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The transfer of risk seems a fundamental part of the purpose of engaging the private sector in such a programme. Payment by results was promised, but we understand that a 30 per cent. up-front payment of the fee is now proposed. A payment of 30 per cent. of the fee up front is precisely what creates the resource constraint which is constantly referred to as a reason for not rolling out the programmes more quickly. Why not utilise the private and voluntary sectors’ appetite for risk? Why not roll out the migration of existing claimants and the work-related activity element via private and voluntary sector providers on a genuine no win, no fee basis, with a fee structure that maximises the incentive of the private and voluntary sectors to reach those furthest from being work-ready and that is cash-neutral to the Treasury—paying them only when
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they have not only placed someone in work but maintained them in work long enough to produce a stream of benefit savings that will cover the fee that they are to be paid?

Kali Mountford: I am listening carefully to the hon. Gentleman’s remarks, having talked to the private and voluntary sectors myself. They have concerns because they sometimes take a great deal more risk, as their client groups are much more difficult to reach and to place in work. When talking to me they have been concerned about whether they would be able to sustain participation if there were no payments up front in order to enable them to deliver a service.

Mr. Hammond: I would be happy to swap notes with the hon. Lady after the debate, but some of the larger providers to which I have talked, in both the voluntary and the private sectors—the not-for-profit sector—assure me that they can deliver such a programme. We all agree that we have an excellent programme—there is consensus that the roll-out of the programme is a good thing—but what bothers us on the Opposition Benches is that we are hearing that, because of resource constraints, neither the migration of existing claimants nor the work-related activity requirements can be rolled out any faster. For perfectly good and understandable reasons, the Treasury is not prepared to invest large amounts of money up front on the Secretary of State’s promise that there will be a saving at some time in the future. I am suggesting that the private and voluntary sectors can deliver some real benefit; they can do something that no Government Department can do. They can take on the risk on their balance sheets and allow the removal of the resource constraint in order to roll out the programmes more quickly.

Miss Anne Begg (Aberdeen, South) (Lab): Does the hon. Gentleman agree that resources are not just money and not necessarily merely Government money? I agree that the not-for-profit sector and some private sector providers are very good, but there are capacity problems, particularly concerning trained people such as cognitive behaviour therapists who deal with those with mental health problems. We cannot magic such people out of the air, and it is in those professions that some of the resource constraints lie.

Mr. Hammond: What the hon. Lady says is self-evidently true. There are real as well as financial constraints, but we can deal with one of the largest constraints—the financial resource constraint. I suggest to the Secretary of State that it can be done. The resource constraints boil down to a lack of imagination—I will not say in the Secretary of State’s Department; it might be in the Treasury or elsewhere—rather than a lack of cash. The benefits of the programme could be made more widely available more quickly through such a transfer of risk. As the Secretary of State knows, a faster roll-out will produce medium-term fiscal savings as well as greater economic and social benefits in the short term.

Mr. Weir: I am interested in what the hon. Gentleman has to say. Many voluntary sector providers, especially those who deal with more difficult
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cases such as people with autism and other learning difficulties, feel that they will be pushed out of the market because they are niche providers. How will his system deal with that problem?

Mr. Hammond: The hon. Gentleman makes an excellent point, and he is right that some of the smaller, more specialist providers fear that the model that the Government are rolling out, in which there is a single provider in an area, will squeeze them out of any chance of a role as a prime provider. I think that there will be a consolidation, whereby specialist and smaller providers act as sub-contractors in consortium arrangements with larger, perhaps financially stronger, lead providers.

Angela Browning: On the issue of sub-contracting to so-called niche or specialist providers, at the moment, the system—and I cannot picture it changing, unless the Minister tells me otherwise—is that large contracts are issued, and are top-sliced by the companies or organisations that win them. When they then sub-contract in a specialism in which there are, of necessity, higher per capita costs if they are to deliver, they make it uneconomic for those specialist providers to play a part in the market. That is the challenge that the Minister must address.

