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10 Dec 2008 : Column 537

Welfare Reform

12.32 pm

The Secretary of State for Work and Pensions (James Purnell): With permission, Mr. Speaker, I should like to make a statement on our White Paper “Raising expectations and increasing support: reforming welfare for the future”.

This White Paper will transform lives. We know that the support that we offer helps people get back to work. It can turn lives around. We want to make sure that as many people as possible have this chance. That is why we want virtually everyone claiming benefits to be preparing for, or looking for, work. It is a fair deal—more support, in return for higher expectations.

That is a deal that has always underpinned the welfare state. As early as 1911, those claiming from the unemployment exchange could be disqualified if they refused a suitable job offer. It is a deal that was extended by the Beveridge report, and one that was championed by the 1945 Labour Government.

In 1947, Herbert Morrison said that

Today, when the national effort is about a global downturn, we can no more afford to waste taxpayers’ money on those who play the system than they could then. But most of all we cannot afford to waste a single person’s talent.

We inherited a welfare state in which fewer than a third of claimants had to do anything in return for their benefits. Even that third got paltry support to get back in to work, while the rest got nothing. That truly was a welfare state that wasted talent and money. We paid for the costs of failure because we were not prepared to invest in the possibility of change. This Government set about putting that right. We taxed the excess profits of the privatised utilities to create the new deal. We merged the Benefits Agency and the Employment Service to create Jobcentre Plus, so that everyone who signed on for benefits signed up for work, too. That was the first phase of reform—deepening the obligations to work, so that there was no fifth option of just staying on benefits. We saw that those obligations caused youth unemployment and long-term unemployment to tumble, so we set about the second phase of reform and widened the scope of those obligations to work. We piloted helping those on incapacity benefit, first with the new deal for disabled people and then with the groundbreaking pathways to work programme, which increases a person’s chance of being in work by 25 per cent. Now we are rolling that out.

Since April, we have required all new claimants to take part, except those with the most severe conditions, and in October, we replaced incapacity benefit with the employment and support allowance, which focuses on what people can do, not what they cannot do. We improved help for lone parents. With the help of the new deal for lone parents, over 300,000 more lone parents are in work, but we wanted more people to benefit, so we are requiring lone parents of children between the ages of seven and 16 to look for work. We expect that to increase employment and lift 70,000 children out of poverty.

The White Paper will kick off the third phase of welfare reform. It is based on the simple idea that no one should be left behind, and that virtually everyone
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should be required to take up the support that we know works. It is built on the recommendations of two independent reviews, the Freud and Gregg reviews. The White Paper confirms that we will implement the Freud report in full, including his “invest to save” proposal, in which private and voluntary providers invest money in helping more people back in to work, and get paid out of the resulting benefit savings. Professor Paul Gregg’s report was published last week. The White Paper confirms our support for his vision. It sets out how we will put it into legislation and pilot his recommendations so that nearly all claimants are either preparing for work or looking for work.

We will migrate everyone on incapacity benefit on to the employment and support allowance. Under the new benefit, the poorest and most disabled will get nearly £16 a week extra. Everyone else will get support to manage their conditions and prepare for work. They will be required to attend interviews to develop their plan to do so, and advisers will be able to require them to implement that plan. We agree with the Gregg report’s recommendation that parents should not be left until their youngest child is seven before they are given help to get back into, or prepare for, work.

The support that we offer lone parents has been transformed since 1997. We pay a £40-a-week bonus to any lone parent going back into work. We pay 80 per cent. of their child care costs. We pay for travel costs to job interviews, and for interview clothes, if necessary. When the parent finds works, there is a £300 emergency fund to help them, if needed. We can also help people with more serious problems such as depression, debt or drug addiction. Most of all, we have made work pay. A lone parent who has one child and works 35 hours a week will be on at least £304 a week in April next year, compared to £182 in 1999. Thanks to the minimum wage and tax credits, such parents are now more than £100 a week better off.

Our goal is simple: we want more parents to benefit from help, so that they can help themselves and their children. That is why conditionality is so important in the welfare state. Only 5 per cent. of incapacity benefit stock claimants voluntarily take up the support that the pathways to work programme offers, and only around one in four lone parents takes up the support offered by their new deal. Partners in couples in which no one is working face even fewer obligations than lone parents.

The Gregg report found that

As a result of such a regime, the UK enters the downturn with the second lowest unemployment rate in the G7. However, the report also found that countries such as Denmark and the Netherlands had lower unemployment and child poverty rates than the UK, so if we want to abolish child poverty and improve social mobility, we need a welfare state that learns from the example of those countries. The Queen’s Speech made it clear that we will reinforce our commitment to ending child poverty in legislation that the Government will introduce in this Session. The White Paper is the other side of the coin, matching higher support with higher expectations.

