Select Committee on Work and Pensions Minutes of Evidence

Examination of Witnesses (Questions 280 - 299)



  Q280  Justine Greening: Thank you for that. So it sounds like Employment and Support Allowance is probably at best certainly a medium-term strategy for the Government. What will happen to those people on existing benefits? Is the aim and the vision to translate them on to the Employment and Support Allowance at some point?

  Mr Hutton: No, we are not going to do that. We are not going to compel people to move on to Employment and Support Allowance, no.

  Q281  Justine Greening: Then you will end up with two groups of people on different benefits. Going back to talking about the fact that this may be a two-tier system, you can debate whether the tiers are higher or lower than one another but you have to accept that there will be more complexity by the fact that at the moment there is one system, and going forward in the medium term there will be two.

  Mr Hutton: Yes, but that is the same approach that previous Conservative governments took to welfare reform. For example, when Incapacity Benefit was introduced in the 1980s, Invalidity Benefit was left where it was, and we still have people on Invalidity Benefit now. I do not think it is true to say that it will be more complex because, by definition, from, in this case, April 2008 there will not be any new claims for incapacity benefits; they will be an historic legacy. Significant numbers, of course, I hope significantly lower than today, but the system is designed, and has been, to manage incapacity benefits. There is a perfectly coherent system of managing the existing claimants who are on incapacity benefits. We need to put in place a similarly efficient system for managing the new Employment and Support Allowance. We can do that, but you have a simple choice when you make these changes. You either move everyone on to the new benefit, but then you have potentially real losers and that has never been done before, and I do not advocate that approach now because I do not think you should set about these sorts of reforms, as it were, by tearing up people's entitlement to benefits. Absolutely not. You have to treat people fairly and reasonably, and people on incapacity benefits, let us be absolutely frank, are not rich; their standard of living is low. I do not think it should be part of our agenda to retrospectively change benefit entitlement, and certainly not to reduce it, so I rejected that approach entirely. It is a perfectly sensible way to manage change in a benefit system; it has been done before; it does not in itself represent a two-tier benefit system; clearly it represents two different benefit rates but, as I said earlier, what I think will be common between Incapacity Benefit and Employment and Support Allowance will be a wider and more extensive portfolio of help and support packages designed to get these people back into work. What is also undeniably true is that clearly, the longer one stays on benefit, the harder it is to reconnect with the labour market; we know that. That is the one shining story that sings out from our previous, our current experience with incapacity benefits, and it is likely to be the case in two or three years' time that the claimants who will be the hardest to reach and to place in the labour market will be people on old incapacity benefits, not people coming into new Employment and Support Allowance. But, again, I cannot see any alternative way of managing this process of change other than the way we have set out in the Green Paper. If people have an alternative, if you have an alternative, let us hear it.

  Q282  Chairman: Not today!

  Mr Hutton: Maybe not today but at some point in the consultation.

  Q283  Justine Greening: Your answer immediately leads us into the next series of questions about this broader package of choices that people can use via Pathways to Work to help them get back into work. One of the fundamental aspects of the Green Paper is the roll-out of Pathways to Work, which up until now has been carried out as a pilot study. Some of the evidence we have had so far particularly focuses on successful aspects of it in terms of the Condition Management Programme and also the Return to Work Credit. The Condition Management Programme is quite a specialist form of assistance given to people, and a number of mental health organisations we talked to praised this cognitive behavioural therapy. Do you think we have enough capacity of those sorts of therapists in this country to be able to roll out Pathways to Work nationally and provide a Condition Management Programme nationwide, and not just in the pilot areas?

  Mr Hutton: There are undoubtedly capacity shortages in CBT; there is no doubt about that. I am sure that is the view of everyone who has given evidence to the Committee, and I concur with it as well.

  Q284  Justine Greening: Do you know what the average waiting time is for somebody on the NHS waiting for behavioural therapy?

  Mr Hutton: I personally do not but I suspect it would be fairly long. It would not be covered by the six-month waiting time guarantee because CBT therapists are not consultants in the way that waiting time figures are configured. It is waiting time to see a consultant that is measured in the NHS, not waiting time to see a therapist, so I do not know. I am not sure what the data is. But in my own experience when I have met people on the Pathways to Work schemes—I do not know whether the Committee were in Derbyshire but you probably heard what I heard—people coming into the Pathways were told that it might be up to a year before they could see a cognitive behavioural therapist. That is completely hopeless and if the whole purpose is to get people back into work quickly, that is not a starter. So they have used their Pathways money to employ CBT expertise from the private sector. Bring it on; that is exactly what they should do. I think there a possibility—and I would not put it higher than that; we have to tackle this problem, I agree, as a Government—that if there is additional resource for this particular strand of the Condition Management Programme, it will encourage people in the private and voluntary sector to provide that service to us, and I would be delighted if one of the consequences that comes out of the roll-out to Pathways is that there is more of a market capacity to provide this type of service. We will obviously have to track this very carefully indeed but using the private sector has been one way of fast-tracking access to this type of help, and I think that is entirely the right thing to do.

