A new deal for welfare: Empowering people to work...A new deal for welfare: Empowering people to...

A new deal for welfare:Empowering peopleto work

A new deal for welfare: Empowering people to work

Presented to Parliament bythe Secretary of State for Work and Pensions

by Command of Her MajestyJanuary 2006

Cm 6730

© Crown Copyright 2006

The text in this document (excluding the Royal Arms and departmental logos) may be reproducedfree of charge in any format or medium providing that it is reproduced accurately and not used in amisleading context. The material must be acknowledged as Crown Copyright and the title of thedocument specified.Any enquiries relating to the copyright in this document should be addressed to The LicensingDivision, HMSO, St Clements House, 2–16 Colegate, Norwich NR3 1BQ.Fax: 01603 723000 or e-mail: [email protected]

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Contents

Ministerial foreword iii

Executive summary 1

Chapter 1: The challenge 13

Chapter 2: Helping ill or disabled people 23

Chapter 3: Helping lone parents 51

Chapter 4: Helping older workers 61

Chapter 5: Delivering welfare reform 73

Chapter 6: A radical new approach to Housing Benefit 81

Chapter 7: Long-term benefits reform 91

Chapter 8: Consultation arrangements and contact details 95

References 99

Ministerial foreword

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Ministerial foreword

Since coming into office in 1997, we have embarked on a radical seriesof reforms to our welfare state. We began the New Deal, which hashelped hundreds of thousands of people to get off benefits and backinto work. We have invested heavily and created Jobcentre Plus, anintegrated service for people who need help in finding employment.Through the National Minimum Wage and tax credits, we have actedto ensure that people will be better off in work than on benefits.This Government is the only one to ensure disabled people have thecomprehensive civil rights they need. And only this Government hascommitted itself to reversing the inexcusable disadvantage faced bydisabled people by delivering substantive equality within a generation.

Our approach has been based on the principle that the best welfare policy of all is work andthroughout this process of reform we have sought to match rights with responsibilities.These reforms have made a huge difference. Britain now has the highest employment rate ofany G8 country. Youth unemployment has virtually been eradicated. The number of peopleclaiming incapacity benefits is falling after decades of rapid increases. There are now a millionfewer people of working age on benefits. The progress we have been able to make hasdepended on a strong economy and a dynamic labour market. Both have been achieved andsustained since 1997, but there is more to do.

Our economy and society are changing fast. Our welfare state must help us respond to thesechanges. It must focus its energy on tackling poverty and social exclusion. Society has aresponsibility to support those unable to support themselves. It should help support people inacquiring the new skills they need for the jobs of the future. It must help UK companiessucceed in the new global economy. We set out here our proposals for how this could bedone. It will require investment to provide more help and support for those who need it. Itwill involve a range of new providers, helping to mobilise local expertise in a new nationaleffort to extend opportunity and prosperity to those who have been, in effect, excluded. Westand ready to make this investment in our people and our country.

The publication of A new deal for welfare: Empowering people to work marks the beginningof what must be a national debate on the future direction of our welfare reforms. I hope youwill join that debate and help shape the future.

Rt Hon John HuttonSecretary of State for Work and PensionsJanuary 2006


Executive summary

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Executive summary

The case for reform1 Ensuring citizens have the right to enter

the world of work is a fundamentalresponsibility of any moderngovernment. That has been the guidingprinciple of the Government’s drive tocreate a modern, active welfare statesince 1997.

2 We have made real progress. Some2.3 million more people are now inwork than in 1997. The UK’semployment rate has risen to becomethe highest of the G8 countries.Jobcentre Plus and the New Deal inparticular have helped move thewelfare state away from a passiveone-size-fits-all model, laying thefoundations for an active, enablingsystem, where tailored support to helppeople back into work is matched bypersonal responsibility for people tohelp themselves. As a result, youthunemployment has fallen dramatically,down 90 per cent since 1997.

3 The Government has also significantlyimproved support and protectionoffered to all groups, for examplethrough the National ChildcareStrategy, the New Deal for Skills andthe extension of disability rights.

4 But there is still more that needs to bedone to break down the barriers thatprevent many from fulfilling theirpotential, barriers that impede social

mobility and, through worklessness andeconomic inactivity, consign people topoverty and disadvantage. We need toaccelerate the move away from awelfare state fixed to the old model ofdispensing benefits and move further inthe direction of enabling people toachieve a better life. Ultimately, it is thesocial injustice inflicted by the povertytrap of benefit dependency that makeskeeping the status quo indefensible.

