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Welfare Reform

In December, I commissioned David Freud to conduct a review of progress on welfare reform to analyse the future challenges that we face and to make recommendations. David Freud has published his report today. Copies are available to hon. and right hon. Members in the Vote Office and on the Department’s website. The report is a substantial contribution to the debate and I should like to put on record on behalf of the Government and, I hope, the House, my thanks to David Freud for his work. Freud concluded that we have made strong progress on welfare reform in the past 10 years. Nearly 1 million fewer people are on benefits, 2.5 million more people are in work, 300,000 more lone parents are in work and the numbers of those on incapacity benefit are falling for the first time. Freud concluded that, by any measure, the Government’s programme of welfare reform has been a success. Freud’s view is that welfare policy now needs to focus on those furthest away from the labour market, especially those on incapacity benefit and lone parents, and that the new focus should be on job retention as well as placement. Progress on all those matters will be essential if we are to fulfil our aspiration of an 80 per cent. employment rate and of eliminating child poverty by 2020, thus ensuring not only a strong economy but a strong society. David Freud has made four principal recommendations. First, in recognising the success of Jobcentre Plus in helping people get back to work quickly, he believes that we should maintain it at the core of the system, but focus it on helping those who are unemployed for short periods, potentially expanding the approach over time so that it provides a one-stop front end for all benefits. Secondly, Freud recommends that, once claimants have been supported by Jobcentre Plus for a period of time, back-to-work support should be provided through outcome-based, contracted support, drawing on the innovation of specialist providers from the private and voluntary sectors. The contracting regime would set a core standard that everyone would receive, but beyond that there would be freedom for providers and individuals to do what works for them, rolling up the existing patchwork of public, private and voluntary provision in favour of a more flexible approach focused on the specific barriers that face individuals rather than the specific benefits that they currently claim. Freud suggests that payments to providers could be made over a three-year period from when an individual client moved into work, with contracts offering rewards that are proportionate to the value to society and the taxpayer of moving that person into work. That approach would work as a public-private partnership to deliver up-front investment to realise savings over the life of the contract. Payments would create incentives to develop programmes across the spectrum of clients to avoid cherry-picking the easiest clients to help. Thirdly, in return for offering that help, Freud proposes that we should expect work-related activity from those on benefit. The report suggests introducing stronger conditionality in line with the jobseeker’s allowance for lone parents with the youngest child aged 12, and, as wrap-around child care becomes more widely available from 2010, to consider whether further reductions would be desirable. He also recommends—over time and as further help and support becomes available—extending the requirement to undertake work-related activity to those already on incapacity benefits who migrate to the new employment and support allowance. Finally, citing international evidence that complexity in the benefits system can act as a disincentive to entering work, today’s report recommends that we should consider in detail the potential for greater simplification of the benefits system, moving towards a single system or, ideally, a single benefit. The recommendations represent the opportunity for a step change in the nature of our welfare system in the United Kingdom. The publication of today’s report marks the start of the debate, not its conclusion. The Government will consider the proposals carefully and come back to the House with a fuller response later this year.