Some people say that we should be slowing down the pace of welfare reform because of the downturn. The Government believe that we should do exactly the opposite.
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We should not repeat the mistakes of the recessions of the ’80s and ’90s, when hundreds of thousands of people were shuffled on to inactive benefits to keep the unemployment count down, and trapped there without support, abandoned and scarring our communities. In contrast, we are investing £1.3 billion in helping people find work, but we will have increasing requirements of people the longer they are out of work, to make sure that they do not fall out of touch with the world of work. After a year, everyone will be allocated to a private or voluntary provider, and expected to do four weeks’ full-time activity. After two years, we will pilot requiring people to work full time for their benefit.

The White Paper will also support children whose parents’ relationship has broken down. We will bring forward legislation so that it becomes the default option for both parents to register the birth of their child, whether they are married or not. And we will fully disregard child maintenance when working out income-related benefits from April 2010, so that children can take full advantage of the money provided for their upbringing.

The White Paper also makes clear our intention to apply new benefit rules for problem heroin and crack users. Instead of receiving jobseeker’s allowance, or the employment and support allowance, crack and heroin users will receive a treatment allowance, alongside an obligation that they address their problem.

There needs to be help for people to find and keep work, as well as responsibilities to look for work, so we will double the access to work budget to allow more people than ever before the support that they need to stay in work, and because we recognise that disabled people are the experts in their own lives, we will legislate for disabled people to have the right to exercise choice and control over the support they receive from the state. This right to control will be a major step towards achieving equality for disabled people by 2025. It will be a transformation in the rights of disabled people.

These reforms point the way to a fairer society where children do not grow up in poverty, disabled people enjoy real equality, and everyone is given real help to overcome the barriers to fulfilling their potential. Yes, the reforms are about looking after taxpayers’ money, but they are also about looking after the future, by making sure that we do not waste anybody’s talent. I commend the statement to the House.

Chris Grayling (Epsom and Ewell) (Con): I would normally thank the Secretary of State for an advance copy of his statement, but instead of doing that, may I ask him to explain to the House why he has given such an extensive briefing about the content of the statement over the past few days in the media? Does he not think that briefing the media in that way, ahead of the House, flies in the face of both the rulings that have come from the Chair in the past few months, and the now rather hollow commitments made by the Prime Minister when he was first elected to that position, about the importance of the House?

I pay tribute to the work of David Freud. It was his report, commissioned by Tony Blair and comprehensively rejected by the current Prime Minister three years ago, that started the debate in Britain. When we published
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our Green Paper in January, we drew heavily on David Freud’s work and added to it the recommendations for mandatory community work to be added to the back to work process in the UK. All those recommendations—David Freud’s and ours—have now, it appears, been adopted by the Government.

We know that the Secretary of State will face a big rebellion on his Back Benches, so may I assure him that we will give the proposals our support? We know that his Back Benchers, his union backers and his own social security adviser are clearly opposed to the measures, but as much of what he is proposing comes from the work that we published in January, I can assure him that Conservative votes will help the measures on to the statute book, even if Labour Members try to stop them.

There will certainly be issues for debate when the Bill comes before the House. I think the Government are wrong to extend from six months to 12 months the date when young people are referred for specialist back to work support. We would change that in government. I am glad the Secretary of State agreed with me that the proposals in the Gregg report to make lone parents of one-year-olds prepare for work were just plain wrong. Even so, I remain unconvinced by some of his other proposals on lone parents, and we will want to debate those vigorously when the Bill comes before the House. There are far too many pilots in the proposals. After 11 years in office, surely the Government can, for a change, do something properly and not just pilot it.

There is one huge, unanswered issue, on which I would like the Secretary of State to concentrate his response to me. He has rightly accepted our proposal to put every single person currently claiming incapacity benefit through an independent medical assessment; that is clearly the right thing to do. However, it will also be a complete waste of time if adequate back to work places are not available for the people who go through the test and are told that they have the ability to prepare for work.

Our intention was always to fund those extra places for a proportion of 2.6 million people through the so-called departmental expenditure limits-annual managed expenditure, or DEL-AME, switch—the invest to save mechanism—using initial savings from getting people off benefits and into work to fund the cost of the programmes that get them there. The Secretary of State has said only that he intends to pilot that plan in two areas after 2010. However, the assessments start in 2010. What will happen in the rest of the country? Where will the extra places come from, and how much extra money does the Secretary of State have to put into the budget for the pathways to work programme after 2010 to pay for those extra places? If those places are not there, many of these proposals will not be worth the paper on which they are written.

We have had a wasted decade for welfare reform. The Government promised change, but failed to deliver it in the good times. Now unemployment is rising and these proposals will be much more difficult to deliver. The measures in the White Paper are mostly right for Britain and we will vote for them. It is a shame, however, that the Government have talked for so long and done so little. Let us hope that, this time, they will finally do something—start the real reform process and establish
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proper foundations for change that will enable the next Conservative Government finally to end Britain’s entitlement culture.

