Select Committee on Work and Pensions Third Report

6  Cities Strategy

143. The January 2006 Green Paper, "A New Deal for Welfare", noted that despite progress in recent years, "there remain pockets of persistent low employment, low skills, poor health and weak overall economic performance."[167] Unlike in many other European countries, the UK tends to have higher levels of deprivation and unemployment in its inner cities, as compared to suburban and rural areas. The DWP told us that in the UK "as a rule of thumb, labour market disadvantage is concentrated in our inner cities; but in countries like France and Italy, disadvantage tends to be concentrated in the suburbs."[168]

144. To address this, the DWP launched the Cities Strategy in May 2006. The DWP described the programme as a "new and innovative approach to delivering welfare services on the ground of the UK's major towns and cities." It said that it would "give the opportunity to local providers and partners to come together in a single consortium and provide solutions to the specific problems that prevent people getting into the labour market." Savings made through delivering improved solutions could then "be ploughed back into local services and other local initiatives."[169]

145. The Minister for Employment and Welfare Reform, Jim Murphy, told us that the Cities Strategy was an important and long-term part of the DWP's plans for raising the employment rate: "Our intention is for the Cities Strategy not to be time-limited at all. The Cities Strategy we see as a department as an important platform of delivering a localised welfare system for the long term."[170]

146. The Cities Strategy aims to break down the barriers between different government agencies, such as health, employment and education services, working in the same areas with workless people. The Secretary of State said at the launch of the Strategy that it would allow "local partners to work together within a community to improve economic regeneration through skills, employment and health."[171] This effort to reduce "silos" is to be commended, although it will undoubtedly be difficult to achieve in practice.

147. To choose the areas in which the Cities Strategy would be piloted, an "Expressions of Interest" exercise was carried out. This closed on 3 July 2006 and the fifteen successful "pathfinder" areas were announced on 27 July 2006.[172] The next stage was the production of business plans, and these were to be given to the DWP in December 2006.

148. The organisations we spoke to broadly welcomed the Cities Strategy initiative, although many commented that it was too early to tell how successful it would be.[173] Cay Stratton of the National Employment Panel told us she believed that "the principles which underpin the Cities Strategy should be charting the direction for the future of welfare reform. I believe fundamentally it is right."[174]

149. Richard Cairns of Glasgow City Council told us that pooling or aligning budgets would allow greater efficiency in delivery:

"The existence of the Cities Strategy offers us the potential to do things more efficiently. In fact, there is an expectation that we will do things more efficiently and that is one of the things we have to do. Although Glasgow has had the whole question of social renewal and addressing worklessness at the heart of its strategies for some time, and it is a fundamental pillar of the economic strategy of the city, the very fact that the DWP, as it were, are now officially on-side on the same agenda and the budgets associated with that are officially on-side on the same agenda gives us a stronger and greater number of shoulders behind the wheel. Where the difference will come is around the alignment of intent, assuming we can find a way of doing it. Great if we do not physically pool the resources, at the very least we can share information and attempt to integrate effort."[175]

150. In order to achieve this, however, Mr Cairns told us that Cities Strategy consortia would need to get a clear understanding of what employment services were working well, and achieve the best mix of public, voluntary and private sector provision:

"The challenge and question for us that the public sector bodies who ultimately will be funding this kind of activity have to look at is the extent to which different types of interventions and different types of vehicles for doing that are appropriate in different situations. It has been said before that what matters is what works […] I think there is an argument for a mixed economy of delivery but there needs to be some very sharp thinking about where the focus should be."[176]

Mapping provision and Early Engagement

151. Mapping existing provision is an important preliminary stage in rationalising the delivery of services in a city. On our visit to Glasgow, we heard evidence that a mapping exercise had revealed uneven distribution of services. Kate Still of Equal Access to Employment told us, "a lot of the growth of organisations delivering on employability are fixed at the point where people fund it, so it is at the job outcome stage, and yet there is a lot of work that has to be done in a pathway with individuals before they get anywhere near that."[177] Professor Ivan Turok argued that the Glasgow exercise showed that "the balance of activity was heavily skewed towards preparing people for work (through skills and jobsearch), rather than initial engagement (or 'outreach') and in-work support."[178]

