but not more money than families who go out to work. That is what the British people mean by fair - and we will be the first Government in history to bring it about.”
It looks like Policy Exchange will propose to extend this further, and the Conservative Party may yet go further still (with some reports that they may propose a cap of £350 per week). Neither, though, are talking about a cap set in line with regional earnings – of course they’re not, given that average earnings in London are £650 a week, and just 2,200 households affected by the cap receive more than this.
Perhaps wrongly, I had expected better from Policy Exchange. Only last week they described the £13 billion over-spend on welfare in this Parliament as “an understandable error inherent in producing forecasts in a period of economic uncertainty.” Yet today, they propose a £100 million potential saving as if it is a serious contribution to reducing the deficit.
The sad fact is that policy wonks like us fixating on the benefit cap does nothing to fix public finances, nor to get people back into work. Meanwhile the cap continues to cause uncertainty, distress and hardship for 27,000 families and 100,000 children. We can surely do better than this. As Policy Exchange put it last week, what we really need is “a sensible debate about the future options.” And as we’ve said before, that should start with a hard look at how we can fix our broken housing market, and improve how we support those furthest from work.
The IntoWork Convention 2014 brought together a wide variety of people involved in helping people find work, keep work and progress in work. Over two days engaging debates and discussion promoted learning about current and future challenges to the sector.
Please click on the pictures to hear more from some of the speakers.
Dave Simmonds OBE, Chief Executive of the Centre for Economic and Social Inclusion, delivered the following speech to the IntoWork Convention on 8 July 2014.
Last year I took a brief look backwards at the ups and downs of welfare to work and stressed how the last year would be one of “rolling up our sleeves” and getting on with the job of delivery. That was certainly true.
But this year I want to keep my eyes firmly on the future. There are two reasons for this: 1) growth appears to be firmly entrenched; and 2) we are now in the run-up to the General Election and the next time we meet will be listening to the plans of the next government.
Now, before we dive into big policy we need to remind ourselves that we are here to talk about people – how we help turn around the lives of millions of people. How well we do our jobs, is how well we give new hope to unemployed people.
We’re here to build employability, build confidence and motivation, build hope. Too often we can forget this in the struggle to meet targets, to win the next contract, and to balance the books with austerity budgets.
It is not easy, but we should recognise the efforts that everyone – from frontline advisors to top managers – make every day to help turn around the lives of some of our most vulnerable people.
A year is a long time in jobs market. Last year most forecasts were saying unemployment would stay broadly flat – but it hasn’t. Unemployment has dropped 15% and JSA has dropped 24%.
Vacancies are up and pretty much every industry indicator is now on the up side.
But we can’t afford to be complacent. Long-term unemployment has dropped but by less, at 11%. Youth unemployment is still far too high and we have some way to go before we are back at pre-recession levels for both young and old.
So my theme for today is that we must all be thinking ‘growth’. I welcome George Osborne’s commitment to full employment, made in March this year, and rebalancing growth so that the whole of the country benefits.
In times of growth there are two main tasks: 1) providing the skilled and motivated employees which employers increasingly need; 2) making sure those who are disadvantaged in the labour market feel the benefits of growth.
First, the skills challenge. If you think of the country having an average qualification level then currently we have just over 5 GCSEs. However, employers want ever more qualified employees.
Where we need to be in 2022 is an average qualification level of 3 A levels – a big jump that cannot be met by young people alone. Adults already in the workforce will need to be increasing their skills as well.
Coming out of previous recessions we have seen the policy debate shift from managing large-scale unemployment to tackling the skills deficit. We will doubtless see the same shift again.
So how we deliver a more integrated employment and skills offer should be a national priority.
The second task is how we make sure it is ‘Growth for Everyone’, to use the CBI’s title of their report last week. There are three challenges:
First, low skills. We will progressively have a surplus of people with low and intermediate skills, and a deficit of people with high skills. The competition for low end jobs will become ever tougher – on top of the existing insecurity of zero hours, part-time and seasonal jobs.
This needs to be seen in the context of the reducing value of wages – down an average of 7% since the start of the recession. Now there are more people in work and in poverty than out of work and in poverty.
Work remains the best way out of poverty but only if people can progress in work – increasing their earnings, increasing their hours, or both.
Most peoples’ ambition is to move from casual work to stable careers. That should be our ambition as well.