  Q285  Justine Greening: One thing that would be helpful to the Committee in preparing our report is if there is any analysis within the DWP about what the current shortage might be with respect to rolling out Pathways to Work, and the current potential for supply and what the gap is between the two, that would be helpful, and if there is any proposal to close this gap, as you say, it may be that more people will enter the private market. It would be helpful to see any work already happened in the Department around understanding this risk, because, as you say, it clearly is one of the issues that you could run up against in successfully rolling out Pathways to Work. The second question is around the Return to Work Credit, which I think people felt cushioned them in terms of income levels when they went back into the work place and gave them some confidence, if you like, about their earning capability. You drop off that after 52 weeks. How can we ensure that claimants after that year, when they have stopped getting the Return to Work Credit, do not just go back on to benefits? Can anything be done to prevent that?

  Mr Hutton: I am not sure that anything can be done legally in the sense of the construction within the benefit system; I think not. The Return to Work Credit has been a very important component of the Pathways scheme and it is frequently cited by many people who have been through Pathways as being the one thing that made a big difference. It made it possible for them to make this leap from benefits to work, and so it is a very important part of it and I am very committed to it. Fifty-two weeks is what we have set out in the original Pathways scheme and it seems to be working; it seems to be a significant part of the success story of Pathways. I think that the rationale, at least part of it, in relation to the time limiting—because there would have to be reasonably some limit on the extent of help that we can provide through this Return to Work credit route—is that it is important to ask them to get a foothold in the work place, and it is related to income. If that person coming in at, presumably, an entry level job, because that is where they would qualify for Return to Work Credit, is able, hopefully together with the Return to Work Credit but also the in-work support, to make a progression in that new employment above entry level, then that is ultimately what we have to try and aim for, because there is always going to be a limit to how much ongoing financial support the DWP itself can provide people with. But the evidence so far is that 52 weeks is a reasonable limit, and it seems to be working. I am not aware; maybe somebody has approached the DWP and said that it should be longer—having said that, somebody is bound now to do that—but I am not aware of any pressure from outside to extend the Return to Work Credit period, but we would need to look very carefully at that if those arguments were put to us.

  Q286  Justine Greening: Finally from me, in the initial pilots—and obviously a report was done by your Department to look at that first pilot cohort that came through—of the 148,000 starts in Pathways areas, there were 19,500 job entries. That is an incapacity benefits off-flow rate of 48% compared to an average normally of 40%. Do you feel that that 8% improvement is enough to justify the resources pumped into Pathways to Work?

  Mr Hutton: I think I had better say "Yes" to that.

  Q287  Justine Greening: You do not have to. We would like the honest answer, obviously.

  Mr Hutton: I say yes, absolutely. The break-even point would have been about four percentage points. We have doubled that. That is the score so far. So it is definitely a cost-effective intervention from the taxpayers' point of view, and we are right now to proceed with a national roll-out. What I would say about the national roll-out is this: that we are going to do this second, very significant roll-out through the private and voluntary sector. That is the principal focus, and I think we should clearly learn from the roll-out of Pathways through Jobcentre Plus in the first phase in the last couple of years to see if we cannot make the roll-out more cost-efficient and cost-effective as well, and that is part of the discipline. I personally think it is important to see how we can make sure there is flexibility in the range of services on offer to people locally, because there is not one part of the country that is identical to another part. There are different labour markets and so on, so I think we should have flexibility. But I am absolutely convinced—and it is not just my view but the view of the OECD and many others—that the Pathways to Work is the leading international model for how we can provide more effective interventions for disabled people, and I think we are perfectly entitled to draw on that evidence and to say now is the time to extend the benefits of it to a wider cohort of people. That is the right thing to do, in equity and social justice.

  Q288  Justine Greening: On the break-even point and how that is calculated, is it purely the cost of Pathways versus benefits saved or is it something more complex and, if so, is it possible to get the details to the Committee?