152. As discussed in Chapter 8 in relation to lone parents, engaging people who are far from the labour market will be crucial to achieving the DWP's employment aspiration. During the Committee's visit to Glasgow, we heard about initiatives which were underway there to contact people who were not considering employment and encourage them to take steps towards getting a job. David Coyne of One Plus told us:

"People often start their journey towards engagement towards economic activity in a very small scale way dealing with the immediate crisis in their life, whether that is around childcare, debt, parenting issues, and through organisations like us engaging with lone parents on those issues we can then start to address issues about self-confidence and returning to some form of training and then thinking about work often some months into the engagement with them."[179]

153. Richard Cairns of Glasgow City Council told us that this could be done by a variety of organisations which were helping individuals with other issues, and that it needed to be done to a high standard:

"We know that one of the areas where we have to do more work in order to move people from various forms of benefit into employment is earlier engagement and the fact is […] that people will engage around the issues that are most pressing for them in the first instance. The types of services that help people deal with those are delivered by a variety of organisations, I suspect a significant number of them at least in the voluntary sector. Once one has built that engagement, built that confidence, built a reliable understanding of what someone's circumstances are you can then […] start to introduce the question of employability and the question of employment as an alternative to whatever their current circumstances are. […] Arguably if one can maintain it to a very specific standard then it matters less who does it and it allows us potentially to create some sort of connection between the confidence winning role that service providers have and then building part of that bridge into employment."[180]

154. One approach that had had good results in Glasgow, Mr Cairns told us, was the Full Employment Areas Initative (FEA):

"The Full Employment Areas Initiative originally started as a pilot and the way it works is we employ local animators, people from within particular communities, equip them with the skills to go out to places where one would find the workless and engage with them, raise the questions about employment, work with groups of people, work with families with a view to starting them on the path. What you get is someone who is an independent broker recognised as having that local credibility with no specific axe to grind who then points people towards other sources of support and assistance to get them started along that continuum."[181]

155. An evaluation report in 2004 found that the FEA was making progress in engaging with people who would not normally use support services: most of "the organisations to whom [FEA] clients have subsequently been referred suggested that they would not normally see such clients as part of their 'normal' client group. This suggests that the FEA Initiative is engaging with hard to reach clients and is therefore highly additional."[182]

156. Mr Cairns told us that, as part of the Glasgow City Strategy, funders would need to consider how to achieve a more even distribution of services within the city, with less activity around job search and more early engagement and in-work support: "In effect what we have to do is depress the bulge in the centre of that employability activity graph and raise both ends."[183] In order to achieve this, they would have to "shift where we spend the money […] [either] we continue to fund the same sorts of people and ask them to do different things at those two ends of the spectrum or […] purchase other forms of service and intervention at those two ends of the spectrum at the expense of whatever is currently going on in the middle."[184]

157. We heard from Wayne Shand of the LGA and Manchester City Council that other Local Authorities were engaged in similar mapping exercises: "I think most of the pilot areas of the Cities Strategy, and there are 15 nationally, are engaging in the process of trying to do that sort of mapping exercise." Mr Shand told us that Manchester City Council had established a skills board two years previously "to try and bring the strategic commissioning and delivering agencies together […] to make sure that, particularly in the vocational, training and educational sector, any provision that is being put in place is specifically aligned to the requirements that employers have and to use the resources as effectively as they can."[185]

158. This evidence suggests that the Cities Strategy is, to an extent, building on initiatives which are already underway in many places. This is to be welcomed, as it shows responsiveness on the part of DWP to local concerns. Dave Simmonds of Inclusion told us that every local authority in UK cities was probably engaged in a similar initiative, "quite simply because there is that local recognition that more is needed over and above what is being provided through the mainstream programmes, either in terms of improving the performance of those mainstream programmes or reaching out to groups which those mainstream programmes were not designed for outside the eligibility criteria."[186]

