The next frontiers of welfare reform

20 January 2016

Frank Field was asked by Tony Blair in 1997 to think the unthinkable on welfare reform. Although a minister for just over a year (it turned out the unthinkable really was unthinkable), he has continued to play an active role in the debate, including as current chair of the DWP Select Committee. So when he says something on the subject, it’s generally worth listening to.

His latest publication, an audit for Civitas of welfare reform since 2010, runs to 146 pages. But it can be boiled down to one success story and two key challenges.

Things can only get better?

The success has been increases in employment delivered by a flexible labour market, active labour market policies, and making work pay. In particular, most people don’t spend long on Jobseeker’s Allowance, the main unemployment benefit, and the sharp rise in lone parent employment is a spectacular success. 

The UK’s record employment rates and good employment record through the recession are sometimes taken for granted. But the experience of other countries shows that it didn’t have to be like that – active choices and policy decisions over recent decades have made it so.

The next frontiers

Banking this success, what’s next? Most commentators would probably agree we face two particularly stark challenges:

  1. Employment for disabled people and disadvantaged groups. There are around 2.5m people on Employment and Support Allowance (ESA), despite 1m saying they want to work. And other disadvantaged groups haven’t shared as fully in employment gains as they might.
  2. Low pay. One in five British workers is paid less than the Living Wage, one million more than the OECD average. This, along with making work pay, is why tax credits were introduced and why the Chancellor found they were difficult to cut. In the absence of other action, people on already low incomes would simply be poorer.

But while there is general consensus that these are the challenges, the real issue is how to tackle them.

On increasing employment for disadvantaged people, Mr Field puts great weight on differential pricing in employment programmes – that is, paying providers a greater premium for helping more disadvantaged groups into work. 

There are three more fundamental challenges meaning this is not enough. The first is that most disabled claimants are not on employment programmes in the first place. So we need a debate on rights and responsibilities – should more ESA claimants be expected to speak more regularly to Jobcentre Plus about the support on offer for example? The second is the design and implementation of ESA. Intended to avoid the poor incentives of Incapacity Benefit (such as having to prove what you can’t do rather than what you can, and getting a higher rate the longer you were on the benefit), it’s ended up replicating some of them. And the third is that we don’t know what works for helping such groups into work. We’ve called for a What Works centre and proper testing of different approaches.

On tackling low pay, Mr Field rightly notes that the only way to increase pay sustainably is to increase productivity. Yet this is easier said than done: it has been the UK’s Achille’s Heel for at least 200 years and represents a new frontier in welfare reform. The steps taken by DWP to trial new approaches through Jobcentre Plus are welcome. But to properly this, it is also likely to need a more rounded offer, including working with employers on job design and business strategy and incorporating skills and training too. That’s what our flagship Ambition London programme is trialling. Why not an In Work Innovation Fund jointly funded by BIS and DWP to trial other new approaches?

Lastly, it’s worth saying that Universal Credit now risks becoming a distraction from these fundamental challenges. It’s principles, of smooth support through the transition to work and merging benefits together, are still right. But it’s original benefits of more generous work allowances and reduced taper rates to make working more pay more, have been lost in various cuts along the way. And of course the support you give people to find work and progress and how you give it, are more important than the name you attach to it.

Successive Governments have argued that the welfare system should give a hand up, not a hand out. The last 20 years shows the success this can bring. Reaching full employment and cutting poverty demand we apply these lessons to the next frontiers of welfare reform too.


Photo by NI Executive [CC BY 2.0], via Wikimedia Commons