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Lord Layard: My Lords, there is an overwhelming case for what the Government propose. I put it in terms of four basic points. First, we have had a voluntary system for a very long time. For years it has been possible for unemployed people to receive free tuition in basic skills, while continuing to draw benefit. The problem is that very few have chosen to take the opportunity to do so. That is why two out of every five unemployed people are functionally illiterate. Surely we must be open minded about this problem. We must try to find a better approach to the problem. That is the argument for this experiment.

Secondly, the proposal is only a pilot scheme to ascertain whether compulsion can make a difference. Moreover, the scheme will cover just two geographical areas. Surely the House would like to know whether this would make a better impact on the problem that we all agree exists. Thirdly, these pilots will be subject to a full evaluation by independent assessors, including an evaluation of how the sanctions aspect worked. How could we possibly know whether sanctions would make a difference unless we try them in this way? It seems extraordinary that the Social

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Security Advisory Committee should encourage us to try to imagine what sanctions would do without allowing us to put them in place. Social science--indeed, any kind of public policy--cannot be conducted on that basis.

Finally, there is the question of the penalty. The noble Earl, Lord Russell, wants a penalty of some sort, but it must be a smaller one to that proposed. I believe that that would prove to be extremely confusing. The benefit system and the sanction system are already too confusing and complicated. What would be the point of introducing yet another rather minor variant just for a gesture of some sort? The sanctions regime already allows for the protection of vulnerable people. Some 60,000 sanctions are implemented every year, and here we are considering a fairly small number. What sense would it make to create a new category when we have a system that we are more or less managing to implement on a very wide scale?

If I take those four points together, it seems to me that the case for the Government's proposal is overwhelming. The voluntary system has failed, so we need to search for something better. We are proposing only a pilot scheme, which will be evaluated, and it should be kept simple. The last thing we want to do is to muddle the system with further complexities.

I have one further, but more general, point to make. The noble Earl raised the general theory of human nature towards the end of his presentation. On the whole, that is not borne out by the evidence on unemployment, on how unemployed people behave and on how that affects unemployment. My colleagues all around the world have been researching this subject for many years. There is a very strong weight of evidence to show that the way unemployed people are treated has a profound effect on their behaviour. If the regime is tighter, people will respond; and that, in turn, affects the level of unemployment.

If we were satisfied with the present level of unemployment that would be all right. But I believe that we should all start from the position that the present level of unemployment is intolerable; indeed, the figure is two or three times higher than that which applied in the fifties and sixties. We have to do very much better in that respect. There is one finding that emerges from all the evidence: the way we treat unemployed people will affect the level of unemployment. Perhaps I may give your Lordships some obvious examples of certain countries.

On the one hand, 10 years ago some countries such as Denmark and the Netherlands had high unemployment--as high as anywhere else--but decided that they must change their approach and that they must simultaneously offer greater rights to the unemployed and more help but also impose a responsibility on the unemployed to take advantage of that help. That has had a most dramatic effect in those countries where unemployment has been more than halved with no increase in inflation.

At the other extreme, countries such as France and Germany still have a system of rights to benefit with few responsibilities attaching to them. In those

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countries unemployment is still high. The research shows the impact of those policies. In Britain we are somewhat in between those two poles. Bit by bit we are getting away from a system where one just has rights to benefit towards one that is based on greater rights and more help but also greater responsibilities. That is important if we are to deal with the unemployment problem to the advantage of the unemployed as well as the rest of society. If I think of this as a debate ultimately about full employment, it is inconceivable that we can get back to full employment if we flinch from the kind of measures which are proposed only as a pilot to determine whether they will improve this terrible problem.

Baroness Carnegy of Lour: My Lords, before the noble Lord sits down, does he not think that the Government's measures to make work more attractive than benefit--which are many and various and are being developed--are more likely to help on the literacy question than the fear of losing benefit as they constitute a proper incentive as opposed to just the fear of losing something? I agree with much of what the noble Lord said. It increasingly amazes me to hear these comments coming from the Labour Benches but he is absolutely right. However, in the case of literacy, the measures to increase the attractiveness of work, as opposed to the fear of losing benefit, are much better because they do not contain the element of fear. Does the noble Lord agree with that?

Lord Layard: My Lords, one has to operate on all fronts. Making work pay is an extremely important part of the Government's policy. If I am asked to provide a rank order, as it were, my feeling is that offering positive help to people while they are unemployed to get them better trained, better placed and more work ready is more important than making work pay. However, all those factors are important.