Joint Working

159. An important factor in the success or failure of the Cities Strategy will be the extent to which it promotes joint working between different Government agencies. In Glasgow, we heard about the Equal Access to Employment initiative. This is a partnership between the city's main service providers, including Jobcentre Plus, the Greater Glasgow Health Board, Glasgow City Council, and careers advice services, amongst others.[187] Kate Still, the partnership's Network Director, told us that improving employment chances could also work to meet the objectives of other organisations within the partnership:

"In terms of the Equal Access strategy, health, social work, the council, the local economic development agencies and the voluntary sector are all working in partnership […] What we are trying to do is change the attitudes to say, "Within health and social work we know there is evidence that says people's health can improve if they have access to employability, so at the stage you are engaging with them you need to know who you can refer on to locally and there has to be locally co-ordinated groups of practitioners, of operational staff and strategic planning".[188]

160. Ms Still told us that the partnership was working to improve awareness and co-operation between employees of different agencies: "bringing the practitioners together so that they can work effectively, they know who is about, what services they provide, where they can go to and who will provide that additional support […]no one organisation can crack this problem on its own, if we want to meet that employment rate we all have to work together in a co-ordinated fashion."[189] However, she told us that not everybody welcomed the new approach. More work was needed to improve "training and culture change and in joint working," and to develop "shared assessment tools to identify when somebody is ready to consider employability or training."[190]

161. Professor Alan MacGregor told us that joint working was likely to be hampered by the attitudes of people working in different public services: "The frontline staff of many agencies working outside of the employability area will often be at best neutral and at worst hostile to employment as an objective for their clients. There are a number of reasons for this but the fundamental one is based on the factually correct notion that the kinds of jobs their clients are likely to achieve are low paid with poor conditions."[191]


162. Several issues emerged during the course of the inquiry which were likely to have an impact on the success of the Cities Strategy. We believe that the Strategy has the potential to make a significant difference to the employment rate and to the life chances of people living in some of the UK's most deprived areas. However, this will not happen unless the DWP follows up its verbal commitments with real flexibility and is able to persuade other Departments to do so also. There are early indications that this may not happen, which are of concern to the Committee. We hope that the DWP will reconsider some of these issues to give the Cities Strategy a real chance of making a difference, as we explain below.

163. When the Committee visited New Zealand, we were impressed by the flexibility available to Regional Commissioners working for the Ministry of Social Development, which covers many of the same policy areas as the DWP. Regional Commissioners have the same commissioning powers as the Chief Executive (equivalent to a Permanent Secretary in the UK), and, we were told, were able to negotiate to get co-operation from leaders of other services. They are able to design and commission programmes to meet the needs of particular groups in their areas. An example was the Pacific Waves programme which we will discuss in Chapter 9.

164. In contrast, at present little detail is available on exactly how much flexibility each City Strategy will be granted. The Minister of State for Employment and Welfare Reform, Jim Murphy, told us that the two areas where flexibility would not be allowed would be in the "core rights and responsibilities agenda", and levels of benefit payable:

"It is important to say one of the two areas where we are not interested in devolution is the core rights and responsibilities agenda. If a city was to say to us, "We don't want our customers to sign on every two weeks", we are not interested in that. If a city says, "We want to give higher Jobseeker's Allowance rates", we are not interested in that either."[192]

165. All of the selected Pathfinder authorities submitted Expressions of Interest (EOIs) to the DWP, as outlined above. These documents are available on the DWP website.[193] Each document includes a list of issues which the consortium working in the area has identified as barriers to increasing the local employment rate, along with suggested flexibilities to overcome them. Wayne Shand, of the LGA, told us that areas will be including a more detailed list of requested flexibilities in their business plans.

166. Although only a preliminary indication of the flexibilities which Cities Strategies consortia are likely to request, these EOIs do give a useful sketch of the sorts of flexibilities which each consortium believes will be useful. Several, including Nottingham, Heads of the Valleys and Leicester, request flexibilities in the eligibility rules for benefits and employment programmes.

