David Willetts

In a speech in Birmingham, David Willetts discusses the issue of worklessness and the many families who are let down by the benefit system.

“I want to focus on one of the most serious problems facing us and one which does not get the kind of attention which it warrants – the human tragedy of worklessness. Everybody thinks this is a problem which Gordon Brown is tackling with the puritanical intensity of a true heir of Stafford Cripps. If you follow this in the media, all you get is an endless stream of crackdowns. We all know the headlines. In the last three months alone, we have had:

• ‘Blair blitz on the loafers’ (Express, 1 Nov 2002)
• ‘Brown to send detector vans after job dodgers’ (Telegraph, 1 Nov 2002)
• ‘Take jobs or lose benefits, Brown tells workshy’ (Times, 17 Sept 2002)
• ‘Brown’s new war on the workshy’ (Mail, 17 Sept 2002)
• ‘Work or lose dole warning’ (Sun, 17 Sept 2002)
• ‘Chancellor to cut 26 weeks of benefit if jobless people turn down work’ (Independent, 17 Sept 2002)

In fact we have had so many crackdowns one is amazed that there is anything left to crack.

Unemployment measured by the claimant count is now down to 940,000 or 3.1 per cent of the workforce. (Office of National Statistics, Labour Market Statistics, 13 November 2002) The Autumn Statement on Wednesday reflected the Chancellor’s satisfaction – even complacency – in his achievement, with statements such as “Claimant count unemployment has fallen by more than 700,000 over the past five years to levels last seen a generation ago, and has remained below one million since the start of 2001 – the first time this has happened since 1975.” (HM Treasury, Pre-Budget Report 2002, p.66)

But such complacency is a far cry from the reality of life in many places around the country. To understand the real problems in hard-pressed communities we have to look beyond claimant count unemployment to many other measures of economic inactivity. Then the picture starts looking very different. After nearly six years of special schemes and initiatives, there are almost 8 million people of working-age who are excluded from the jobs market and the figure is higher than when Labour came to power. (ONS, Labour Market Statistics, 13 November 2002)

Let’s look at closer quarters at what is happening to four groups of people who make up such a large proportion of the people living on our tough estates. They might not be working, but they are not claiming unemployment benefit either:

• There are almost 2.7 million people of working-age who are not in employment because they are long-term sick or disabled. Most of them are on Incapacity Benefit. [DWP, Helping people into employment, p.6);
• There are 0.9 million lone parents on Income Support (ONS, Income Support Quarterly Statistics, 21 November 2002);
• There are 2.6 million economically inactive people aged over 50. (ONS, Labour Market Statistics, 13 November 2002) They are victims of what is probably the most prevalent and destructive form of discrimination left in our country – discrimination against older people – and may well want to work;
• And there are 1.2 million young people aged between 18 and 24 who are supposed to be helped by the main New Deal programme, along with a further 0.7 million people aged 16 and 17.

Let me look at each of these groups in turn.

People with disabilities

We have all heard the Government’s rhetoric on people with disabilities. Do you remember all those stories last year about MoT tests for disabled people which caused such understandable offence? Well what have Labour done to Incapacity Benefit, the main benefit for disabled people who are out-of-work? They have means-tested it, just as they have with so many other benefits.Yet despite this reduction in entitlement, there are currently 2.4 million people claiming Incapacity Benefit. (ONS, Incapacity Benefit Quarterly Statistics, 19 September 2002) That is the same number as when Labour came to power over 5 years ago. But the difference is that, at that time, the number of claimants had been falling for around two years. Since February 2000, it has been rising almost continuously. So Labour are back to where they started, yet the trend is still upwards. And even this is not the whole story because the number of disabled Income Support claimants has gone up in every year since 1997 and now stands at over a million people. (ONS, Income Support Quarterly Statistics, 21 November 2002) So we have ended up with the worst of all possible worlds: offensive briefing, more means-testing and more people on benefit.

Up till now, the Government’s main scheme for helping disabled people find work has been the New Deal for Disabled People. This has had so little impact that just 3 per cent of people invited to join the scheme even responded to the invitation. (Department for Work and Pensions Research Report 144, p.1) The main reason for this low take-up was that people felt too unwell to join. And, it is true of course, that some disabled people will never be in a position to take paid work. But we know from the Labour Force Survey that hundreds of thousands of disabled people do wish to work.

So how can we solve the apparent conundrum that people with disabilities want to work, but are not taking up the help on offer? The answer is that ministers fail to understand the importance of rehabilitative help. For many disabled people, the main obstacle to work is not a lack of access to job advertisements and other information, but the absence of the sort of rehabilitative support that private insurers provide to people with income-protection insurance. The lack of such support is probably a major factor behind the failure of the ONE Programme – according to the Government’s evaluation, “in the pilot areas, respondents in the sick and disabled group who had not participated in ONE were more likely to be in work than were participants.” The research concludes, “This finding is not easy to explain.” (DWP Research Report 126, p.14)

People who have been claiming Incapacity Benefit for a year or more have only a 1 in 5 chance of returning to work within 5 years. The private sector is far more proactive than the state in getting people back to work after an accident or serious illness and has a much better record. That is why we are looking anew at the proposal in our last manifesto to establish an Incapacity Benefit fundholder, which would both pay out the benefit and provide access to rehabilitative support.