In the case we are discussing the national literacy and numeracy tests will be extraordinarily important in the development of the Government's basic skills policy and in whether employers at last become interested in whether their workers have basic skills problems. I take this opportunity to advertise those tests. One of the reasons employers have been so slack about the matter is that it is difficult for them to know whether someone has basic skills problems. People are good at hiding them. The factor which will most motivate people to deal with their basic skills problems and to face up to them and address them is if they think that by doing so they will obtain some kind of acknowledgement of their capabilities which they can show to an employer.

Baroness Hollis of Heigham: My Lords, I hope that the noble Earl, Lord Russell, will not press his Motion.

These draft regulations are essential to the Government's national strategy for improving adult literacy and numeracy skills, as outlined by my noble friend Lord Layard. For far too long the scandal of adults not being able to read, write and do maths has

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gone unchecked. We shall address that. Improving the literacy and numeracy skills of 750,000 adults by 2004 is one of our top priorities.

As your Lordships may be aware, around one in three of the unemployed have literacy and numeracy skills below that of the average 10 year-old. That is twice as many as in Sweden and is one of the worst records in the OECD. They are functionally illiterate. That means that they cannot often use Yellow Pages to get a plumber; they cannot read the departure screen at a railway station or use a street map. Therefore, they cannot even go into the job of last resort; that is, driving a minicab. They cannot read a tabloid newspaper or their children's school reports. They cannot make sense of instructions to work a machine or even follow the instructions on a bottle of medicine for their children. They are far more likely to be unemployed, depressed and not vote. Worse than that--I believe that this is one of the compelling reasons for intervening--is that in the case of children, particularly sons, who are brought up in a household where their parents do not read, not only the father's unemployability but also his illiteracy cascade down the generations. We know that to be true.

Earl Russell: My Lords, if I might save the Minister's time, we agree with the arguments that she makes; the question is, will the regulations do anything to improve the situation?

Baroness Hollis of Heigham: My Lords, unless one accepts, first, the scale of the problem and, secondly, the inadequacy of all of the approaches undertaken so far to address those problems on a voluntary basis, we cannot move on. The noble Earl seems to think that we can describe the problem, continue with existing policies, possibly adding the odd incentive, and all will be well. It is precisely because of the depth and the breadth of the problem and the way in which that deprivation is inherited that the Government cannot continue simply with a voluntary approach.

We know who many of those suffering functional illiteracy may be. For example, English may not be their first language. Many may have finished formal education at primary school, partly because of their age. As the noble Baroness rightly said, others may have finished primary school, "lost it" at secondary school and entered a truanting cycle. As other noble Lords have said absolutely rightly, others may have hidden learning difficulties and may have spent 20 years in developing coping strategies to conceal them. They remain unemployed.

I say to the noble Lord, Lord Astor of Hever--who seemed to suggest that while any jobs may exist which could be performed by someone without literacy or numeracy skills we did not have a moral case to press them into remedial literacy training--that, whatever the cause, 49 out of 50 jobs now remain closed to people with functional illiteracy. I suspect that in 15 to 20 years' time the figure will be 495 jobs out of 500. That is the degree of handicap to life chances we are bestowing on them and their children.

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We believe that the key to improving the prospects of such adults is to raise their skill levels so that they can find and keep secure work. We do not really know the most effective measures to raise the skill levels of the unemployed. We still do not know what works when dealing with people who have functional illiteracy, particularly when they have managed to conceal it for many years at the price of continuing unemployment. That is why we propose five pilots for jobseekers as part of our national strategy. I emphasise the word "pilots". They comprise mix and match schemes, running for six months, carefully evaluated to measure the impact of different approaches, not "one size fits all". Let me describe them as I am not sure that noble Lords fully appreciate them.

Two of the five pilots concern new approaches to screening jobseekers for basic skills. One of the pilots will test the impact of early screening at 13 rather than 26 weeks' unemployment, while the other will try out a new screening tool designed by the Basic Skills Agency. After screening, those who have been identified as possibly having inadequate basic skills will be given an independent diagnostic assessment. That assessment will determine more clearly whether jobseekers have difficulties with literacy and numeracy, where their ability lies and what the most appropriate course is for each individual. I say to the noble Lord, Lord Astor, that there is no question of putting everyone on the same course. Different courses, some tailored specifically for clients on the pilots, will be provided to meet different levels of need.

The other three pilots--as I say, two are about points of intervention and how one intervenes--will test out new approaches to motivating jobseekers to improve literacy and numeracy. A pilot in Wearside will provide financial incentives for jobseekers to undertake training--no sanctions, just financial incentives--a further £10 a week and a £100 bonus for completing the course. Another pilot in north Nottinghamshire will test the requirement that jobseekers with poor literacy and numeracy must undertake training or risk a temporary loss of benefits. The third pilot in Leeds will test the impact of both sanctions and incentives. Therefore the schemes comprise two involving interventions, one involving sanctions, one involving a benefits increase only and one involving a mix of both benefits and sanctions. A full range of possible ways forward is being explored in those five pilots because we say in all humility that we do not know what works best. What we do know is that the present strategy has failed generations of men and women and their children. Therefore we are going for mix-and-match ranges.