167. The Nottingham consortium notes that "[b]enefit restrictions prevent […] funds being used for training of more than 16 hours per week. This inhibits local partners from being able to provide training which fully meets the needs of employers and jobseekers […] we would like to pilot it [flexibility] with specific BME groups or in specific wards." They also ask for flexibility in housing benefit rules, to "retain stability by keeping housing benefit and free prescriptions for a transitional period. We need to reward people financially for working by making the incentive great enough to overcome their fear of moving from incapacity benefit and reassuring them that we will take every possible step to ensure that the transition is easy and smooth and not something to fear." [194]

168. A similar suggestion was made by David Coyne of One Plus, who told us that "if we could look at the interaction between Housing Benefit, Working Tax Credits and Childcare Tax Credits we could use the transition into work and make it a more rewarding experience."[195]

169. Heads of the Valleys requests flexibility on return to work credits:

"Jobcentre Plus are able, under Section 2 of the Employment and Training Act 1973 to make non-taxable payments to customers in the form of return to work credits. These are currently available to Pathways and Want2Work clients. [We] would wish to extend this provision across any clients who cannot currently benefit from this credit […] This would require legislative change to enable incentive payments and return to work credits to be disregarded in tax calculations […] This would remove a barrier to clients wishing to undertake a 'taster' and afraid of losing their benefit. Removal of this barrier would result in reduced unit costs."[196]

Leicester asks for flexibility to extend Work Trials "beyond the current 13 week limit."[197]

170. We asked Jim Murphy whether there would be flexibility on eligibility for programmes. He told us that this would be possible, but only with the caveats set out above:

"Justine Greening: Just very briefly, will there be flexibilities regarding eligibility rules? You have talked about sanctions and stuff not being devolved and obviously the amounts that people get paid in benefits not being devolved, but will eligibility rules to programmes be something that are decided at the local level?

Mr Murphy: If a city was to say, 'We have a specific problem and a specific challenge in this area' then we would listen to what they have to say. If, for example, the East London consortia was to say, 'We have a particular challenge regarding Bangladeshi women' then we would listen to see what their solution would be. We have an open mind, but without breaking out of that national rights and responsibilities framework however."[198]

171. Outreach into local communities will be essential to raise employment rates in the disadvantaged areas where the Cities Strategy will be piloted (this is discussed further in Chapter 9). We asked the Minister whether consortia would be able to place temporary Jobcentre Pluses in these areas:

"Justine Greening: […] Do you think that as part of the Cities Strategy one of the things you will consider is possibly for those big projects that are going to be going on for several years that there may be some benefit in setting up some temporary Jobcentre Pluses for very local initiatives to make sure that local people can take advantage of the jobs that are there in their community as they arise?

Mr Murphy: I think if people in the consortia wish to make that as part of the flexibilities in the bid, we will listen to it."[199]

Centralisation of Procurement

172. One area in which local decision-making might be expected in the Cities Strategy is that of procurement. However, the DWP has recently announced that it will centralise Jobcentre Plus procurement decisions.[200] Mr Murphy explained to us that this had been done for two reasons: a "perception" that there might be a conflict of interest, as Jobcentre Plus both awarded contracts and provided services, and a desire to ensure a higher level of expertise in making procurement decisions. He said that the DWP aimed to create a "centre of excellence in procurement at the heart of the department which will drive greater efficiency and will get us a better structure to our contracts."[201]

173. Mr Murphy told the Committee he thought that, when making contracting decisions, experience and expertise were more important than local knowledge:

"It is an issue as to whether it is proximity to the service delivery or expertise in the service delivery, and there is a play-off there, of course. Bringing into the Department that procurement process I think will create, as I have already alluded to, that centre of expertise that will enable us to monitor these contracts in a really effective way to make sure that what is contained within the contracts is effectively delivered, that there is no cherry-picking of customers based on the easiest to help and that the management information flows quickly enough so that there is an early warning system of any difficulties within the contracts. I am not certain, although you may wish to make observations of your own, that it has always to be about proximity. I think it is about understanding the system which is really very important rather than the geographic location."[202]

174. Mr Murphy told the Committee that "we will look for ways within the Cities Strategy to give those consortia the chance to influence the national procurement policy."[203]

175. We heard evidence which suggests the centralisation of procurement would impede the ability of local decision-makers to respond to specific labour market conditions. Alan MacGregor said that "Jobcentre Plus [is] often now contracting for services over a much wider area than previously and working with a smaller number of contractors. However the problem with this approach is that the contract selection process is not carried out by people sufficiently close to the service being delivered to know whether value for money is being obtained."[204] By extension, this problem seems likely to worsen if procurement is centralised still further. There is also the question of how centrally-based procurers will be able to compensate for local knowledge of which providers have worked well in the past and which are well engaged with the local community.