  Mr Hutton: I do not have the details of that cost benefit analysis but I am happy to share it with the Committee.

  Q289  Greg Mulholland: Carrying on talking about evaluation, obviously the roll-out is 2008, and although the Department has said that the evaluation will be done by then, I believe the full evaluation will not be able to have taken place till after that time, so does it make sense to do the roll-out while there has not been a full evaluation?

  Mr Hutton: I may be wrong but I think the full evaluation will be done next summer, so we will have that before the full nationwide roll-out of Pathways. I do not want to repeat everything I have just said. I think the evidence is clear that Pathways is a successful intervention; that is not just my view but the view of others. It has been the most successful approach we have developed in the United Kingdom and it is producing significant results. Of course, we could choose to delay the national roll-out but that is essentially the choice we have to make if we wanted to wait until the full extensive evaluation, and my view is that if we were to delay the roll-out, we would be delaying the benefits of Pathways to literally hundreds of thousands of disabled people who, by and large, and their organisations, have been saying to us: "Move on, do the national roll-out as quickly as possible", and that is what we have tried to do and what we have set out in the Green Paper. I think it is a perfectly sensible response, yes. We are not just sticking our finger in the air, hoping; it is based absolutely on firm, bankable results that have come in from the Pathways pilots.

  Q290  Greg Mulholland: Are you confident there will be enough meaningful evaluation by the time of the roll-outs?

  Mr Hutton: Yes. The fact we have committed ourselves to the national roll-out I will not allow in any way to restrict the opportunity in the evaluation to say all the different things that need to be said. Clearly, we are gathering and learning experiences all the way along with the roll-out to Pathways. It is a learning process for us and I am quite sure it will evolve and there will be more flexibility built into the system, but I am equally sure that those who will be doing the evaluation will know from me that they are at large and free to say whatever they think, and whatever their evidence points to is the conclusion that we should all be aware of in relation to Pathways. So there will be no burying of unwelcome information; absolutely not.

  Q291  Greg Mulholland: Moving on to what we all agree is probably the crux, which is the money involved, government figures estimate that the pilots works out about £400 per claimant in terms of the cost and that totals £220 million a year. As we all know, the Government has currently allocated £360 million to the new scheme, so by the Government's own figures that is an £80 million shortfall, so you can perhaps see why some people have termed the Green Paper proposals as "Pathways Light". Do you therefore deny the charge that that is underfunding and that services will be watered down, which I think is the main concern? If that is the case, people will think it will not work.

  Mr Hutton: If that were the case, then that would be a matter of genuine concern. The first roll-out to Pathways to a third of the country cost us £150 million, incurred by the Department in rolling out Pathways to Work for a third of the country. We are now spending, providing an extra £360 million over and above, if you like, the initial costs of roll-out to a third for the remaining two-thirds of the country. I do not think anyone can fairly say we are not fully funding the roll-out of Pathways. The total annual cost will be over £500 million, £150 million in the first third, £360 million in the remaining two-thirds. I do not think it could be fairly claimed we are underfunding the roll-out to Pathways. I do not accept that.

  Q292  Greg Mulholland: You must be aware that people are saying that, fairly or unfairly? The TUC, Child Poverty Action Group, and Disability Alliance have pointed out that pilots often work when roll-outs do not because of the intensive nature of the schemes of the people involved. If the services are not to be watered down, then, with the figures I gave you, where are the savings going to come from?

  Mr Hutton: I am not entirely sure that the figures you have quoted me point to this £80 million deficit. It is not my view or the Department's view of the roll-out of the Pathways. It is going to be fully funded and, particularly in relation to the key areas where we know it has made a significant difference, namely the Condition Management Programme, we are not going to cut any corners with the funding available for those sorts of elements of Pathways. They are absolutely fundamental. Once Pathways ceases to be a pilot, the £40 a week Return to Work Credit becomes part of the Department's annually managed expenditure and not part of its Department expenditure limit, and at the moment with the Pathways it is currently scored against my departmental expenditure limit. Maybe that is the reason why somebody has discovered this illusory gap in funding, but there is not going to be a gap in funding. This is not doing anything on the cheap—absolutely not. We are going to roll-out Pathways and the key elements of Pathways in exactly the same way, and I have tried to make that repeatedly clear, not just today but in other settings as well. This is not "Pathways Light".

  Q293  Greg Mulholland: But are you saying the amount per claimant in the roll-out will be equivalent to the other areas, pilot areas, or significantly less?