James Purnell: I am glad that at last the hon. Gentleman has acknowledged that it was this Labour Government who commissioned the Freud report; normally, he goes around creating the impression that it was his report. We are implementing it in full in this White Paper.

I am slightly confused about the hon. Gentleman’s position on these welfare reforms. Originally, he said that the Opposition would welcome the proposals enthusiastically; last week, he said that he thought that we were going a bit over the top; on Sunday, he said that the proposals did not constitute welfare reform; and by Monday, he went back to saying that he would back them enthusiastically. That is confusing, but the confusion is not mine—it is due to the fact that the policy of the Conservative party is confused. It does not know what it thinks because its modernisation was a spray job. It is increasingly falling back on exactly the ideas of the ’80s and ’90s that created the problems in the welfare state which we have had to address.

The hon. Gentleman used to say that he would give these proposals his full backing. However, if people listen to what he has said today, I think that they will see that he is trying to maintain a tiny bit of wriggle room. I tell him this: he can either be statesman-like and do the right thing for the country or play politics. He cannot do both at the same time. That is the test to which we shall hold him—will he support the full reforms in the White Paper or will he try to have his cake and eat it, and play politics while trying to say that he is doing the right thing?

The hon. Gentleman raised a number of points. He said that he wanted me to direct my remarks to the questions about extra funding. There is extra funding in this package for the pathways to work programme to be extended to people who are migrating from incapacity benefit to ESA. He has no such funding at all. Given his party leader’s remarks yesterday on the radio, he has a real problem. He would have to cut spending in our Department. The Conservatives said that the borrowing in the pre-Budget report was reckless, but it allocated an extra £1 billion and this White Paper allocates still further money. None of that would be available to him. He has already committed to cutting the new deal, and he would have to make even further cuts.

The hon. Gentleman said that he would bring forward further proposals. We will apply three tests to them. First, are they fair? Secondly, would they work? Thirdly, how would they be funded? There is no point in his bringing forward theoretical proposals for which he has no money. He cannot just go around talking about the invest to save proposals as if they were some kind of magical piggy bank. We can proceed only at the pace that David Freud recommended.

The hon. Gentleman suggested that we were not implementing David Freud’s proposals, but he has an article in today’s papers saying that we are doing exactly what he recommended. It is right that we should do what he said, which is to pilot the scheme, not in two areas but in five, and then to make sure that we evaluate it and roll it out on the basis of that success. That is exactly what David Freud recommended.

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The hon. Gentleman can no longer go around saying that there will be extra money from that process, because it is simply not available under his proposals. Nor can he say that he would pay for what he calls “ending the couples penalty” out of further welfare savings. He agrees with what we are doing, so there would be no further welfare savings to be had. I hope that in future he will make it clear that he would have no money for his proposal.

The hon. Gentleman has completely misunderstood the Gregg report. It does not say that we should make parents look for work when their child is aged one—it says that people should prepare for work. It gives them ownership of their own journey back into work. It says that they should be able to develop a personalised action plan, but then, as their children get older, in certain circumstances it is also right that they should be required to carry out that action plan. Like the rest of the White Paper, this proposal is about reducing child poverty, reducing unemployment and transforming lives. We believe in this because we think that the welfare state is the solution; the Conservatives do not, because they believe that the welfare state is the problem. On Sunday, the hon. Gentleman’s leader said that 5 million people in this country could all be a potential Karen Matthews. That is an insult to people on benefits, and it lets people like Karen Matthews off the hook. I think that in future Conservative Members should dissociate themselves from their leader’s remarks.

Mr. David Blunkett (Sheffield, Brightside) (Lab): I commend the Secretary of State for the White Paper, particularly the move to greater flexibility for advisers and for the invest to save project. Does he agree that the global downturn means that many more people, in addition to the 2.5 million who already rely on legal, but very high, domestic credit repayments will require support and help? Does he also agree that the consultation launched a fortnight ago on the reform of the social fund should lead to a much more radical approach based on the partnerships in invest-to-save projects that would allow the public, private and voluntary sectors to expand dramatically the availability of affordable credit to the millions of people who would otherwise find themselves reliant on loan sharks who demand incredible payments that those people cannot afford to make?

James Purnell: My right hon. Friend is absolutely right. I pay tribute to him for starting off the process of welfare reform that we are announcing today. I also pay tribute to him for campaigning to reform the social fund. We think that it does great work, but that it could be improved by ensuring that people get financial advice alongside help with their finances. That is why we want to consider whether we could use that money to subsidise credit unions to do their job even better by helping people with their financial needs but also ensuring that they get out of debt.

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