176. Richard Cairns of Glasgow City Council told us that procurement should be one of the tools available to Cities Strategy consortia:

"Greg Mulholland: […] do you think there will be advantages in involving the Jobcentre Plus procurement to allow Cities Strategy partnerships to contract provision locally?

Mr Cairns: Yes. If you think of all the discussion we have had around what local agencies know about this, and assuming that one can design that procurement process so that it has a quite clear best value discipline attached to it then absolutely. These are City Strategies. At what point do we abandon the principle of the City Strategy and leave it to the mercies of some other process? If we are serious about it then we need as many of the tools in the toolbox at our disposal as possible and that would be one of them."[205]

177. In its expression of interest submitted to the Cities Strategy planning process, Nottingham commented:

"Recent moves to regional procurement have had a negative impact on local control and flexibility to respond quickly to local circumstances. This hinders local strategic planning and accountability of impact on the ground. To address this we are requesting that resources intended to benefit Nottingham are devolved to the Jobcentre Plus District Manager and the Skills Board. Regional procurement has had [a] negative impact on the local voluntary and community sector who have been disadvantaged through the process. We need to harness the ability of this sector to reach those most distant from the labour market and are unable to do this within these procurement processes."[206]

178. Centralisation of procurement may reduce the extent to which Cities Strategy consortia can make locally appropriate decisions. We recommend that the DWP make clear how consortia will be able to "influence" procurement decisions, and ensure that they have a significant role in choosing providers. Consortia should be able to control at least some funds directly; [for example, their allocation from the Deprived Areas Fund as recommended below in Chapter 9].

Budget flexibilities

179. In order to improve employment chances in deprived areas, flexibility over budgets and programmes will be needed. As the Secretary of State pointed out in his Cities Strategy launch speech, the division of available funds into up to 70 distinct budgets, each with their own rules, can militate against appropriate responses to local problems.[207]

180. The Secretary of State's speech also made it clear that part of the aim of the Cities Strategy was to allow the pooling of existing budgets.[208] However, it is not yet clear whether this will include the budgets of organisations such as Jobcentre Plus and the Learning and Skills Council. The evidence which we heard on this point strongly suggested that the Cities Strategy would need to include these flexibilities in order to succeed. Wayne Shand of the Local Government Association told us that "unless the Government departments release grip and allow greater local delegation to this then the Cities Strategy probably will not work. You will be able to deal with the peripheral funding issues around the edges of core, but unless you fundamentally change the approach of how national programmes are delivered and commissioned then the Cities Strategy will not work."[209]

181. Dave Simmonds of Inclusion expressed a similar view, telling us that "City Strategies will not be as effective as they can or should be if they are just marginalised to what is called the "funny money" at the edges. It is the performance of the mainstream programmes that needs to be improved, and that is the critical step which City Strategies can and should be taking, and so seeing those mainstream programmes, both in LSC and Jobcentre Pluses, within the Cities Strategy pot is incredibly important."[210]

182. The expression of interest submitted by Nottingham asked for flexibility over Learning and Skills Council funding:

"Many of the Cities Strategy hotspot wards have high concentrations of people with low or no qualifications (40.9% of Nottingham's population hold below level 2 qualifications) and the consequent employment rates for this group (55.5% for the conurbation) evidence that this is an inhibitor to employment. Flexible and tailored community based learning at a foundation level is therefore needed to support this client group towards level 1 and 2 qualifications. Where national PSA targets are being met (e.g. Skills for Life outcomes) flexibility is requested for the local LSC to have the autonomy to redirect LSC funds to deliver foundation level provision in the hotspot wards."[211]