Second, the most disadvantaged in the jobs market. We must not repeat the mistakes of previous periods of growth following the ‘80’s and ‘90’s recessions. Too many were parked on inactive benefits and insufficient emphasis was given to re-designing labour market programmes to meet the needs of the most disadvantaged.
Having worked in labour market policy through those periods, I am passionate not to see those mistakes made again. I will gladly put my hands up and say I also made mistakes.
So let’s not lose the opportunity this time. This does mean being honest with ourselves and ask whether what we are doing now is working for disadvantaged people?
Are we sanctioning those who need help not punishment? Are we parking people on programmes, rather than guaranteeing services? Are we working in public sector silos when people need personalised services?
In our report ‘Fit for Purpose’, launched last week, we showed that we’re not supporting enough ESA claimants and for those that we are supporting – we’re not doing a good enough job. This is why, for the future, we need a new programme that is focused on people with disabilities and health problems.
The same scrutiny needs to be brought to bear on what is needed for other disadvantaged groups. Without it, it will not be growth for everyone.
Third, some local economies are a long way from full employment.
The government acknowledges that unbalanced growth is not good for the country and the economy. That is why they announced the Local Growth Funds yesterday and why Lord Adonis for the Labour Party has advocated going much further in devolving funding.
At the end of the day it is local economies themselves that have to mastermind their renaissance. This needs to be a partnership between employers and local government – which is why Local Enterprise Partnerships is the right approach. Even if their lack of resources and capability to date leaves many struggling to match the aspiration.
Local partners can’t create local solutions for local problems if they don’t have some degree of control over the resources for employment and skills. The Labour Party is now publicly committed to greater devolution and we know employment support will be devolved to Scotland, irrespective of the independence vote. I suspect Wales will not be too far behind. This will leave DWP controlling England. I will leave it to you to decide if you think that is good or bad news.
Localism also makes sense for the challenges I have outlined. We need to integrate employment and skills – best done at the local level. We need to integrate employment and health – best done at the local level. We need to address families in poverty – best done at the local level. We need to be better at meeting employer demand – at the local level.
It will not be easy and will involve some radical thinking and changes for all, including Jobcentre Plus.
Now I will keep saying it – Jobcentre Plus is a national asset. But current policies seem intent on turning it into a box-ticking machine pursuing a hasher benefits regime. Many were shocked by the dramatic increase in sanctions and this was not because claimants were suddenly more wilful.
Success for Jobcentre Plus should be good job matches leading to sustained employment not how may sign-off benefits to reappear again later.
To help fuel growth Jobcentre Plus in the future will need to focus on: 1) providing the best job matches for local employers; 2) increasing opportunities for disadvantaged people.
In the midst of these debates, let us not forget that welfare reform has not gone away. I keep saying the roll-out of Universal Credit is almost with us – only for it to roll-back rather than roll-out!
But welfare reform that involves cuts is now in place. The majority of the impact falls on hard-working low income households. Working with advice agencies and social housing landlords are further reasons why we need to think local.
I haven’t talked about the Work Programme and don’t intend to. After three years the pros and cons are now pretty clear. Looking to the future we have to be asking what we must keep and what we must discard if we are to meet the challenges I have outlined.
At Inclusion we are getting ready for the challenges that growth will bring. We all must.
We want to help inform the debate and bring partners together to keep the best and reform the worst.
So enjoy the first IntoWork Convention.
We are one industry – but with diverse skills, capacity and goals.
Together we have one task – sustainable jobs.
I hope this Convention helps you achieve your aims for the coming year.
The Rt Hon Stephen Timms MP, Shadow Minister for Employment, delivered the following speech to the IntoWork Convention on 9 July 2014.
I want this morning to set out in greater detail our plans for employment support in the event of our being elected next Spring.
After three damaging years of flat-lining, the economy is growing. New jobs are being created. We hope that will continue to be the case for some time. But its going to take a great deal of effort to deal successfully with the legacy impact in the UK of the global financial crisis, and the three years after 2010 with hardly any growth. The return of growth now creates the opportunity to address it, and its an opportunity we have to grasp.
We are concerned in particular by three major problems in the labour market:
I want to say a little about each of those, because addressing each of them is shaping our policy thinking. And serious skills shortages – and the growing mismatch between the shrinking number of unskilled jobs and the large number of unskilled people – are also underlining the need for change.
Unemployment among young people has thankfully come down in recent months, but at 850,000 – a youth unemployment rate almost three times the overall rate – its far too high. It spells trouble not just for those out of work now, and the Prince's Trust has highlighted links between unemployment and mental health problems for young people, but for the economy in the future.