Mr. Hammond: My hon. Friend makes a good point. Perhaps I can provide some grounds for optimism by explaining my understanding of what is taking place in the marketplace between lead providers and specialist providers. Providers of specialist services are very much sought out by those who seek to be lead providers. That is because, in presenting their bids to Government, those lead providers need to show that they can access those specialist services, so I hope that the balance of negotiating power is not as lop-sided as my hon. Friend fears.

We have a unique opportunity to exploit one of the advantages of using private and voluntary sector providers, and allow those providers to take on some of the risk, so that there is quicker roll-out, and so that we do not always have to listen to admirable ambitions for programmes that cannot be rolled out until resource constraints allow it. We may be failing to maximise the advantages of engaging the private and voluntary sectors as a result of a prescriptive structure. In particular, I was concerned, as were some potential providers, to learn that it is intended that Jobcentre Plus will, in every case, deliver the first work-focused interview. That proposed model hugely constrains the private and voluntary sectors.

I understand that the Department for Work and Pensions has a screening tool to screen out those who are closest to the workplace, and that is quite right under value-for-money considerations; it would be frankly barmy to allow private sector contractors to take on people who were about to go back into the workplace, and to collect a large fee. I completely agree that there has to be a way of ensuring that that does not happen, but in a system where work-related activity is not compulsory, and in which even delivering the action plan is not required, the first interview will be the key to success.

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The first interview is the point at which many private and voluntary sector providers believe they can genuinely deliver value—by galvanizing a marginalised individual into seeing, understanding, and grasping his potential for getting back into the workplace and overcoming the disadvantages that his absence from it has caused him. He must be able to see the potential to change his situation. In other words, we must turn the rhetoric of putting the focus on what people can do into a reality. I am not saying for a moment that Jobcentre Plus staff cannot do that; I am saying that the first contact is integral to the whole process. In private and voluntary sector-led areas, the work-focused interview should be carried out by the provider, as an integral part of the process. Otherwise, there is a risk that the model proposed by the Secretary of State will be compromised.

Mr. Rooney: Does the hon. Gentleman not accept that, under the system, claimants have an initial interview as part of the process of making a claim, so it makes perfect sense, and is cost-effective, to wrap that up with the initial work-focused interview?

Mr. Hammond: The problem that I see is that there are two different functions—policing of the benefit rules and arrangements, and trying to catch someone’s imagination and get them to think about what they could do and to think outside the box that they have been in. Even the most positive person, even the person who is most determined to try and get himself back into the workplace, will still want to secure his benefit arrangements and will have an eye focused on that. It has been strongly suggested to me by people I have spoken to that there is an inherent conflict that people face when talking to Jobcentre Plus staff about their benefit arrangements and entitlements, and about their abilities and possible courses of action. In areas where the private and voluntary sector is rolling out the positive side of the relationship, it should be allowed at the first contact to try to catch the person’s imagination and engage them.

I agree with the hon. Member for Kingswood (Roger Berry) that one of the roles that should correctly remain with Jobcentre Plus is the sanctioning arrangements. Following logically from what I have just said to the Chairman of the Select Committee, it would be perverse if the provider who is trying to focus someone resolutely on the positive side was engaged in a sanctioning role. The Secretary of State said that private sector providers had said that they wanted that power. None of those that I have talked to want to go within a mile of having a sanctioning power. They all said that they would rather Jobcentre Plus had that role.

Mark Pritchard: I welcome my hon. Friend’s comments about the voluntary and not-for-profit sector. That proposal would be helpful where Jobcentre Plus staff have been laid off, as many thousands have been over the past few months, but where there are still Jobcentre Plus staff, does he agree that they are in the best position to undertake the first interview and assessment, and that there is a role in the job market
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for both providers? That may be a way forward, rather than one or the other, as the Government are suggesting.

Mr. Hammond: I thank my hon. Friend for that intervention. As the Chairman of the Select Committee rightly pointed out, there is a temptation to say that there are two functions: one entails gate-keeping the system, and the other relates to the first work-focused interview. There is a sense in which it might be economical to combine them. I am suggesting that that might cause considerable damage to the private sector providers’ specific innovative approach.