183. Leicester agreed that "[w]e would like to establish pooled funding arrangements between the City Council, NRF, SRB, ESF and Job Centre Plus and LSC to allow for a joint commissioning process to be developed in line with the City Strategy priorities."[212]

184. The Minister for Employment and Welfare Reform, Jim Murphy, told us that announcements about core budget flexibility would be made shortly:

"What we have set aside thus far is some seedcorn money to enable the consortia to come together to establish a small secretariat if they so wish, and we will in January make some detailed announcements about the flexibilities and the funding around those flexibilities."[213]

185. As flexibility will be key to the success of the Cities Strategy, it is important that the DWP should be clear about what is allowed and why. This will enable fair and informed assessment of the success of the programme. We recommend that DWP publish the full list of flexibilities requested by the 15 Cities Strategy pathfinder areas, as it has published the initial Expressions of Interest. If it has decided not to grant any of the requested flexibilities, it should explain why.

186. Unless the Cities Strategies are able to make use of core budgets from organisations such as Jobcentre Plus and the LSC, and make significant alterations to the way in which services are delivered, it is doubtful whether they will be able to achieve as much as the DWP hopes. We recommend that DWP clarify as soon as possible what budget and programme flexibilities will be available to the Cities Strategies. We recommend that it be bold in allowing local consortia to make real changes in order to tackle worklessness and social exclusion in cities.

187. Chapters 3 to 6 of this report have focused on the cross-cutting issues which, witnesses told us, needed to be addressed in order to raise the employment chances of people at a disadvantage in the labour market. The next three chapters will look in more detail at three groups with low employment rates - people over 50, lone parents and people from ethnic minorities - and consider some of the specific problems they face and measures which would help address them.

167   Department for Work and Pensions, A New Deal for Welfare: Empowering people to work, p 76 Back

168   Ev 330 Back

169   "New cities strategy will devolve the welfare state down to the doorstep, "DWP press release, 9 May 2006 Back

170   Q 464 Back

171   "New cities strategy will devolve the welfare state down to the doorstep, "DWP press release, 9 May 2006 Back

172   DWP website,, "Cities Strategy: Expressions of Interest." Back

173   See for example Q 147, Q 227. Back

174   Q 150 Back

175   Q 40 Back

176   Q 8 Back

177   Q 9 Back

178   Ev 151 Back

179   Q 7 Back

180   Q 19 Back

181   Q 31 Back

182   Cambridge Policy Consultants, "Interim Evaluation of the Full Employment Areas Initiative", November 2004., Full Employment Areas Initiative. Back

183   Q 30 Back

184   Q 30 Back

185   Q 232 Back

186   Q 232 Back

187 Back

188   Q 37  Back

189   Q 37 Back

190   Q 37 Back

191   Ev 275 Back

192   Q 479 Back

193, Welfare Reform, Cities Strategy Expressions of Interest. Back

194, Welfare Reform, Nottingham Expression of Interest in Cities Strategy. Back

195   Q 44 Back

196, Welfare Reform, Heads of the Valleys Expression of Interest in Cities Strategy. Back

197, Welfare Reform, Leicester Expression of Interest in Cities Strategy. Back

198   Q 484 Back

199   Q 497 Back

200   "The Management of DWP's contracted employment programmes," a notice to partner organisations, Back

201   Q 448 Back

202   Q 459 Back

203   Q 448 Back

204   Ev 277 Back

205   Q 42 Back

206, Welfare Reform, Nottingham Expression of Interest in Cities Strategy Back

207   Speech by Secretary of State for Work and Pensions, 9th May 2006, at DWP City Strategies Conference,, Ministers' Speeches, and see also "New cities strategy will devolve the welfare state down to the doorstep,"DWP press release, 9 May 2006. Back

208   Speech by Secretary of State for Work and Pensions, 9th May 2006. Back

209   Q 229 Back

210   Q 232 Back

211, Welfare Reform, Nottingham Expression of Interest in Cities Strategy Back

212, Welfare Reform, Leicester Expression of Interest in Cities Strategy Back

213   Q 460 Back

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