Select Committee on Work and Pensions Third Report



Incapacity benefits are now claimed by 2.7 million people. Many of those claiming incapacity benefits want to work but require appropriate support to enable them to do so. In January 2006, the Government published its Green Paper on welfare reform which puts forward its proposals for helping more ill or disabled people move into employment.

The Green Paper sets out the Government's aspiration to reduce the number of people claiming incapacity benefits by one million within a decade. We welcome this bold aim - the current system has long required improvements to assist ill or disabled people entering, and remaining in, employment. However, the Government will need to invest effort and resources, particularly over the next few years, if its reform programme is to be successful. The Government has not fulfilled its commitment to produce forecasts of the incapacity benefits caseload to 2016 and should do so immediately. Clarification of the baseline by which this aim will be measured is also urgently required.

The Green Paper sets out a wide-ranging strategy to reduce the incapacity benefits caseload. Yet there is a distinct lack of detail about most aspects of the reforms that leaves much to be decided. The Department must ensure that it maintains ongoing dialogue with all key stakeholders during the process of making these decisions. This is particularly important when redesigning the gateway onto incapacity benefits - the Personal Capability Assessment (PCA). We welcome the proposals to shift eligibility criteria in the reformed PCA towards the capabilities of the claimant rather than just entitlement to benefits. Yet the Department must ensure that disability organisations have as great a role in the redesign as health professionals so that the reformed PCA takes into account the complexity of ill or disabled people's lives, especially those with fluctuating or mental health conditions.

The Green Paper also proposes to replace the current incapacity benefits with a new Employment and Support Allowance (ESA), paid to most people in return for attending work-focused interviews and agreeing an action plan. Those with more severe illnesses or disabilities will have no conditions attached to receipt of their benefit, which will be paid at a higher rate. We are very concerned that, by introducing a two-tier system, the new ESA will introduce further complexity to an already confusing incapacity benefits system. Apparently little consideration has been given to the IT systems, risks and other resources required to administer a two-tier system properly. These need to be clarified. In any case, all levels of the ESA, including the 'holding benefit', should be set and uprated at levels which ensure an adequate benefit rate for new claimants.

Pathways to Work is the flagship of the Government's efforts to help more disabled people move into work and elements such as the Condition Management Programme and the Return to Work credit are particularly helpful. Incapacity Benefits Personal Advisers (IBPAs) play a key role in delivering Pathways and the majority do it well. However, they require improved training to deliver a better service, particularly on handling clients with mental health conditions, and may benefit from the sharing of best practice.

The Government plans to roll out Pathways to Work nationally in 2008 alongside the introduction of the new ESA. This will encompass a new approach, delivered primarily by the private and voluntary sectors, that will test a range of 'work-related activities' and increase the requirements that ill or disabled people will be required to fulfil. The Committee welcomes this new approach. However, where services are being delivered by external providers the judgment of whether to administer a benefit sanction must rest with a DWP decision-maker. The proposal to utilise outcome-based funding for service providers is welcome, although contracts must reward providers for a range of outcomes to ensure that focus is not skewed towards helping those who are already closest to the labour market. Outcome-based contracts should also reward cases where job retention lasts for at least 12 months.

We are concerned that existing claimants of incapacity benefits are in danger of being left behind as the new benefit is introduced and Pathways to Work rolls out nationwide. It is crucial that they are able to access the full range of support available to help them move into work if they wish. We recommend that the Department publishes a date by which existing claimants will be included in the Pathways programme.

£360 million has been allocated for the national roll-out of Pathways to Work. There are widespread concerns that this may not be sufficient without services being watered down. A more transparent outline of the proposed funding allocation for Pathways is required and the Department needs to work closely with the Treasury to ensure that sufficient funds are available. In addition we are concerned that there may be a capacity problem with the numbers of trained Cognitive Behavioural Therapists, or other appropriate therapists, when Pathways is rolled out to the rest of the country.

Finally, employers are a crucial part of the required efforts to help more disabled people move into sustainable employment, yet have been largely overlooked in the Green Paper. The Department, and its service providers, need to actively promote incapacity benefits claimants to employers and strive to change the misconceptions that many employers have about disabled people and the requirements of the Disability Discrimination Act. Particular attention should be given to employers' attitudes towards employing those with mental health conditions. The public sector should take a lead in this.

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Prepared 6 May 2006