When the Minister for Employment and Welfare Reform winds up, will he touch on the Transfer of Undertakings (Protection of Employment) Regulations 1981? I am concerned by reports that TUPE requirements might be imposed on private and voluntary sector providers of pathways programmes, even though it would be a new programme being rolled out in those areas. It would be helpful if the Minister could clarify that.

The Secretary of State is aware of and touched on the concerns that have been expressed about the design of the personal capability assessment, which is central to the process. We are all aware of the problems with the current system. The high success rate on appeal tends to suggest poor decision making in the Department for Work and Pensions. The Green Paper suggests that there are likely to be fewer appeals under the new system, but no indication is given of how we will achieve that step change in the quality of decision making following a more complicated assessment. It will be interesting to hear whether the Minister has any idea how we will get the number of appeals down. Will that be through better decision making or through a process change that will make it more difficult for people to appeal?

I should like to ask the Minister about the single interview. My understanding—I am happy to be corrected if it is wrong—is that the personal capability assessment, the basic assessment of a person’s ability and whether it is reasonable to expect them to work, and the capability for work test, the test to establish whether it is reasonable to expect them to engage in work-focused activity, and possibly the work-focused health assessment for those in the non-support group as well, will all be carried out at the same time. Concerns have been expressed by some providers that there will be perverse incentives for the individual going to a single interview that deals with those three very different things.

I understand that it is the intention to pilot the new personal capability assessments, and I assume that that will be a piloting of the test itself within the framework of the existing benefit structure before the ESA is introduced. The explanatory notes suggest that there will be piloting, but I am happy to be corrected if that is not the case.

One of the most important topics of the Green Paper was early intervention. The Green Paper referred to interventions in the GP’s surgery and during the statutory sick pay period. The Opposition believe strongly that there is a need for early intervention. What was a pure test of medical condition has often become confused, with different standards being
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applied and different factors taken into account by different GPs. The Green Paper made proposals for changes to statutory sick pay and the Government were right to abandon the idea of scrapping the three-day rule, but the focus on on-flow will be incomplete if SSP is ignored.

There is nothing in the Bill about SSP, but that may be because it does not require primary legislation. I urge the Secretary of State not to ignore this aspect. It cannot be right to ignore somebody in work who has become sick or incapacitated for six months before even considering their case and what ought to be done.

My hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) and I made an interesting visit to the Netherlands a couple of months ago—I understand the Minister may do so in due course—to see how the system operates there, with early and active intervention to help avoid people reaching the stage of long-term sickness.

Mr. Rooney: The hon. Gentleman should tell the full story. For the first two years of sickness, the employer remains liable for full wages under that system. That is a powerful incentive for the employer to get involved in rehabilitation. Does the hon. Gentleman want the same system in the United Kingdom?

Mr. Hammond: If the hon. Gentleman will allow me, I was about to say that the situation in the Netherlands is quite different from the situation that we have in this country, but as a model for early intervention, it was extremely informative. The Select Committee has also made a visit and drew broadly the same conclusions, and I believe the Minister is due to make a visit. I met many people who are looking forward to greeting him in due course.

We do not want to impose further burdens on employers. They have quite a few of those coming down the line anyway. The hon. Member for Bradford, North (Mr. Rooney) will forgive me if, after having stood up and been counted recommending a 3 per cent. compulsory contribution to NPSS—national pension savings scheme— pensions, we do not want to impose too many new burdens on employers.

However, what we think is necessary is a simple procedure to identify likely long-term cases early in the statutory sick pay period—perhaps after six weeks, although I do not know whether that is the right period—so that people who remain in employment and on statutory sick pay could begin the processes of assessment under the ESA. That would entail engagement with their existing employer to look at their options, which is the preferred route, or engagement with job brokers or pathways providers to find suitable alternatives. That makes sense for both the individual and society. If we leave somebody idle and cast aside for six months on SSP, we raise the bar significantly to their eventual return to work.