5 The Government and externalstakeholders must act to provideadditional help and support so thatpeople can fulfil their potential. Butmaking this difference also requires aclear response from individual citizensthemselves: they need to meet theirresponsibility to take the necessarysteps to re-enter the labour marketwhen they have a level of capacity andcapability that makes this possible.

6 For individuals and families, the benefitsof work are clear. Work is the bestroute out of poverty. It strengthensindependence and dignity. It buildsfamily aspirations, fosters greatersocial inclusion and can improve anindividual’s health and well-being.Furthermore, there is a clear linkbetween benefits dependency andhardship. As many as half of the mostsevere pockets of deprivation inBritain are contained within the100 parliamentary constituencies that


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have the largest numbers of peopleclaiming incapacity benefits.

7 Making a reality of employmentopportunity for all is the only wayBritain can meet the challenge of anageing society. Growing numbers ofretired people and a low birth ratemean that only by ensuring thateveryone who can work is in work canwe secure dignity and independence inretirement.

8 That is why we have set ourselves theaspiration of achieving an employmentrate equivalent to 80 per cent of theworking-age population. There aregroups of people locked into long-termdependency on benefits who have beendenied the opportunities that work canbring. In a modern, dynamic economy,we cannot afford to be denied the skillsand contributions of those who havethe potential to work.

9 To achieve our aim, we will:

■ reduce by 1 million the number onincapacity benefits;

■ help 300,000 lone parents into work;and

■ increase by 1 million the number ofolder workers.

10 We cannot achieve this without furtherreform. The success of the New Dealhas been based on a clear frameworkof rights and responsibilities. We havebeen extending this to all claimants,building a system that recognises theresponsibilities people have to getthemselves off benefits, while ensuringthat society fulfils its obligations tothose unable to help themselves. Only

through an active, supportive welfarestate can we achieve the progressivegoal of employment opportunity for all.

Incapacity benefits11 The number of incapacity benefits

claimants more than trebled betweenthe late 1970s and the mid-1990s asemployment in many traditionalindustries collapsed during tworecessions. Many claimants saw this asthe end of their working lives.

12 Over the last decade the characteristicsof claimants have changed. No longeris it just those from the industrialheartlands. The South East has moreclaimants than the North East and thereare at least 150,000 claimants in everyregion, making this a national problem.A third of new claimants cite mentalhealth conditions as the primary causeof their incapacity – compared withone-fifth in the mid-1990s. Over a thirdof new claimants come not from workbut from other benefits such asJobseeker’s Allowance and IncomeSupport.

13 Although since the mid-1990s thenumber of people coming ontoincapacity benefits has fallen by a third,the total number of claimants remainsbroadly the same because people stayon benefits longer. Although mostpeople coming onto these benefitsexpect to get back to work, a very largenumber never do. After two years onincapacity benefits, a person is morelikely to die or retire than to find a newjob. It is not acceptable to write offmillions of people in this way.

Executive summary

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14 Since 1997 we have introducedsignificant innovations, such as the NewDeal for Disabled People and Pathwaysto Work. The success of Pathways toWork has demonstrated that, with theright help and support, many people onincapacity benefits can move back intowork, reinforcing our view that labellingpeople on benefit as ‘incapable ofwork’, is normally entirelyinappropriate. However, fundamentalproblems remain:

■ Little is done to prevent peoplemoving onto incapacity benefits.

■ The gateway to benefits is poorlymanaged – with claimants receivingincapacity benefits before satisfyingthe main medical test.

■ Benefits trap people into a lifetime ofdependency – the longer a personremains on benefits, the less chancethey have of leaving.

■ There are perverse benefits incentives– paying more the longer peopleclaim.

■ Almost nothing is expected ofclaimants – and little support isoffered. Those who try to plan theirreturn to work through volunteeringand training perceive that they runthe risk of proving themselvescapable of work and therefore losingtheir entitlement.

■ The very name of incapacity benefitssends a signal that a person isincapable and that there is nothingthat can be done to help get themback into the labour market.

