Select Committee on Work and Pensions Third Report

1  Introduction

Background to the Inquiry

1. The Department for Work and Pensions Five Year Strategy, published in February 2005, announced the Government's long-term aspiration for an employment rate of 80%:

"We are on the verge of achieving our initial aspiration of having at least 75 % of the working-age population in work. The next stage will be even more stretching with a long-term aspiration of moving towards an employment rate equivalent to 80 % of the working age population […] This is a modern vision of full employment."[1]

2. The aim was reiterated in the Department's January 2006 Green Paper, A new deal for welfare: empowering people to work, in which the connection is made to other important objectives: tackling child poverty -"for individuals and families […] work is the best route out of poverty"; and meeting the challenge of an ageing society: "only by ensuring that everyone who can work is in work can we secure dignity and independence in retirement."[2]

3. Previous Committee inquiries have touched on the Government's employment strategy. In our inquiry on the Efficiency Savings Programme in Jobcentre Plus, for example, we expressed our concern about the uncertain direction of policy:

"Vacillation about the future of BoND [Building on the New Deal], small-scale adoption of Ambition [see Chapter 4], uncertainty over New Deal funding, a reduction in the use and scale of the Adviser Discretion Fund, major reductions in Work-Based Learning for Adults and the 2005 contracting problems, are significant issues in themselves. The cumulative impact is even more considerable. We are concerned that some good provision - which saves money in the long run - could be lost. We recommend that DWP and Jobcentre Plus should commission an independent overall review, with significant stakeholder involvement, of its provision of employment and training programmes, the effectiveness, costs and benefits of those programmes, and how funding is prioritised. The results of the review should be made available to the Committee."[3]

4. In our report on Pension Reform, we concluded that:

"Getting more older people into work will be necessary both for pensions reform to be successful and for the achievement of the Government's aspiration to reach an 80% employment rate. However, as alluded to in the evidence we received, achieving this aim will be a considerable challenge.

Partly because of this complexity, and the importance of older workers, the Committee has decided to conduct an inquiry in the autumn into the Government's employment strategy and will include as part of that a detailed study of this aspect of labour market policy. We will therefore return to the matter later this year."[4]

5. We therefore announced on 24 July 2006 our inquiry to:

"examine the effectiveness of the Government's employment strategy and the action required to achieve the aim of increasing the employment rate to 80%."

6. As we had recently conducted an inquiry into Incapacity Benefits and Pathways to Work, we decided not to focus on people who were prevented from working, or found it difficult to work, because of ill health or disability. Instead, we announced that we would "examine some of the measures proposed in the recent Welfare Reform Bill and will predominantly focus upon lone parents, people aged 50+ and ethnic minorities." Together with people with the lowest qualifications, these groups are the focus of the Department's PSA Target 4 - relating to the employment of disadvantaged groups.

7. We announced that we would particularly examine:

  • the barriers to work, such as housing costs and employers' attitudes, experienced by the above groups;
  • the effectiveness of DWP's national employment programmes, such as the New Deal and Employment Zones, and the different pilot schemes in operation around the country;
  • area-based variations in employment rates in both urban and rural areas and the initiatives aimed at tackling them, including the new Cities Strategy;
  • the provision of services by, and the contracting out of functions such as work-focused interviews to, the private and voluntary sectors; and
  • job sustainability.

8. We received 38 pieces of written evidence and held seven oral evidence sessions. The Committee also conducted two visits, one to Glasgow and one to New Zealand. We are grateful to all those who contributed to the inquiry. Thanks are also due to our two Specialist Advisers who provided invaluable assistance throughout the process, Professors Dan Finn from the University of Portsmouth and Jane Millar from the University of Bath.

Scope of the inquiry

9. The Committee considered it important to analyse the employment rates of people who are lone parents, members of ethnic minorities or aged over 50 as a way of examining the effectiveness and relevance of the PSA target. We therefore requested information from the DWP and the House of Commons Library, which is included in Appendix 1.

10. The information provided by the DWP shows that inactivity rates are high for all of the groups on which our inquiry focused. The unemployment rates of lone parents and people from ethnic minorities are also higher than the average. The unemployment rate of people over 50 is low, but we found that there were still important issues to be addressed for this group, as Chapter 7 explains.

Table 1: Employment status of PSA target groups[5]
Employment Rate Unemployment Rate Inactive Rate
Working age population 74.9%3.8% 21.3%
Disabled 49.3%4.0% 46.7%
Over 50s 69.9%2.2% 27.9%
Lone parents 53.1%5.9% 41.0%
Ethnic Minorities 60.0%7.3% 32.7%
No Qualifications 50.3%4.9% 44.8%

11. We also requested further information about the analysis DWP had done on the extent to which characteristics associated with being at a disadvantage in the labour market overlapped, and the impact on chances of employment of having multiple disadvantaging characteristics. The information provided suggests that having more than one disadvantaging characteristic considerably reduces a person's chances of finding work. For example, compared to an overall employment rate of 74.9%, in Winter 2003:

  • There were 235,046 disabled people over the age of 50 with no qualifications. Only 24% of this group was employed.
  • There were 67,950 people who were disabled, over 50, of an ethnic minority and with no qualifications. 17.4%% of this group were in work.[6]

This led us to focus on the nature of the support available to help such disadvantaged groups find and keep paid work. Overlapping disadvantage became a key theme of the inquiry.

DWP's Review

12. On 19 December 2006, the DWP announced a review of welfare to work strategy. The Rt Hon John Hutton MP, Secretary of State for Work and Pensions, said that the review would focus on three sets of issues -

13. We note the launch of the review, on which we comment further in Chapter 11.

Key challenges

14. The evidence we received suggested that, while much has been achieved - there has been a significant increase in lone parent employment, for example - there are a number of problems with the current strategy. In particular it became clear to us that:

These issues run through the report.

15. Achieving improvements in these areas is undoubtedly a challenge but will be essential if the Government is to have a chance of achieving its employment rate aspiration. The 2007 Comprehensive Spending Review will cover departmental allocations for 2008-09 to 2010-2011. DWP's allocation for this period has already been agreed, and will result in reductions of the DWP's Departmental Expenditure Limits of 5% a year in real terms over the Comprehensive Spending Review period.[8] As resources are limited, it will be all the more important to ensure that money is spent effectively.

1   Department of Work and Pensions, Five Year Strategy: Opportunity and Security Throughout Life, Cm 6447, February 2005, p 22 Back

2   Department of Work and Pensions, A New Deal for Welfare: Empowering People to Work, Cm 6730, January 2006, pp 2-3 Back

3   Second Report of Session 2005-6, The Efficiency Savings Programme in Jobcentre Plus, HC 834, pp 3-4 Back

4   Work and Pensions Select Committee, Fourth Report of Session 2005-6, Pension Reform, HC 1068, para 411 Back

5   Source: DWP, Ev 330 Back

6   Ev 330 Back

7   Rt Hon John Hutton MP, Welfare Reform: Ten years on, ten years ahead, 18 December 2006, Back

8   HM Treasury, Budget 2006, HC 968, March 2006, p 136  Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2007
Prepared 21 February 2007