Lone parents

Out-of-work lone parents have also gained little from the Government’s policies. The main scheme for helping them is the New Deal for Lone Parents. But this was shown by the Government’s own researchers to reduce the chance of finding work. They said, “17 per cent of lone parents in the prototype areas and 18 per cent in the comparison areas had moved into work.” (DSS Research Report, 108, p.4) In other words, the main scheme for helping lone parents is actually counter-productive.In this week’s Pre-Budget report, Gordon Brown made a great deal of extending mandatory work-focused interviews, which act as a gateway onto the New Deal for Lone Parents, so that they cover most out-of-work lone parents. But the evidence released by the Department for Work and Pensions just a couple of weeks ago shows that only 14 per cent of lone parents who are already meant to have had one of these compulsory interviews have actually had one. (DWP In-house Report 103, p.4)

We recognise that the quality of life for lone parents and their children is generally improved if the lone parent is in work. But – unlike the Government, who seem unable to recognise any form of childminding other than registered childcare – we also recognise that the parents of young children have a right to look after their own children without being forced out to work. Instead of the current Government’s unfocused approach, which tries to force all lone parents to attend interviews – but then fails to deliver anything for more than a tiny minority – surely it would be better to concentrate resources on those lone parents whose children have started secondary school? This is likely to be more effective than the New Deal for Lone Parents, both in terms of increasing the number of lone parents in work and in improving the life chances of children brought up in lone parent families. And, as the work by the National Council for One Parent Families’ suggests, it would also be more in line with people’s expectations about how lone parents should act. (National Council for One Parent Families, Lone parents and employment)

People aged over 50

Thirdly, people aged over 50. Everybody is focusing their attention on the state pension age, but forgetting that what’s really important is the retirement age. The number of economically inactive people aged between 50 and state pension age is 2.6 million (and 53,000 higher than when Labour came to power) despite the New Deal 50plus and the ‘tight labour market’ that we hear so much about. (ONS, Labour Market Statistics) In fact, if anything, the problem has got worse since the New Deal 50plus was introduced – during its first two years, the number of economically inactive older people grew by 25,000.Nonetheless, the Government have put forward some useful ideas on how to increase the number of people in this age group who are in work. Over two years ago, for example, they suggested allowing people to continue working part-time for their existing employer after beginning to draw their pension – something which is currently banned by Inland Revenue rules. The idea has been re-announced as a new initiative several times since then. But even though the idea enjoys support on all sides of the political spectrum, nothing has been done to implement it.

Young people

The final group I want to consider are out-of-work young people. They are meant to join the original New Deal scheme, the New Deal for Young People. But this has not been a success – one piece of independent research even suggests that 3 of the 4 New Deal for Young People Options significantly reduce the chance of finding work. (Employment Service Report 67, pp.4-5) That is why one of Gordon Brown’s latest initiatives is aimed specifically at people who have already been through the New Deal - it is really an admission that something is going seriously wrong.It is important to remember that many people on the New Deal do not even count as unemployed. That is one reason why ministers are able to claim such a big drop in long-term youth unemployment. Let me give you a statistic that puts the Chancellor’s claims into perspective. You have doubtless been reading all the problems of the German economy – and they are real enough – but let me tell you something you never hear. According to Eurostat, fewer than 10 per cent of people aged under 25 are unemployed in Germany. The equivalent figure for the UK, according to a recent parliamentary answer, is 12.1 per cent. (Hansard, 23 October 2002, col.316W)

That confirms that the New Deal is not working. But I have seen schemes that are effective and compassionate and really do help young unemployed people. Yet many of the charities and volunteers working with unemployed young people have not been able to get contracts under the New Deal to help them. In Birmingham, for instance, I was very surprised and disappointed that an American scheme, America Works, which had been so successful with young black people in New York, didn’t succeed in getting the tender for the New Deal. As always with this Government, it is the same story of the sheer complexity of the bidding process and the tendency of existing bureaucracies to capture new initiatives. That is why a reform of the New Deal with a much greater role for the voluntary sector will be at the heart of Conservative policies to help young unemployed people.

Workless households

The Government used to make a great deal of the link between the number of workless households and the incidence of poverty. They were right to do so because a community in which many families have no-one in work cannot possibly thrive. However, ministers have become much quieter about this in recent months. This is not – unfortunately – because the problem of workless households is now on the decline. On the contrary, I can reveal tonight what ministers do not admit in public. The number of workless households has been rising for two years and is 83,000 higher than in Autumn 2000. As a result, the number of individuals living in workless households has risen to 4.4 million, including 1.9 million children. (ONS, Work and Worklessness among Households Statistics)These figures on economic inactivity help to explain the gap between the Government’s rhetoric and what is really happening on the ground in places like Quinton and King’s Norton in Birmingham which I visited recently. Indeed, they suggest the gap between deprived areas and more affluent ones is becoming deeper. In some local authority areas, around 40 per cent of residents are now economically inactive. (ONS, Annual Local Area Labour Force Survey 2001/2002) And another new statistic confirms this trend. A few days ago, the number of people on Income Support overtook the level it was at in May 1997. There are now 4.0 million claimants and every major category of claimant is growing. (ONS, Income Support Quarterly Statistics, 21 November 2002)

Conclusion

The evidence shows that it is no longer just one or two indicators that are travelling in the wrong direction. All the main measures of worklessness are growing, including those on economic inactivity, Incapacity Benefit, Income Support, workless households and even – in recent months – ILO unemployment. Despite the variety of Whitehall-inspired welfare-to-work schemes, there is a growing problem of worklessness and millions of people are being left behind in Labour’s Britain.That is why we are looking at new ways to bolster locally-based voluntary and faith-based groups, it is why we have promised to reward successful innovation and it is why we have pledged to reduce the swathe of red tape that is strangling some of the best projects in our inner-city areas. Over the past year, the Conservative Party has displayed a renewed interested in the plight of areas that think politicians have forgotten about them. This will continue with even more vigour in the months ahead.”