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There was a leaked report in The Observer only a couple of weeks ago. My hon. Friend the Member for Birmingham, Selly Oak and I tabled a series of parliamentary questions to ask what evidence existed about privatisation and the past performance of the private sector in delivering some of the objectives set for incapacity benefit claimants and other claimants. We were advised by Ministers that no report or evidence was available that we could use to judge any further privatisation proposals. We then discovered, because of a leak, that there had been a DWP report on that very issue. It was marked “restricted” and circulated to jobcentre managers, not to hon. Members or the House. We were told that it was not published because the research was
still in progress and had not been validated. Well, that was two weeks ago; it could have been validated by now, and we still have not seen a copy of it.
What did that research say? It revealed that the private companies placed into work just 6 per cent. of incapacity benefit claimants on their books, rather than the 26 per cent. that they claimed would be possible when they bid for the contracts. That compares with 14 per cent., achieved by state jobcentres during the same period. The report described the private contractors’ performance as “not satisfactory”. That information should have been put before the House and published before the debate took place, because it evidences the fact that the rush to privatisation is being pursued for dogmatic reasons and is a waste of taxpayers’ resources.
What have we seen in the approach to the privatisation of further jobcentre work? So far, the Government have gone out on their consultations and in the development of tenders, and a number of companies have expressed their interest. There were regional discussions and consultations. The Government gave a commitment that money would be paid up front—the argument was that 20 per cent. of it would be front-loaded—and that the companies would receive the rest of the payments on the basis of placing people into work. We are now told that those involved have had to re-consult, that the companies want more money up front and that the targets are not to place people into work, but to prepare them for the possibility of work. I do not understand why we are wasting resources and undertaking such a lengthy process when we are praising jobcentre staff to the hilt for their professionalism and success.
I considered some of the problems that the private sector has brought forward. If we look at a number of areas in which back-to-work support has already been contracted out, we see that some contractors have failed completely. Two external providers of the pathways to work scheme, Instant Muscle and Carter and Carter, went bust almost as soon as they were awarded the contract, leaving claimants high and dry. Other contractors, notably A4e and Maatwerk, have been heavily criticised for poor performance. Again, I just do not understand why the Government are pursing such a dogmatic path when there is no evidence to justify their doing so; all the evidence demonstrates the perils of dependence on the private sector for the delivery of the services that we are talking about.
Mr. Gordon Prentice (Pendle) (Lab): Could the answer be relatively simple—that the Government want to drive down the civil service headcount, and think that the way to do that is to transfer jobs done by civil servants to the private sector, regardless of the consequences?
John McDonnell: There is an argument that the Government, taking a very short-sighted approach, may well want to do exactly that—drive down the headcount. They may try to look at the issue as a cuts exercise, or a reduction-of-expenditure exercise, and dress it up as a way of increasing performance and getting people back into work, or preparing them for work. However, all the evidence points in the opposite direction. All the evidence points towards abortive costs. If contracts are awarded to companies that go belly-up and into administration, we are back to square one, and there will be abortive costs as a result of going through the whole tendering process again.
The argument has been put forward that the measures are not about private companies, but about awarding contracts to the voluntary sector, or third sector, as we now call it. Well, in the recent period, 33 out of 34 DWP contracts have gone to the private sector, not the voluntary sector. The private sector companies have largely been the large corporates. We have consulted, and looked at the evidence from, the voluntary sector. I give the example of the Leonard Cheshire charity. It stated that the model that the Government were putting forward would result in the
“complete loss of the competitive market, to the detriment of small specialist existing providers, as well as the removal of customer choice and control”,
because contracting out is being dominated by the large companies.
Jeremy Corbyn: Does my hon. Friend have any evidence on the comparative working conditions of those employed directly by the DWP to deliver services, and those employed by companies that successfully bid for such contracts?
John McDonnell: We are aware of some comparisons of wage rates, which are considerably lower in the private sector. We are also aware of the high turnover of staff in the private sector, which is possibly a result of the management style, but also a result of conditions of work and wage rates. That is an issue that we need to consider, because jobcentres and the DWP have built up expertise over decades. We have commended staff for the expertise that they have shown in their performance in recent years; Ministers have said that they have provided an excellent service.
My amendments on the subject seek to halt the privatisation, as there is no evidence or justification for it. There is another reason, too: we have to accept that the continued onslaught on DWP staff is undermining their morale. We have already laid off 30,000 workers in the DWP. It has been mentioned that 200 jobcentres were closed down, but in total, more than 500 offices have been closed down. At the same time, we have engaged in a management style that has provoked a whole series of disputes in recent years, yet DWP staff still provide the excellent service described by Ministers. However, staff can only take so much. Having provided an excellent service, they are threatened with more privatisation and more job losses.