Just compare unemployment by age in the UK and Germany. Overall unemployment is higher, of course, in the UK. But, for over 30s, there is hardly any difference between the two countries. The overall disparity is almost entirely accounted for by higher unemployment among the under 30s, and in particular by much higher unemployment among young people under 25. We can’t let that go on.
In his review on growth in the UK economy, Lord Andrew Adonis points out: “The UK has near record levels of youth unemployment and chronic skills shortages.” We have to do a far better job – recognising how the economy is changing – of preparing young people to contribute.
Long term unemployment
The number of people – of all ages – out of work for two years plus reached a twenty year high last year. It has thankfully come down a little since then, but not very much. And we know that those who have been out of work for a long time will be at the back of the queue for the new jobs being created.
Inclusion’s Tony Wilson and Paul Bivand have pointed out in a recent pamphlet for the TUC: “hiring rates for the longer-term unemployed remain far below those for shorter-term jobseekers, and hiring rates have fallen significantly for the very longest unemployed (more than two years).” Its much harder to get in to work if you've been out of work more than two years.
Its going to require serious effort to support those people to make a contribution again, to avoid creating a permanent drag-anchor on the productiveness of the UK economy.
People with health impairments
IPPR’s research for its “Condition of Britain” report has pointed out that we have a much lower rate of employment among people with health impairments than some other OECD countries. And 93% of people on Employment and Support Allowance have failed to secure a sustained job outcome after two years on the Work Programme. We have to do much better. We are looking with great interest at the proposals made in this area in the last few weeks both by IPPR and by Inclusion.
For people on JSA, we are committed to the urgent introduction of a Compulsory Job Guarantee. Young people who have been out of work for a year, and over 25s who have been out of work for two years will be guaranteed the offer of a job – and, where possible, a choice of jobs. And once the offers have been made, their Jobseekers Allowance will stop.
The jobs will be intended to last at least six months, to be for at least 25 hours per week, and paid at least at the National Minimum Wage. The model is based on the Future Jobs Fund, in place for young people until the last election, and has been in use since in successful initiatives like Jobs Growth Wales. Where necessary the Government will pay the full six month wage cost to ensure that a job is available.
For us, this is the key to raising substantially the overall performance of employment support and ensuring that we re-engage many of those – young and not so young – who are not able to make a contribution at the moment. We have set up a Compulsory Job Guarantee Advisory Board to work with us through the details of making the Guarantee successful. We would welcome ideas about the interface between the Work Programme and the Guarantee when it is first introduced.
I want to say more today about how we want to support people on Jobseekers Allowance before they reach the one year or two year point when the Job Guarantee kicks in.
The Youth Allowance
Ed Miliband has recently endorsed a proposal made by IPPR in “The Condition of Britain” for 18 to 21 year olds. IPPR argues: “Our goal should be for all young people to be earning or learning… Currently young people in this age group are sucked into a benefit system that is designed for adults who have lost their jobs rather than for young people starting out on their careers”.
The proposal is that young people in that age group becoming unemployed should not be placed on JSA, but instead on a new Youth Allowance, if they have not yet been in employment for a year, and they have not yet achieved a level 3 qualification.
The Youth Allowance will be paid at the same level as Jobseekers Allowance, but it will be available to people in full time learning. As IPPR sets out: “It would aim to increase the number of 18-21 year olds remaining in education to gain the skills necessary to embark on a successful career”.
Taken alone, that would be a major new spending commitment. We have agreed to IPPR’s proposal that it should be funded by making the Youth Allowance means tested on the basis of parental income, along the lines of the system used for maintenance grants for higher education. On the IPPR's model, it could produce a small net saving to the Exchequer.
Replacing the Work Programme
Work Programme contracts are due to end in 2016, although there are rumours they will be extended to 2017. We will allow the Work Programme contracts to run to their conclusion. Terminating the previous programme early was a costly mistake made by the current Government, and it led to many months of lamentable performance as providers of the new programme struggled to find their feet. Its a mistake we will not be repeating.
A Labour Government would commission the successor to the Work Programme in a different way, reflecting other changes we will make – like the Guarantee and the introduction of the Youth Allowance – and to improve performance, and the experience of participants in the programme.
There has been valuable innovation on the Work Programme. We don’t want to lose the gains in efficiency which have been achieved.
But the National Audit Office has found that performance for JSA claimants – even after the terrible performance early on has been put right – is not exceeding previous employment programmes. And performance for ‘hard to help’ groups, like those on Employment and Support Allowance, has been very poor.