15 The measures we propose –improvements to workplace health,reform of the gateway, increasedsupport for claimants and removingthe perverse incentives in the system,should, over time, significantly reducethe number of people claimingincapacity benefits. It is difficult tomodel the precise impact of thesemeasures. If, however, the Government,employers, local authorities and healthprofessionals come together to tacklethis challenge, we should aspire toreduce the number of incapacitybenefits claimants by 1 million over thecourse of a decade.

16 Our proposals will be underpinned bythe new Employment and SupportAllowance that will simplify the currentsystem. From 2008, this new integratedcontributory and income-relatedallowance will replace Incapacity Benefitand Income Support paid on thegrounds of incapacity for new claimants.It will be paid to most people in returnfor undertaking work-related interviews,agreeing an action plan and, asresources allow, participating in someform of work-related activity. If benefitclaimants do not fulfil these agreedresponsibilities, the new benefit will bereduced in a series of slices, ultimatelyto the level of Jobseeker’s Allowance.But for those claimants with the mostsevere health conditions or disabilities,the benefit will be paid withoutconditionality and they should get moremoney than they do now.


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17 We will reduce the number of peoplemoving onto this new benefit by:

■ improving workplace health – byworking in partnership withemployers, employees, healthprofessionals and insurers – andbuilding on Health, work and well-being – Caring for our futurepublished in October 2005, todevelop a comprehensive package ofmeasures that help to:

●● create healthy workplaces andimprove access to good-qualityoccupational health support, thusminimising the likelihood of peopledeveloping health problems in thefirst place; and

●● facilitate better absencemanagement and early interventionto help employees who do becomeill to stay in work or, where this isnot possible, support recovery andreturn to work at the earliestopportunity;

■ improving the ‘Gateway’ by:

●● transforming the PersonalCapability Assessment process sothat it focuses on assessingpeople’s capability for work ratherthan just their entitlement tobenefits;

●● ensuring that no one is eligible formore than they would be onJobseeker’s Allowance until theyhave completed the PersonalCapability Assessment process andhave been found to be eligible forthe new benefit;

●● reviewing the mental healthcomponent of the PersonalCapability Assessment to ensurethat it reflects the type of mentalhealth conditions prevalent today;and

●● modernising the processes so thatthe system is more efficient and thenumber of appeals is minimised;

■ supporting GPs and primary careteams in the key role they play inhelping people back to work,including:

●● identifying specific interventionsthat improve outcomes andseeking to incorporate performanceagainst these within primary carecontracts, in order to rewardprimary care staff who take activesteps to support individuals toremain in or return to work;

●● piloting employment advisers in GPsurgeries;

We will:

■ reduce the number of people wholeave the workplace due to illness;

■ increase the number leavingbenefits; and

■ better address the needs of allthose on the benefit, withadditional payments to the mostseverely disabled people.

Executive summary

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●● working jointly with the healthdepartments, taking steps tosupport GPs and their teams inrecording sickness certification aspart of good medical practice; and

●● revising the format of the medicalcertificate to encourage theprovision of more comprehensiveand robust fitness for work advice(this will then provide tools forevaluation and audit of movementonto Statutory Sick Pay andincapacity benefits); and

■ reforming Statutory Sick Pay tosimplify it and ensure that it helpspeople to stay in work.

18 To increase the number of people wholeave benefits quickly to return to work,and to better address their needs,we will:

■ increase support for claimants toreturn to work, replacing the oldone-size-fits-all model, which writespeople off as completely incapable ofwork, with a tailored, active systemthat addresses each individual’scapacity;

■ build on the progress we havealready made with the Pathways toWork pilots by extending provisionacross the country by 2008. FuturePathways to Work provision will bedelivered primarily by the private andvoluntary sector with payment byresults; and

■ introduce, from 2008, the newEmployment and Support Allowance,which is built on a clear frameworkof rights and responsibilities. Newclaimants, except those with themost severe disabilities and health

conditions, will need to participate inwork-focused interviews, produceaction plans and engage in work-related activity, or see theirbenefit level reduced; and

■ increase the level of support overtime, in light of evidence, capacityand affordability. As support isincreased, so will the level ofconditionality for claimants.

19 Claimants will, as now, have a right ofappeal at appropriate points in thedecision-making process.

20 Getting people back into work has tobe the start and not the end of theprocess. We must ensure support is notwithdrawn once a claimant is back inwork. Therefore we must provideongoing support and training to helppeople reach their full potential.