Let me end on a quote. Ministers say that they have toured jobcentres and found that staff were supportive of everything that the Government were doing, and all the rest of it. When those staff meet separately, and within their trade union branches, they express their concern and their anger. The PCS DWP group president, Jane Aitchison, said:
“Our members are proud of the work they are doing in jobcentres. The staff have responded in exceptional fashion to sharp increases in workloads. After years of being under-valued, constant cuts and under investment, the response to the recession has demonstrated our members’ ability to meet extraordinary challenges in a way no private company could have done. The government should not be galloping towards further privatisation. The kind of outsourcing of jobcentres proposed in the welfare reform bill would be a major blow to my members’ morale.”
If the amendments were agreed to, they would end that privatisation. We should be building DWP staff’s morale and congratulating them on the work that they have done, not targeting and undermining their role in this way.
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Paul Rowen: It is a pleasure to follow the hon. Member for Hayes and Harlington (John McDonnell). My party and I have serious concerns about some of the clauses in this part of the Bill. A series of amendments seek to deal with conditionality.
As the hon. Gentleman said, this is a Bill for another age. This week, we will see unemployment top the 2 million mark. The Bill does not address the problems that many of our constituents now face. There are many things that it could and should have done to help employers and to help people who are losing their job to stay in work. I spoke to an employer yesterday who told me that in the next six weeks he is likely to have to shut his company because of insufficient orders. We ought to do what they are doing in Germany and France, which provide support for such companies, so that they can lay off their staff but continue to pay them. There is no provision for that in the Bill, so that company will close in six weeks, as many others have done.
We are not opposed to welfare reform, but there are some basic principles that the Bill does not address. The Royal College of Psychiatrists set out five principles for effective reform which the amendments should meet. Although those principles are meant particularly for people with mental health problems, they apply across the piece. The first is that there should be clear evidence that welfare programmes work for people. We are talking about introducing a raft of programmes, introducing conditionality, and forcing people to work for their benefits, as the hon. Gentleman said, at rates of less than £1.60 an hour, but where is the evidence that such conditionality works?
The Government are good at quoting examples from abroad. However, the examples from America, the Netherlands and Scandinavia are very different. The programmes in America clearly do not work and have not been a success. As I pointed out to the Minister for Employment and Welfare Reform in an earlier debate, the scheme in Wisconsin pays people who work a proper wage and does not put them on Workfare, as the Bill proposes.
The second principle is that the welfare system must address people’s needs and particular circumstances. Where in the Bill is there clear provision for proper child care facilities to be in place before a lone parent is put on such a scheme? Amendment 36 tabled by the hon. Member for Glasgow, North-West (John Robertson) seeks to address that need. There is no guarantee of that in the Bill. Similar safeguards are not in place in respect of other provisions.
Thirdly, when services are contracted out, there should be no discrimination against those who are difficult to place. From the evidence that has been provided, we know that so-called parking and creaming—that is, parking those people who might be difficult to get into work, and creaming off those whom it is easy to place in employment—already takes place. Where are the safeguards in the Bill to prevent that? The fourth principle is that employers should fulfil their responsibilities to employ
and support disabled people. What does the Bill do to strengthen that commitment? An opportunity has been missed. Fifthly, everyone must have access to an appropriately well informed and trained vocational work force.
I want to talk about amendments 49 to 65, which stand in my name, and to say a few words about the other amendments in the context of the five clear principles for undertaking any welfare reform. I also want to ask why the Government are not adhering to those principles.
We support new clause 1. As my hon. Friend the Member for Northavon (Steve Webb) said, in 1988 the Conservative Government made a clear distinction between those under 25 and those over 25 in respect of the amount that they should receive. Young people on JSA are currently on £13.35 a week less than other JSA claimants. Where is the evidence that that is necessary? Young people’s needs are the same as those of other people. I am not talking about child care, as that is dealt with elsewhere, but the differential puts young people at a real disadvantage. We support the new clause, which would ensure that there is no discrimination against young people. The Equality Bill is going through the House. How can the Government say in all seriousness that that Bill’s provisions will be adhered to, given that some of the unemployed are discriminated against for one reason and one reason only—because they are of a certain age? That is a clear breach of the provisions.
New clause 8 seeks to ensure that income-related benefits can be adjusted to take into account work-related activity performed by the claimant. There is already a provision whereby employment and support allowance claimants can receive an additional £24-odd a week for undertaking work-related activity. Why has that provision not been extended to all people undertaking work-related activity? Why should a lone parent who has agreed to undertake such activity not receive that bonus, which is paid to ESA claimants? Where is the fairness and equity in that? Where is the evidence that not paying lone parents that supplement will encourage them back into work? As the hon. Member for Hayes and Harlington said, there is no evidence for that. The evidence is that when lone parents are properly supported they return to work, and that Government schemes are successful. We support new clause 8, which seeks to enshrine what is patently missing from much of the Bill—equality in how claimants of all types are treated.
