---

Flexible New Deal (Miscellaneous Provisions) Order 2009

My Lords, I thank the noble Lord, Lord Kirkwood, for giving us the opportunity to canter through Flexible New Deal and other issues. As noble Lords are aware, and as the noble Lord pointed out, the Flexible New Deal programme became operational in 28 of the 48 Jobcentre Plus districts on 5 October, and I welcome the chance to update the House on its progress, and to discuss the regulations that underpin it. The Motion was tabled on the Flexible New Deal (Miscellaneous Provisions) Order, which covers the employment status of those undertaking the Flexible New Deal. The purpose of the order is to ensure that the training allowance payments are not treated as employed earners’ income and that those taking part in the Flexible New Deal are not treated as being engaged in employment. It has been recognised that, without this order, people receiving training allowance would risk losing their eligibility to other benefits, grants and bursaries that are specified in the schedule to the regulations, and which may be affected by remunerative work. That is the narrow purpose of the regulations. Generally, people on Flexible New Deal will remain in receipt of jobseeker's allowance for the duration that they are on the programme, but will receive a training allowance when an activity or combination of activities means that they cannot be available for and actively seeking employment, which are conditions for continued entitlement to JSA. In particular, this will apply to periods of full-time work experience and work-related activity. It is important that we remove any barriers that might prevent long-term unemployed people from gaining the experience and skills necessary for them to find employment. This order allows jobseekers to participate in the Flexible New Deal and to develop work habits and skills, while ensuring that they retain their focus on moving off welfare and into paid employment. As noble Lords will be aware, the majority of customers will move on to Flexible New Deal only at the 12-month stage of unemployment. The people reaching this stage of a claim, therefore, will include those for whom finding work is most challenging. In answer to the noble Baroness, Lady Thomas, it is possible for people to be accelerated on to Flexible New Deal, including NEETs who have been unemployed for a period. Active intervention is key for this group of people who have been away from the labour market for a period, and at no time is this more important than in a recession. We need to keep people who find themselves in long-term unemployment close to the labour market, rather than repeat the mistakes of previous recessions in which the long-term unemployed were abandoned on benefits. This is why it is right to push ahead with Flexible New Deal, building on the success of the New Deal to offer people the personalised, tailored and flexible help that they need. The noble Lords, Lord Kirkwood and Lord Freud, stressed the importance of self-employment. For those who wish to take advantage of self-employment support, as part of the six-month offer, we have ensured that there is a coherent and structured route to help people make the transition into work and to provide the skills, knowledge and confidence they need. It takes the form of training support, both light-touch and intensive, depending on the needs of the individual. Using the expertise of Business Link in England, Training for Work in Scotland and Flexible Support for Business in Wales, together with private and voluntary sector providers, eligible customers can access practical advice and support on how to set up a business, what works and the pitfalls to avoid. This support is available while the customer is still claiming benefit and, where necessary, can continue for up to 16 weeks in the form of mentoring support once they have started trading. To help overcome the recognised financial difficulties of making the transition to work, we have also introduced the self-employment credit to underpin eligible customers’ finances for the first few months of trading as they start to generate an income from their self-employment or business. The self-employment credit is a tax-free payment of £50 a week, payable for up to 16 weeks for customers who leave JSA to take up self-employment. It is designed to give straightforward, unambiguous help to those who decide to take the step into self-employment and to encourage them to take that step. Providers of Flexible New Deal can choose how best to support people who are interested in self-employment. To respond to customers’ varying needs, they may adopt a number of different routes, including short periods of supported test-trading for some, but that would be entirely their decision. In many cases, customers prefer to move quickly off benefits and into independent trading, supported in the early stages by working tax credit where needed. I am also pleased to confirm that the DWP has secured additional funds to help people back to work in the recession—part of the fiscal stimulus, including funds for Flexible New Deal contracts. The actual costs of Flexible New Deal contracts will not be known until later, as providers are paid for helping jobseekers into sustained jobs, so the more jobseekers they help the more they will be paid. Funding requirements are calculated on the basis of £1,500 