We do not need new legislation to pilot incentives. But it is necessary for us to seek powers to test sanctions in this context. That is why we bring forward the draft regulations today. Subject to your Lordships' agreement, these regulations would enable the Government to establish pilot schemes imposing sanctions on people claiming JSA if, without good cause, they refused or failed to take part in literacy and numeracy skills training. The two pilot schemes

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involving sanctions out of the five would involve jobseekers aged between 25 and 49 who had been claiming benefit for at least six months and had been assessed as needing training. The sanction would be for two weeks in the first instance. The sanction for a further failure to participate within 12 months could be four weeks' loss of JSA.

We fully recognise the need to be sensitive to the complex problems that everyone identifies are carried by those who are disadvantaged by their illiteracy. It has been a particular concern of the Social Security Advisory Committee. It is reflected in its report on our proposals. We accept that there will be jobseekers for whom basic skills training would be inappropriate. We have incorporated an additional safeguard into the draft regulations that are now before your Lordships' House. We have made clear that whether or not a claimant will be required to undertake training will be subject to discretion.

There will be, therefore, no question of compelling all jobseekers with low levels of literacy or numeracy to undertake courses whatever their individual circumstances. Such a course must be appropriate for the individual before he or she can be required to undertake it or risk losing benefit. For example, jobseekers for whom English is not their first language and who need additional support in English may be referred to language support where appropriate.

The Social Security Advisory Committee also expressed concern, rightly--it has been aired today--for people with mental health problems, learning difficulties and dyslexia. Claimants with those disabilities are more likely to be receiving incapacity benefit or other disability allowances than JSA. The pilot schemes apply only to those on JSA who are presumed, therefore, to be available for work but who are effectively unemployable because of their illiteracy. Where a JSA claimant has such a disability--I share your Lordships' concerns for people with mental health problems, learning difficulties and dyslexia--personal advisers have clear guidance to refer them to a disability employment adviser. Such advisers are specially trained to help people with disabilities and give them appropriate support and guidance. Those clients would not be required to undertake unsuitable training or risk losing benefit. Indeed, the very process of screening may help to bring forward people who have so far concealed some of those disabilities and ensure that they receive the benefit they should have had for many years but have failed to do so. For example, instead of JSA they may be entitled to claim severe disability allowance. They may be entitled to claim IS with a disability premium.

If a jobseeker begins a literacy/numeracy skills course and it becomes apparent that the course is not suitable--perhaps he or she is dyslexic--it will be possible to exercise discretion and stop attendance on the course. In such a context, much depends on the sensitivity, and thus the training, of the personal advisers. They not only have the full six weeks Employment Service training--it covers equal opportunities, interviewing skills and preventing and

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calming difficult situations--in addition, the Employment Service is preparing special training packages for each pilot to cover how to judge the exercise of discretion. Other safeguards will include good cause for failing to attend appropriate training, illness, domestic emergency or caring responsibilities. In that case, no one will be sanctioned and lose benefit. That brings me to the question of sanctions.

I believe that we are able to meet virtually every point raised by the Social Security Advisory Committee apart from the point on sanctions. I wish to turn to that now. Jobseekers will have the opportunity to explain their actions before any sanction decision is taken. They will be given that information verbally and in writing, as the noble Lord, Lord Astor, said. They will have the opportunity to bring with them a friend, advocate or mentor. That might be particularly important if there is a language difficulty--for example, because English is not their first or main language. The decision will be taken by an impartial decision-maker; and in the meantime benefit will continue to be paid in full. If a decision-maker decides that a sanction is justified, the jobseeker will have the usual right of appeal to an independent Social Security Appeal Tribunal. Clearly, if someone has had his benefit removed, his benefit does not continue while he appeals, as applies with regard to any other social security benefit. If someone has had his incapacity benefit removed and he appeals, his benefit stops until the appeal is heard. If the appeal succeeds, the benefit is reinstated. The proposals are in line with all the other sanctions and appeal systems of support that the social security system offers. If the tribunal finds in a person's favour, then arrears of benefit will be paid.

Where no such special circumstances exist and refusal to undertake training results in a sanction, JSA will be stopped for two weeks in the first instance. Even then, at any point the jobseeker could regain the allowance if he changed his mind and took in basic skills training. I give way.

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