21 It will never be reasonable to expectsome people to plan for a return towork or to impose the responsibilitiesand conditionality associated with thison them. These people – who have themost severe health conditions anddisabilities – will receive the new benefitwithout any conditionality, and at ahigher rate, but will be eligible for helpand support as and when they want it.

22 This group will differ from the currentPersonal Capability Assessment‘exempt’ group in being based noton the specific condition an individualhas but rather on the severity of theimpact of that illness on their ability tofunction. For example, blind people arecurrently consigned to the exemptgroup, although most blind people arecapable of, and indeed wish to,


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undertake appropriate work, withappropriate support where necessary.Our proposals will correct this anomaly.

23 Existing claimants will remain on theirexisting benefits. However, many havepotentially manageable conditionswhich may have changed or improvedwhile they have been on benefits.We propose to work more proactivelywith this group of people, balancingtheir responsibilities to prepare for areturn to work with the need to treatthem fairly.

24 We will:

■ protect the level of benefits ofexisting claimants but will encouragethem, as in the Pathways to Workpilots now, to volunteer for the helpavailable to return to work;

■ ensure that existing claimants arehaving regular Personal CapabilityAssessment re-assessments;

■ ensure that claimants each have awork-focused interview and developa personal action plan over the nextfew years, so that they are clearabout what help is available;

■ establish a unit to undertake periodicchecks of those claiming benefits toconfirm ongoing eligibility, seekingrenewed medical evidence asappropriate;

■ pilot a new initiative that will providea leadership role for cities in tacklingworklessness; and

■ protect the level of benefits paymentshould people enter work and findthat they need to return to benefits.

Lone parents25 The lone parent employment rate is

at a record level of 56.6 per cent, andthe number of lone parents on IncomeSupport has fallen by 230,000 since1997. However, the number of loneparents out of work and claimingIncome Support remains high, bothhistorically and compared with othercountries. Lone parents are much lesslikely to participate in the labour marketthan partnered parents with children ofthe same age. This has a significantimpact on the Government’s childpoverty targets, as most non-workinglone parent families live in low-incomehouseholds.

26 Parliament is now consideringlegislation to introduce a new duty onlocal authorities to secure a sufficientsupply of childcare to meet workingfamilies’ needs. Also, maternity supporthas increased so that, by 2007, themaximum Statutory Maternity Pay andchild benefits for mothers at home withtheir first baby will have risen in realterms by £5,000 since 1997. Theintroduction of flexible working rightshas helped lone parents balance theircaring responsibilities with paid work.

27 Furthermore, there is substantialevidence that the New Deal for LoneParents has greatly increased theemployment prospects of lone parentswho participate.

28 We therefore believe that the welfaresystem should do more to enable loneparents to work, but we believe that inreturn lone parents have a responsibilityto make serious efforts to return to

Executive summary

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work, especially once their youngestchild goes to secondary school.

29 Our roll-out of compulsory work-focused interviews to lone parentswho are claiming Income Support hasshown that these interviews help themthink about work and prepare for it byjoining the New Deal for Lone Parents.

30 We propose to go further, as resourcesallow, and to:

■ hold interviews every three monthswith lone parents whose youngestchild is at least 11 years old;

■ introduce six-monthly interviews(twice as frequent as now) for all loneparents who have been on benefitfor at least a year and whoseyoungest child is under 11;

■ pilot the provision of more intensivesupport for lone parents during thefirst year of their claim, becauseduring this time many people are stilladapting to their changedcircumstances and therefore needmore help;

■ pilot a new premium so that loneparents are better off if they takeserious steps towards preparing forwork. Parents would be expected towork actively towards returning tothe labour market. We are consultingon the most appropriate age of theyoungest child for introducing thisnew incentive;

■ work proactively with employers todevelop work-taster programmes forlone parents;

■ explore new ways of increasing thesupport that Jobcentre Plus can giveto lone parents who are moving intowork, or who are already in work;and

■ ensure that lone parents know theycan contact Jobcentre Plus for adviceon the full range of support that isavailable to them, including help withhousing costs, tax credits andchildcare.

Older people31 By 2024, an estimated 50 per cent of

the population will be over the age of50, due to a combination of increasedlife expectancy and low birth rates.Despite people living longer thanever before, they are spending asmaller proportion of their lives in workthan previous generations did.Unemployment for people over 50 islow but inactivity is high, and manypeople leave work early due to illhealth. Those out of work tend to facegreater barriers returning to work thanpeople in other age groups do.