per customer starting on provision. The current New Deals have served unemployed people well over the past decade—I think there is testament of that in the noble Lord’s report of 2007, but I will not cite the particular reference—and we need to learn from them and adapt. Successful though the New Deals have been, we expect Flexible New Deal to move even more people into sustained employment and to offer appropriate, tailored support for every customer referred. That will put us in a strong position to cope with the long-term unemployment that the recession has caused and will also better place us to address long-term unemployment in the decade to come. Demand for this programme will clearly be greater than that envisaged in July 2008 when the invitation to tender was first published. We have worked with providers to ensure that this additional demand is reflected in contracts. The contracts signed with the providers allow for the increased investment necessary for the providers to cope with increased customer volumes, with funding split 40 per cent in service fee payments, 40 per cent short job outcome payments and 20 per cent sustained job outcome payments. After 18 months we expect to revert to the default funding model for the Flexible New Deal—a 20 per cent service fee, 50 per cent short job outcome payment and 30 per cent sustained job outcome payment. Contracts retain a strong element of outcome-based payment, which will encourage providers to move customers into employment. Furthermore we have made provision to ensure that, after 52 weeks, customers can voluntarily extend their mandatory Flexible New Deal programme by up to six months—a point which may address in part the concern of the noble Lord, Lord Freud—if their provider and Jobcentre Plus agree that this is appropriate. That will occur in situations where Jobcentre Plus believes there is a clear value in the customer continuing to work with the supplier and the supplier can demonstrate that with a revised action plan. That may benefit those customers who are good prospects for employment, but who have been held back by a lack of jobs in their area, as they will be able to retain support from their provider further into the economic recovery. As I said, the Flexible New Deal has now gone live in all of the 28 phase 1 districts. The noble Lord asked whether there is anything else apart from phase 1 and phase 2 and the pilots relating to the personalised employment plans. The answer is no; that should encompass the whole of the JSA regime. In the remaining 18 districts we announced the invitation to tender on 12 October, which is an important stepping stone to achieving full UK delivery around this time next year. The Flexible New Deal is a key step forward in our programme of welfare reform, which we will be taking further in the White Paper due to be published later this year, something I am sure we will all discuss at a later date. I shall now deal with some specific points. On the desire of the noble Lord, Lord Kirkwood, for a consolidated measure, one recognises that consolidation would be helpful but we should not confuse lack of consolidation with the assumption that the changes to the system are piecemeal. They may be piecemeal to a certain extent in the legislative anchor but not in terms of concept and how they are constructed. The noble Lord asked about training payments and whether the reference in the regulations was new from that point of view. It is not. I can write to him with reference to similar provisions if that would help. In terms of provider volumes, in July 2008 we indicated that initial estimates of customers would be 773,000 referrals over the five years of the contract. In February 2009, providers were notified that they would be given the opportunity to reassess their proposal to enable us to consider jointly the impact of increases in customer referral volumes, possibly up to 300 per cent higher than those published in the ITT. However, as the noble Lords, Lord Kirkwood and Lord Freud, have recognised, since then estimates of volumes have come down. The latest estimate in September was 1.47 million referrals over the five years of the contract. So even though there have been changes in the interim, the number is still twice that given to the original invitation to tender. The noble Lord, Lord Kirkwood, asked about self-employment evaluation within the Flexible New Deal. A key element of the evaluation is to establish the immediate and longer term destinations of customers following their participation in the Flexible New Deal. Therefore, customer employment destinations will be tracked upon completion of each stage of the programme and a year later, and this will of course include self-employment destinations. The noble Baroness, Lady Thomas, asked about "creaming" and "parking" to seek to ensure that everyone is properly catered for under these contracts. We expect our providers to use their skills to achieve the maximum number of outcomes for our unemployed providers. This will require them to make judgments on each individual customer on what support to apply and when to maximise their chances of securing sustained employment. Consequently, we are focusing on the design of our contracts, payment systems and performance management systems to reward providers for their achievements. It should be remembered that the people referred to our