  Mr Hutton: I do not know the answer to that but I can certainly tell you that it is £150 million for the first third of the country and £360 for the remaining two-thirds, and I do not accept on those figures that anyone could reasonably claim that we are underfunding the national roll-out of Pathways. We have made significantly extra resources available to do that.

  Q294  Greg Mulholland: Finally, you mentioned yourself that when the roll-out happened, you will be looking to make the scheme more cost-effective, which is entirely sensible. Can you give us an idea of some of the things you will be doing to make it more cost-effective?

  Mr Hutton: I think this is something that we will have to talk to the voluntary sector providers who are going to deliver the roll-out Pathways about. It may well come down to choice of partners, procurement from the private sector as opposed to the public sector. These things are all possible. But I think the search for cost-effectiveness, let me just make this clear, is not going to be confined to the two-thirds where Pathways are going to be rolled out to, but is going to continue to be applied to the third of the country that already has Pathways. I think we have to learn from all of this and make sure the programme is cost effective. I think it is very likely we will be able to make efficiency savings and cost-effective savings as we roll out Pathways, but how that is going to be done very much depends on the dialogue and the procurement process that now needs to kick off with the private and voluntary sector.

  Q295  Greg Mulholland: And without watering down services?

  Mr Hutton: No, without watering down services. There would be no point in doing that. We would be spending money inefficiently and ineffectively if we watered down the help and support we were providing for people on incapacity benefits. Why on earth would we want to do that? It runs the risk that the expenditure itself does not produce the result we want. We must not in the roll-out of Pathways dilute to any extent the actual help and support we provide for people on incapacity benefits, otherwise there would be no point in providing the roll-out. It would simply not be efficient and effective.

  Q296  Jenny Willott: Moving on now to conditionality and the mention of it in the Green Paper, it says that the Employment Support Allowance will be conditional on drawing up a personal action plan for rehabilitation and work-related activity. Will it only be necessary to draw up the action plan or will it be necessary to take the actions as well?

  Mr Hutton: Going further will depend on having additional resources available to us in terms of providing a wider range of help and support services, and what we have said in the Green Paper is that the conditionality regime, until we are clear about resources in the next Spending Review and beyond, cannot go further at this point than requiring people to do the work-focused interviews and to prepare the action plan. I want it to be the case later on that there will also be a requirement to undertake the work-related activity that arises from the action plan but we will not be there, I think, yet.

  Q297  Jenny Willott: You expect there to be benefit sanctions attached to that in the future?

  Mr Hutton: There could be, yes.

  Q298  Jenny Willott: What safeguards are there going to be in place to make sure that claimants are not required to do activities that are inappropriate for their condition or disability?

  Mr Hutton: I think this has to be an iterative process. What we are proposing at the moment is a compulsory work-focused interview regime, which is important and part of the something-for-something approach that we want to embed in these reforms, and then the action plan that comes out of it. We are not proposing at the moment to sanction failing to take work-related activities; that is not part of the reforms. It might become so in the future, as I said. What are the safeguards around the imposition of sanctions in the current regime, the actual regime? You remember this is happening now in relation to incapacity benefits claimants, the work-focused interview requirement and so on. There is a proper process of appeals. In relation to people, for example, who suffer from mental health complaints we have further safeguards built into the system in relation to home visits, advocacy and so on, and the number of cases in the Pathways areas where sanctions have been imposed since last year are very few; at most there has been a couple of hundred where there has been a benefit sanction. There is an appeals process, it can be challenged, and as soon as someone becomes compliant, then the sanction is removed from their benefit entitlement. So I think the system is fair and reasonable. I think it is absolutely essential that there is follow-through on this and there should in some appropriate cases be a sanction imposed if people are not complying with their statutory obligations, but it is perfectly possible, as I think is the case now, that those sanctions regimes are imposed sensibly and carefully and as a last resort. I think that is an important part of the whole process. So it should not necessarily be the first consequence. There needs to be a process and a sequence but, at the end of the day, there has to be, in appropriate cases, the right to sanction if somebody is not complying their statutory requirements.

  Q299  Jenny Willott: So the safeguards are basically the appeals process?

  Mr Hutton: The appeals process and also the training of the personal advisers as well, judging when it is appropriate to impose the sanction. As I said, if you look at the evidence, it is actually applied as a sanction in fact very infrequently. What is important is, I think, that it is there as a sanction and people know it is there, and I think it is a sign ultimately of the success of that approach when you do not have to impose the benefit sanction because people are in compliance with their obligations in the system.

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