32 The overall effect is that employmentrates for those aged 50 to StatePension age are lower than for thepopulation as a whole. Theconsequences of this are far reaching,both for the economy in the light ofan ageing population, and for theability of individuals to make provisionfor later life.

33 Many people will continue working intotheir 60s. Indeed, around 1 millionpeople already work beyond StatePension age, while many choose towithdraw from the labour market


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earlier. But for those who want to,there remain structural, personal andcultural barriers to working longer.The culture of early retirement anddiscrimination against older peoplepersists. Many people feel forced toleave work early, while others takeill-informed decisions about earlyretirement, with little thought for thefinancial consequences. We need toincrease the average age of retirementby providing support for people toreturn to work more quickly and to stayin work for longer.

34 We have already made good progressand intend to build on this.Employment rates for older people havesteadily improved and the gap betweenthis and the overall rate has decreased.We are considering a variety of optionsin the light of the Pensions Commissionreport30 and will set out our proposalsfor reform in the spring. Moreimmediately, we wish to boost supportfor people returning to work andprovide better information to peopleabout the work and retirement optionsavailable to them. To do this we will:

■ align our additional employmentsupport for older long-termunemployed people with that foryounger age groups by requiringpeople aged 50 to 59 to take up theadditional jobseeking supportavailable through New Deal 25 plus;

■ improve back-to-work support forJobseeker’s Allowance claimants andtheir dependent partners who areover 50;

■ pilot face-to-face guidance sessionswith people approaching 50 or over50, to deliver tailored and relevantinformation on working, training andplanning for retirement; and

■ work with employers to extendflexible working opportunities toolder workers.

Delivering welfare reform 35 We need to reform not just the policy

framework, but also the delivery of thewelfare state. This is why we investedover £2 billion in bringing together theBenefits Agency and the EmploymentService to create Jobcentre Plus. Thisintegrated service helps unemployedand inactive people of working agemove closer to the labour market andcompete for work. The old, depressingoffices with glass screens are beingreplaced by open-plan environmentswith personal advisers for all claimants.Already there is evidence that theintegrated service is increasing thenumber of job entries.

36 At the same time, we have brought inprivate and voluntary sector providers.In Employment Zones, providers arepaid not according to what they do,but according to what they achieve.By giving them greater freedom, theyhave improved performance –independent evaluation shows thatthey achieve significantly better joboutcomes than Jobcentre Plus doeswith comparable clients.

37 Private and voluntary organisations alsoplay a key role in delivering manyprogrammes – notably New Deal forDisabled People. The Government is

Executive summary

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committed to removing the barriersthat these organisations face in order toestablish a level playing field whichenables them to provide a broaderrange of services than they do currently.

38 In this next stage of reform we willneed to engage private and voluntarysector providers. We will invite bids foroutcome-based contracts as we roll outPathways to Work nationally.

39 Tackling the problems of cities is centralto meeting the Government’s aims ofincreasing prosperity and reducingpoverty and social exclusion. Despiteprogress over the last eight years,there remain pockets of persistent lowemployment, low skills, poor healthand weak overall economicperformance. More needs to be doneto address these reinforcing cycles ofunderperformance and deprivation.

40 Our long-term aspiration is for anemployment rate equivalent to80 per cent of the working-agepopulation. Nationally, the numberof people in work has risen by well over2 million since 1997, with the biggestimprovement in the areas that startedin the poorest positions. But we believethe resources flowing into cities wouldhave more impact if we could get localagencies working together more closely.

41 There will be an expectation in Englandthat local partners will work togetherto improve economic regenerationthrough skills, employment and health.Voluntary and private sectororganisations, with their distinctiveunderstanding of the social andeconomic environment in a local area,will be key contributors to making asuccess of this initiative.

42 Key aims will be to:

n deliver a significant improvement inemployment rates among those ofworking age, with a particular focuson the most disadvantaged, especiallybenefits claimants, lone parents,older people and people fromminority ethnic groups;

n ensure that individuals within theseclient groups are better able to bothfind and remain in work; and

n improve the skills of individuals withinthese client groups to enable them toprogress once they are in work.

43 Each local area will be asked to developa consortium of local partners,including employers, who have a sharedinterest in working together to raiselocal employment rates and improvethe local economy. Partners would beexpected to identify existing fundingstreams that they would use to supportthe work of the consortium, through aprocess of local alignment or pooling ofbudgets. Each consortium would alsobe expected to make use of private andvoluntary sector providers to deliveradditional employment support.