A wide range of evaluations have found ‘creaming and parking’. The NAO says that providers now spend less than half of what they promised to invest in groups furthest from the labour market. They also report DWP’s analysis of case files as showing that 46% of participants had not had contact with their work programme provider in the last two months. These are natural, commercial responses to the way the Work Programme was set up.
The Work Programme contract package areas have been too big. Some really good local organisations have been squeezed out, and capacity lost as a result. Local authorities have often played no role in the Work Programme – an omission which, in our view, we can’t afford. A survey of London local authorities found almost half felt they had ‘no influence’ over the Work Programme in their area.
So Labour would establish a national set of minimum s+tandards, including setting out the specialist support that should be in place for those with health impairments and others furthest from the labour market. We will consult on the best way to collect customer feedback and ensure compliance with these standards. One possibility would be to establish a regulatory body, but we would want to canvass industry views before deciding on the best way forward.
More disadvantaged claimants require more up-front investment. We will have to look at the balance between attachment fees and sustainment fees for those who are furthest from the labour market, while maintaining the strong emphasis on sustained performance which has been achieved in the Work Programme. We will retain payment by results.
We will commission the new programme at a more local level, on the boundaries of Local Economic Partnerships and Combined Authorities. Andrew Adonis has set out a compelling case for giving “city and county regions the powers they need to promote growth”. We agree, and the powers here are a case in point.
In the Work Programme, there are important additional benefits of a more localised approach. The current disjunction between employment support and skills support is a serious problem. Successive governments have been unable to line those two things up together.
But at a city region level, employers, providers, jobcentres and colleges can work together with local authorities to build a strategy to meet the needs of their local labour market. And the health service can be there too.
In those areas where combined authorities can demonstrate that they have the capacity to do it, we will devolve commissioning of the replacement for the Work Programme. We recognise, however, that, first time around, there will not be many regions able to take this on.
Funding to secure the contracts will be agreed on a conditional basis, along the lines of the Labour Market Agreements that operate in Canada. It will be based on previous performance within the area, with combined authorities able to keep savings from delivery above the baseline, but responsible for the costs if the delivery mechanisms they commission fall short of it. Delivery must meet the minimum standards that we will set out, and will be monitored on a national basis.
For those areas not yet ready to take on this level of risk, provision will be co-commissioned between the Department for Work and Pensions and local areas working together. Initially, that will be the majority. Local areas will feed in their local growth strategies to the DWP, and will sign off the commissioning strategy. Commissioning itself will be the responsibility of DWP.
We will then encourage combined authorities to develop the capacity to monitor the performance of the Work Programme contracts in their area, and to take a lead on commissioning next time around.
It is widely agree that the current system of classifying jobseekers in terms of the benefit they were in receipt of previously has not worked well. We think we have to come up with something much better.
We understand the scepticism in the UK – particularly in parts of Jobcentre Plus – about the reliability of up front job seeker classification of the kind practised in Australia. I visited Australia last year to see it in operation. It is clearly not infallible. But it works much better than classifying people on whether they were previously on Jobseekers Allowance or Incapacity Benefit – a distinction which, in itself, tells you very little about how much help they are going to need to get back to work.
We therefore agree with the Work and Pensions Select Committee recommendation, set out in their report in January that the department should “develop a ‘segmentation’ tool, to be conducted by Jobcentre advisers face-to-face with claimants, to allocate claimants to separate work streams according to their distance from the labour market and relative need for intensive employment support”, and that this tool should be ready in time for the new Work Programme contracts. In our view, the industry should be involved in advising on it, including drawing on the fantastic data providers now have, so that – as far as possible – the output from the tool will be of value to all providers.
We also agree with the Select Committee that Jobcentre Plus should be evaluated on the basis – not of benefit off-flow – but of “off benefit and into work” performance, on exactly the same basis as Work Programme providers.
The improved labour market is an opportunity we need to grasp. Our aim must be – as the title of the pamphlet by Tony Wilson and Paul Bivand for the TUC puts it – “Equitable full employment – delivering a jobs recovery for all”. The recovery isn’t delivering for far too many people at the moment. Without a change of policy, there will be a large, long term price to be paid.
Our aim is to develop policies that can deliver for everyone – policies we can quickly put into effect if we are elected to Government next year. And we look forward to working with everybody here, and with others, as we finalise the details of those policies over the next few months.