Cicero Policy Briefer

Issue 14, July 2007

The Freud Report and welfare reform

By Kate Stanley, Director of Research and Head of Social Policy, ippr

David Freud’s report on the options for the future of welfare to work is exactly the report you’d expect from a former investment banker. It’s slick, rationally argued, and loaded with figures. It also argues for the kind of expansion of the quasi-market in welfare services that is capable of bringing in the giants of business.

His arguments are initially compelling. There is a strong case for opening up the opportunities for the private and voluntary sector to compete to deliver welfare to work services. The level of additional investment that’s needed in the sector implies risk. Only government and big business are capable of taking on this kind of risk. We also know that—with the right kinds of contracts—private and voluntary sector operators can deliver excellent results, supporting many more people into work.

However, on closer reading all kinds of problems emerge with Freud’s model for reform. For example, he recommends that future incentive structures for providers are benchmarked against current performance and rewards are based on achievements over and above current practice. While the days of mass unemployment may be behind us, this proposal offers no mechanism to allow for changes in the wider economic environment (such as reduced labour demand). Nor is any account taken of regional variations in current and future performance.

There is a tension in the report between an interest in breaking down the barriers between different categories of claimants, and proposals which will reinforce these categories. The logic of the argument for the personalisation of public services overwhelmingly supports the end of categories such as ‘lone parents’ and focuses us on people as individuals. There is an opportunity for the revamped New Deal programme to spearhead the personalisation of public services and end unhelpful group-based classification.

Gordon Brown was at the launch of David Freud’s report and you can be sure his presence will loom large in the Department for Work and Pensions response, expected soon. There are many excellent proposals in Freud’s report—but the trick will be to steer clear of the gimmicks.

Kate Stanley is the Director of Research and Head of Social Policy at the Institute for Public Policy Research (ippr) and can be contacted here.

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