44 Advantages would flow from:

n rationalising funding arrangementsas far as possible;

n simplifying and reducing the targetsassociated with these fundingstreams; and

n greater inter-agency co-operation,understanding of, and influence over,each other’s objectives and spendingdecisions.


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45 Successful bids will receive initial seed-corn investment from centralgovernment and a financial reward formeeting their aims. Bids would need todemonstrate robust accountabilityarrangements for the delivery of agreedtargets and a commitment from localemployers to engage in, and support,the initiative.

46 Within the overall framework set outabove, a key aim of this initiative wouldbe to provide a solution that offers themaximum degree of local flexibility, sothat local areas can provide localsolutions to their particular problems.

Housing Benefit47 No discussion on improving employment

opportunities through the benefitssystem would be complete withoutconsideration of Housing Benefit, whichhas long been criticised as an extremelycomplex and passive system of financialsupport. We intend to simplify theexisting Housing Benefit system to helpimprove work incentives and increasepersonal responsibility. Delays inprocessing and the uncertainty thatclaimants have about the level ofsupport that they can receive can actas barriers to work. In the majority ofcases, payment is made direct to thelandlord, which does nothing to assisttenants in developing the essentialfinancial and budgeting skills they needwhen moving into work.

48 We have already made good progressin tackling poor administration andfraud, and have simplified the systemto align Housing Benefit with otherbenefits and tax credits. However, moreradical reform is needed to simplify

Housing Benefit and ensure that itsupports our wider objectives forwelfare reform. The central element ofHousing Benefit reform is therefore theintroduction of Local HousingAllowance. This approach is currentlybeing tested in 18 local authority areas,and we will build on this experiencewhile developing our proposals for ascheme suitable for national roll-outacross the deregulated private rentedsector.

Conclusion49 Taken together, these reforms will go a

long way towards creating a simpler,more flexible system. But in the longerterm, we want to go even further. Ourvision is for longer-term reform of boththe benefits system and how we offersupport to help people back to work.Our vision is for a single, transparentsystem, with a single gateway tofinancial and back-to-work support forall claimants.

50 Ultimately, the Government cannot doall of this on its own. We need the helpof all our partners to deliver thischallenging and wide-rangingprogramme – and to ensure that weget the system right. But most of all weneed to work with the individuals whoare without work. Our proposals set outa clear way forward for our welfaresystem. We believe it must providesecurity as well as opportunity. It mustpromote the right to work and fullemployment. It must support personalresponsibility and not undermine it.And it will be based on fairness andtolerance.

Executive summary

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51 Our economy will benefit from higheremployment rates among lone parents,older people and people with a healthcondition or disability. Taxpayers willgain too as the bills for benefitdependency come down. But the gainsfor those individuals helped into workwill be the greatest: respect, dignity,security, and achievement.

52 Our proposals build on the principlesestablished by the New Dealprogrammes. They are designed toliberate the talents of millions of ourfellow citizens who are not properlysupported by the present rules. Theywill extend opportunity. They willaddress the deeply entrenched pocketsof deprivation and inter-generationalpoverty that still scar many parts of oursociety. They will set a new direction oftravel – bringing together the public,private and voluntary sectors in a newmission to transform some of Britain’smost disadvantaged communities.

53 The proposals are published forconsultation. We hope that you will bewilling to contribute your thoughts andexpertise, and we look forward tohearing your views.


The challenge

Chapter 1

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Chapter 1The challenge

1 In the 1980s and 1990s the welfarestate failed those who most needed itshelp. Instead of combating massunemployment, the welfare statealleviated its worst effects and divertedpeople onto other benefits. Instead ofhelping people into work, it lockedthem into long-term dependency.By 1997, there were almost 5.5 millionpeople on benefits, 3 million more thanin 1979. The number of peopleclaiming unemployment benefits hadrisen by 50 per cent, while the numberclaiming lone parent and incapacitybenefits had more than tripled.

2 These stark statistics can tell only partof the story. They cannot fully reflectthe impact on family and communitylife. Too many people had been writtenoff and condemned to a life dependenton benefits, extending into poverty inretirement. Too many families hadsuffered inter-generational poverty, withlittle expectation of work. Too manycommunities had become breedinggrounds for despair and low aspiration.