providers are those who already have been unemployed for 12 months. It is unacceptable simply to leave unemployed people with no support whatever. Providers are required to provide a minimum level of support to all Jobcentre Plus customers referred to them. We do not specify the process for dealing with our different customer groups beyond the minimum necessary to ensure that they are available for work. Providers are expected to use their skills, knowledge and expertise to achieve positive outcomes for all their customers. Our contract management processes are designed to ensure that contractors meet the quality and delivery standards set out in the contract specification for all of those they deal with. In addition, external inspection, by Ofsted in England and Estyn in Wales, and validation will ensure the quality and accuracy of their activities. The noble Baroness asked about niche providers. The smaller and third sector organisations which deliver support for the hardest-to-help and specialist groups play a valuable role in welfare provision and are well placed to offer services because of their local experience and knowledge of what the community needs. Under the commissioning strategy principles, prime contractors will be expected to ensure that DWP provision is joined up with local partnership arrangements. They will be expected to work proactively with smaller specialist providers. The noble Lord, Lord Kirkwood, asked about guidance for these regulations. Guidance is in place in Jobcentre Plus to ensure that those placed in training or work experience by a contractor will be transferred smoothly between jobseeker’s allowance and the training allowances and back again. Similarly, the contractors are aware of this change. The noble Baroness, Lady Thomas, asked about operational issues. Jobcentre Plus has recruited some 15,000 extra staff since the recession began at the end of September 2008. Once the official statistics for headcount are published, it will confirm that Jobcentre Plus has achieved its plan to reach 82,000 full-time equivalents by the end of September 2009 with a planned rise to 85,000 by March 2010. Perhaps I may emphasise the size of the challenge by saying that the jobseeker’s allowance claimant count nearly double from around 800,000 in April 2008 to around 1.63 million in September 2009. Currently, we receive more than 85,000 calls every working day in contact centres and nearly 150,000 in benefit processing centres. JSA claims are being cleared in around 10 days, ahead of the target of eleven and a half days. The noble Baroness, Lady Thomas, also asked about what the Budget means for Jobcentre Plus workloads. Budget 09 announced an additional £2.8 billion for the DWP, which ensures that over the next two years we can create the capacity to maintain and expand our support to jobseekers through the economic downturn and continue with our programme of welfare reform. But I stress that that money is part of the fiscal stimulus and that those who oppose the fiscal stimulus and would not be prepared to carry it forward given the chance could not deliver on the programmes that are in place. The noble Lord, Lord Freud, gave us a snapshot of his party’s policies on these matters. He referred to what happened to Flexible New Deal customers who at the end of 12 months go back on to JSA. That would be the norm, although I indicated the possibility of a six-month extension. On the timing, 12 months on from the just-introduced phase one takes us to this time next year. If it is the noble Lord’s assessment that we will be in the depths of recession, that is an interesting economic analysis. I am sure that we will have time to debate the noble Lord’s proposals in more detail. I do not believe that they provide an analytical basis for reducing the time that claimants spend on JSA before being referred for specialist support. They give no evidence that the definition of sustainable employment placements, the provider target, should be increased from 26 weeks to a year. Although the noble Lord advocated differential pricing for provider support to avoid a provider premium, we heard no detail of how customers will be classified, priced, or who will do it. Indeed, they provide no analytical basis for increasing the time period in which providers can engage with jobseekers. The proposals argue that provider funding should be purely outcome-based to minimise risk to government and enhance provider incentives. However, there is no suggestion about where the interim finance to fund providers should come. There are other more detailed points, which I am sure that we shall have the chance to debate, but I return to the point that unless the noble Lord’s party changes its view on the fiscal stimulus, should it ever have the opportunity to be in power, it could not possibly deliver even on his aspirations. That would undercut a whole raft of programmes protecting people from being unemployed for longer. I hope that I have covered the points raised. Perhaps I may conclude my remarks by saying that the introduction of the Flexible New Deal will greatly benefit people who are long-term unemployed, giving them access to a level of individual and tailored support that was not previously available. I am grateful to the House for noting the order and providing the opportunity for the benefits of the Flexible New Deal to be clarified.