The proposal will also be attractive in the short term to the individual employee, because if he can get the assessment period for ESA under way while he is still on SSP, he will be chewing up some of the 12-week period in which he will be on an effective JSA rate of support and getting—

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Mr. Deputy Speaker: Order. Call me old-fashioned, and initials are all very well, but sometimes it is a good idea to say everything in full, not just for the sake of the Official Report, but for people outside the House.

Mr. Hammond: I am grateful to you for that guidance, Mr. Deputy Speaker. It is remarkable how quickly we slip into the jargon of our portfolios. The only trouble is that removing all the initials will probably double the length of the debate. JSA is the jobseeker’s allowance and ESA is the employment and support allowance.

If it were possible to get somebody on to the assessment stage of ESA during the statutory sick pay period, that would be sufficiently attractive to the individual for this to be an entirely voluntary programme. I simply want to float this idea to the Minister and ask whether the Department is considering that, and if not, whether he would be prepared to do so, because from all the work that we have done it seems to be the key to addressing the problem, at least for the group of people who go from work on to long-term incapacity payments.

Many other issues have been raised during the course of the consultation, and they will be probed more fully in Committee. However, I have a couple of other questions to put to the Minister in relation to part 1. The DWP five-year plan refers to a further conditional payment for fulfilment of action plans. That seems to have been dropped in favour of work-related activity, which the notes explicitly say could be different from the action plans. It is difficult to understand the point of making an action plan if people will then be allowed to fulfil their obligations by doing something different from what has been written in the action plan, so perhaps the Minister could explain why that pledge has been dropped. I make no apology for having concentrated on the employment and support allowance and the pathways to work programme.

The Green Paper made a clear commitment to getting 300,000 lone parents and a million older people back into work. There is nothing specific in the Bill about achieving those targets, and there may not need to be because they may not need legislation, or the legislation may exist elsewhere. We strongly support the proposals, but there is a need for employer education and a change in some employer attitudes. My point in raising that at this stage is to say that while that may not need primary legislation in a DWP Bill, I hope that the DWP is prepared to act as lead supporter for the initiative in government. I am shocked that private and voluntary sector providers of up and running programmes universally say that placing people with the public sector is much more difficult than placing people with the private sector. The Government, as the largest employer in the country, should aspire to lead from the front and be the most flexible and receptive employer to the particular needs of people coming off incapacity benefit, older workers wanting to work flexibly and part time, and lone parents with particular requirements for a particular kind of flexibility in their working life, if they are to get back into work.

The changes to housing benefit fall into two parts, the first being greater tenant engagement in achieving value for money. No one could possibly disagree with that. That is a sensible and unbureaucratic way of
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trying to give people some real responsibility for the consequences of their decisions, and some benefit from making the most appropriate decisions.

The second part is the direct payment of rent, and I have some reservations about the wisdom of going down that route. The theory that the Secretary of State outlined is unimpeachable: giving people greater responsibility must in general be a good thing. But housing benefit payments will often be a very significant part of a person’s total income, and some at least of the people who receive those direct payments will succumb, either to temptation or to pressing alternative need, and the consequence will be that they get into debt, into rent arrears, and ultimately perhaps face eviction. The Secretary of State says that the evidence from the pilots does not suggest that, and I know that the full results of the pilots will be published in due course, but what he says is so counterintuitive, and everybody involved in dealing with housing benefit tenants in the housing markets is so surprised by that outcome, that we need to do some more work on that area.

On Friday, I visited a homeless drop-in centre in Chester and I asked how many of the people who were being referred on to hostel accommodation were there as a result of having got into rent arrears and having been evicted from private accommodation. The answer was about 50 per cent. one way or another. The manager of that centre gave me an unequivocal assurance that the numbers would go up if a significant number of her clients were to receive direct payment of benefits. I know that there is a provision for local housing authorities to identify people who are at risk and not to make the payments direct to them, but the Minister will know that the guidance notes suggest that local authorities should not in any way be proactive in seeking out people who may be vulnerable in that way, so there is a real problem there that needs to be considered further. It is not a dogmatic point. There is a clear consensus that if we can give people responsibility, we should, but surely to goodness, not at the expense of them getting into rent arrears and debt, and facing possible eviction.

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