Progress to date3 Since 1997, however, the UK has seen

rising employment. What is more, theUK has broken with its past record ofboom and bust. It has coped betterwith the global economic slowdownthan its competitors. During this periodemployment fell in the US, Germanyand Japan. In the UK it continued

rising. The UK now has one of thehighest employment rates in its history.Total employment is currently at recordlevels, having risen by over 2.3 millionsince spring 1997.

4 Furthermore, not only has the UK oneof the highest employment rates in itshistory but it also now has the bestpattern of employment andunemployment among the majorindustrialised countries. In particular, forthe first time in at least 50 years the UKemployment rate is the highest amongthese countries, and there are very fewcountries in the world with higher rates.

5 The rise in employment, combinedwith successful labour market policies,has led to an overall fall of around1 million in the number of joblesspeople on benefits. The biggestimprovement has been among thenumber of people claimingunemployment benefit, which has fallenby more than 700,000 since 1997 tolevels last seen a generation ago. Sincethe start of 2001 it has remainedconsistently below 1 million – the firsttime this has happened since 1975.

6 The number of people on lone parentbenefits has also fallen substantially,while the sustained growth in theincapacity benefits caseload slowedinitially and has now been reversed.The number of people on incapacitybenefits has now been falling for more


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than a year, after decades ofcontinuous increase.

7 The strong labour market performanceof recent years reflects a consciouseffort to build macroeconomic stability,combined with a new approach towelfare.1 The Government’s labourmarket policies are founded on fivepillars:

■ macroeconomic stability, to allowindividuals and businesses to planahead with confidence. We gaveindependence to the Bank ofEngland and set a clear fiscalframework for growth andstability;

■ a regulatory framework for thelabour market which sets clearminimum standards of employment

but allows flexibility for employersand employees alike. We introducedthe National Minimum Wage andfamily-friendly employmentlegislation, and havestrengthened protection againstall forms of discrimination;

■ tax and benefit policies that ensurethat work pays. As a result ofpersonal tax and benefits changessince 1997, 4.8 million workinghouseholds with children arebetter off;

■ education, skills and training policiesaimed at creating an adaptable,flexible and productive workforce.We have introduced provision forall adults with a skills deficit, theTrain to Gain programme,

Chapter 1: The challenge

Figure 1.1: A comparison of employment (A) and unemployment (B) rates among theG7 countries

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Notes: Employment figures refer to 2004 and are for those aged 16–64 in the UK and US and those aged 15–64 in the other countries. Source: OECD data, 2005. The latest national UK employment rate is 74.5% (September–November 2005).

Unemployment figures show OECD standardised unemployment rates for November 2005, except for the UK (August 2005), Italy (June 2005) and Germany (October 2005). Source: OECD data, January 2006.

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enabling employers to upskilltheir workforce, and the NewDeal for Skills; and

■ an active labour market policy –the focus of this Green Paper –particularly aimed at preventingpeople from drifting into long-termunemployment or inactivity andbecoming detached from the labourmarket. We have introduced themost comprehensive menu of helpever available, tailored to theneeds of the individual andfocused on work as the best routeout of poverty.

The New Deals8 Our new approach to active labour

market policy has meant a radicaltransformation of the welfare state,built around a framework where rightsare balanced with responsibilities.

At the heart of this approach are theNew Deals:

■ the New Deal for Young People wasintroduced in April 1998 to end theprospect of a lifetime on benefits.It provides support for all peopleaged 18–24 who have beenunemployed and on benefits for sixmonths or more;

■ the New Deal 25 plus and the NewDeal 50 plus offer similar help toolder age groups. Together with theNew Deal for Young People andother policies described above, theyhave helped us reduce the number ofpeople on unemployment benefits fora year or more by over three-quartersto less than 130,000. The number onunemployment benefits for a year ormore is now less than a tenth of thepeak of 1.3 million in 1986;


Figure 1.2: Numbers of people on benefits, 1979–2005

Source: Office for National Statistics, Department for Work and Pensions Information Directorate, Work and Pensions

Longitudinal Study

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1991

1992

1993

1994

1995

1996

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2005

Unemployment benefits Incapacity benefits Lone parent benefits

17

■ the New Deal for Lone Parents hashelped more than 410,000 loneparents into work. Independentevaluation shows that this New Dealdoubles the chances of a lone parentgetting a job, and more than pays foritself; and

■ the New Deal for Disabled People hasnow helped almost 75,000 peopleinto jobs, significantly improving theirchances and, again, more thanpaying for itself.

