Cicero Policy Briefer

Issue 22, March 2008

Is a year a long time in the Department for Work and Pensions?

By Terry Paul

“Increasingly, we must focus on the most disadvantaged by rewarding private and voluntary sector providers based on their success in supporting the hardest to help back to work.”

John Hutton MP, Secretary of State for Work and Pensions, 28 February 20071

“The private and voluntary sector already plays a role in delivering our work programmes. I want to take this to the next level, free them from central control and allow them to innovate. Their involvement is here to stay and set to grow.”

James Purnell MP, Secretary of State for Work and Pensions, 28 February 20082

Add to the above mix the unfortunate Peter Hain and you have a Government department, which, despite its high secretary of state turnover rate, does have a commitment to tackling the challenges of the British welfare system and the UK’s seemingly poor ability to get its own citizens off welfare and into sustainable employment. Many trees and pen ink have been used to portray in words and statistics the British welfare system’s problems and solutions, but an interesting perspective was provided recently by the Government’s welfare reform advisor, David Freud:

“The system we have at the moment sends 2.64 million people into a form of economic house arrest and encourages them to stay at home and watch daytime TV. We're doing nothing for these people.
“[There is] one simple reason why it's got to be the private sector. You cannot incentivise someone on payment-by-results if the person who is paying is the Chancellor of the Exchequer. There has to be some risk.
“We can pay masses—I worked out that it is economically rational to spend up to £62,000 on getting the average person on Incapacity Benefit into work.”

David Freud, Daily Telegraph, 2 February 2008

Even if one only considers the one million people who the Government often states want to work, but with the right level of support, then Freud’s comments conservatively value this market at £62bn. Is it any wonder that our transatlantic and continental cousins, keen to improve profit and loss and balance sheets, are beating a path to ministerial offices in Tothill Street? Add the unemployed and lone parents, and the total comes to approximately 5 million people on the main out-of work benefits; with the Government’s desire to increase the involvement of the private sector, we could be witnessing one of the biggest boosts to the UK’s private and third sector employment services industry.

The economic and social rationale for getting people back into sustainable work is strong and compelling, but in seeking to deliver upon this objective the Government needs to focus and be mindful on policy implementation and delivery. This Government has had many years in opposition and in office to refine the art of policy and its accompanying narrative, but this is a policy area which needs real results and cannot be a future case study on poor Government delivery. The inability to get British people into work influences the prism through which many view the policy areas of welfare, the family, Eastern European immigration, the skills levels of younger people and Britain’s ability to compete globally; issues which could play heavily in the forthcoming general election.

In previous Cicero Consulting articles, I have made the case for the Government to focus hard on implementation and policy delivery and not waste time with pointless rhetoric and political point scoring against the Opposition. The invitation to the private sector to take part in a procurement process fills one with trepidation—just look at recent NHS patient records and CSA computer systems disasters—but Government cannot fail to deliver upon this particular policy objective. The private sector will impose a discipline upon ministers and senior civil servants to produce good implementation and strategic focus, because if the policy fails the taxpayer and/or the out of work individual will simply pick up the bill!

The final proof will be in the ‘contract pudding’ but the DWP has already made moves to reorganise its internal structures in its commercial division, in response to eventual changes in how Government interacts with the welfare recipient. Together with lessons learnt from the current DWP personal accounts procurement process, this should sharpen the Government’s ability to deliver a contract, which provides the right incentives for the private sector and imbues confidence on the taxpayer’s part.

One important piece of the jigsaw is, I feel, missing—and that is actual employment targets. The Government’s drive to reduce the numbers claiming incapacity benefit by one million and provide incentives for the private sector seems to be without hard, measurable targets, specifically on how many will get off benefit and into sustainable work, and by what date.

Without this important target loophole being closed the Government is in danger of not having a ‘macro’ view of the private sector’s strategic performance. There is a great deal of talk around various international case studies, with the US Wisconsin experiment often mentioned by the main political parties, but we are to remember that some, unable to find work, simply dropped off the radar and into a socio-economic black hole. Alongside the employment contracts, similar provision needs to be made to investigate the experiences of those who enter the first phase of these new contracts. It must be ensured that all, and not only those who are easier to help or cherry-picked by the private sector, are helped into employment.

1. John Hutton, Secretary of State for Work and Pensions, “We must tackle unemployment amongst ethnic minorities”, Department for Work and Pensions, 28 February 2007
2. James Purnell, Secretary of State for Work and Pensions, Department for Work and Pensions, 28 February 2008

Terry Paul can be contacted on +44 (0)20 7665 9533 or click here to email.