Amendments 40 to 43 would make the “work for your benefit” scheme a pilot. The Government are right to say that in a recession they do not want to stand back on reform, that it is important that no one should be forgotten and that things should move forward. However, I put it to Ministers that unemployment is rising and that there is already evidence—there were reports in the press last week—that Jobcentre Plus staff cannot cope with the number of people whom they have to see; people are getting two-minute interviews instead of 20-minute ones. Why, then, do we need to press ahead completely and make these things mandatory for everyone? It makes sense—again, sticking to the principle that there has to be clear evidence that welfare reforms work—for the scheme to be a pilot. Then it could be properly evaluated and reported on to the House, and we could see where to go from there. We support amendments 40 to 43.
Amendments 11 and 12 would render the “work for your benefit” scheme an offer, rather than an imposition. Again, where is the evidence that imposing something is successful? The available evidence, whether international or based in this country, shows that providing good-quality support to people is what works, not seeking to impose something.
Amendment 36 would ensure predictable access to good-quality, affordable and flexible child care. An important principle is involved, which is that the parent should be able to make that decision. It is not for an adviser, who may not live in the area and may not know what is available, to decide what that claimant should do. I know that the hon. Member for Glasgow, North-West has tabled amendment 36 because in Scotland there is no legal entitlement to child care. In Committee, the Minister promised to reflect on it, and get back to us on Report. I hope that he is willing to consider it, because it is fair and reasonable. It is a matter not of saying no, but of saying that there has to be access to proper entitlement.
Amendments 13, 14 and 15 deal with the compulsory elements. Amendment 13 would mean that work-related activity was not compulsory. That is the right way forward in the current circumstances—such activity should be an option, not imposed. Amendment 14 removes the provision that requires individuals to participate in “work for your benefit” schemes, and we support that. Amendment 15 ensures an hourly rate at the level of the minimum wage in any “work for your benefit” scheme, or a wage equal to that of staff directly employed and undertaking the same role. In Committee, I cited the example from Wisconsin where, whatever benefits might be paid in America, it is clear that someone undertaking a work-related activity is paid a fair wage for it. Again, I ask the Minister why that should not take place? Why should someone be required to undertake work, even though it may benefit them, without being paid a fair rate? Given this Government’s record on the minimum wage and protecting vulnerable workers, I find it surprising that they are not putting such protection in place.
Amendment 45, following an established sequence, would require a pilot to continue until 2013, when it would be properly evaluated. Throughout the Bill, there are provisions to set up pilots—whether we are talking about direct payment, or the Child Support Agency and the removal of driving licences—about which there will be reports to this House. Given that wholesale changes are being made that affect a large number of vulnerable people, why can we not have a pilot that is reported on in 2013? That seems logical and fair, and we support it. Amendments 13 to 16 deal with increasing payment and lessening compulsion for work-related activity. That is the way forward.
Amendment 17 deals with work-related activity, and amendment 35 deals with the problem of a lone parent returning to work. We all want to see as many people who are able returning to work. Whatever our stance, that has to be the case. However, it really ought to be for a parent, particularly a lone parent, to decide when they are able to go back to work. We have moved rapidly, in the Green Paper, the White Paper and then the Bill, from a lone parent having to return to work when their child is 16 to their having to do so when their child is three, if the Bill is not amended. Again, I ask Ministers
what the evidence is that compulsion, and forcing a lone parent to go back to work when their child is that age, is successful.
Mr. Terry Rooney (Bradford, North) (Lab): How about Sweden, Norway and Denmark?
Paul Rowen: There are examples elsewhere, but in places where there are much better systems in place to support such parents.
Mr. Rooney: There is evidence.
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Paul Rowen: There is some evidence, as the Chairman of the Select Committee on Work and Pensions says, but we are moving far too fast. The system needs to be supportive.
Again, I wish to quote Fiona Weir, the chief executive of Gingerbread. She said during the evidence session of the Public Bill Committee:
“From our experience of working with single parents, we feel quite strongly that the vast majority want to work; in fact, nine out of 10 say that they want to work when it is right for their family. Usually, when you unpick that a bit, there are very good reasons behind their choices on work, and 40 per cent. of lone parents with children under seven are already in work. Those who are not working often have very good reasons: sometimes it is skills and confidence, sometimes a lack of access to the right child care, and sometimes a different set of barriers relating to the particular needs of the children. Fundamentally, what is required is a system that really provides support on skills training and building confidence, and good provision of child care, but that essentially leaves the decision about when it is right for the family for the single parent to return to work up to that single parent.” —[ Official Report, Welfare Reform Public Bill Committee, 10 February 2009; c. 42, Q53.]
If we had all the other things in place—if the personalised agenda that the Government are so keen to talk about were up, running and working and if we had excellent child care in every locality that could deal with the needs of not just very young children but older ones, for whom there is clear evidence that adequate child care is not available—then yes, the Government could go ahead and introduce compulsion. However, those things are not available. We are putting the cart before the horse. We are not concentrating on improving services to make it easier for lone parents to go back to work, even though we have it in our head that that must be done. We are willing the ends but not the means, which is not an acceptable way to behave.
Mr. Gordon Prentice: How does that square with what the hon. Gentleman said earlier: a lone parent is in the best position to decide when to go into employment, taking into account the interests of her, or sometimes his, children?
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