9 Our approach has been driven byevidence, not ideology. Our New Dealprogrammes are independentlyevaluated by recognised experts, andthere is strong evidence that theprogrammes significantly improve thechances of a participant getting a job.

Much done but much stillto do10 Compared with both recent history and

other countries, the UK labour marketis performing very well. However, inspite of our overall success, somegroups continue to face barriers toentering and progressing in the labourmarket. What is more, these groups aredisproportionately likely to be furtherfrom the labour market, because theyare inactive rather than unemployed.Our success in tackling unemploymentmeans we are now well placed toextend support to harder-to-helpgroups.

11 Recognising that some groups ofpeople are more likely to suffer relativedisadvantage in the labour market, theGovernment has set Public ServiceAgreement targets to monitor progress


Figure 1.3: Employment rates among the Public Service Agreement target groups

0%

10%

20%

30%

40%

50%

60%

70%

80%

The lowest qualified

Disabled people1

Lone parents

Minority ethnic

groups2

30 worst performing

local authority districts1, 2

Aged 50 to State

Pension age3

GB national

rate

Sprin

g 19

97

Sprin

g 20

05

Sprin

g 19

98

Sprin

g 20

05

Sprin

g 19

97

Sprin

g 20

05

Sprin

g 19

97

Sprin

g 20

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Sprin

g 19

98

Sprin

g 20

05

Sprin

g 19

97

Sprin

g 20

05

Sprin

g 19

97

Sprin

g 20

05

Notes: 1 Data available from spring 1998 only. 2 Data are for a four-quarter average to spring of the year shown. 3 State Pension age is currently 60 for women, 65 for men.

Source: Office for National Statistics, Labour Force Survey.

18

in raising employment among thesegroups and reducing the gap betweentheir employment rate and the nationalemployment rate. These groups are:

n disabled people;

n lone parents;

n minority ethnic groups;

n people aged 50 or over;

n people with low or no qualifications;and

n those living in the 30 most deprivedlocal authority districts.

12 Since 1997, not only has the overallemployment rate increased butdisadvantaged groups have benefitedthe most.

13 In particular, lone parents and peopleaged between 50 and State Pensionage have seen substantial rises in theiremployment rates – up by 11 and 6percentage points respectively betweenspring 1997 and spring 2005. So,despite strong growth in overallemployment, the gap has narrowed.

14 The problem is not a lack of jobs;indeed, employment rates are lowest inthe major cities, where there is at leastone job per person. However, manyresidents of cities do not take up thesejobs even though they live within easytravelling distance of thousands ofvacancies. The problem is connectingpeople with the work that they wantand need and also with the jobs thatemployers need done.

15 In order to address these economic andsocial problems we have set ourselvesthe aim of an employment rateequivalent to 80 per cent of theworking age population. There aregroups of people locked into long-termdependency on benefits who have beendenied the opportunity that work canbring. In a modern, dynamic economyno one who can work should be deniedthat opportunity.

16 To achieve our aim, we will need totackle inactivity among threekey groups:

n people on incapacity benefits – thenumber on incapacity benefits roseby almost 2 million between 1979and 1997. Around three-quarters ofclaimants have been on incapacitybenefits for more than two years. Thenumber on incapacity benefits fell byover 40,000 over the year to May2005, but we need to do muchmore. We aim to reduce thenumber by 1 million;

n lone parents – in 1997, fewer thanhalf of lone parents had a job,compared with more than two-thirdsof partnered mothers. Since then wehave seen the first sustained rise inlone parent employment rates inrecorded history and now more thanhalf are in work. But we need to domuch more. We aim to help300,000 more lone parents intowork; and

n older workers – the employment rateamong older people is now one ofthe highest in Europe, but we needto do more to address the


19

demographic challenge. We aim toincrease the number of olderworkers by 1 million.

The principles for reform17 We have come a long way from the

days when mass unemployment wasregarded as a fact of life. But wecannot reach our aim of anemployment rate equivalent to 80 per cent of the working-agepopulation without fundamentalchange to the welfare state to help themost disadvantaged groups. We haveundertaken a detailed analysis of thebarriers to work faced by each of ourkey client groups. What is clear is thatthe current system fails too manypeople too often.

n The current benefits system isdesigned for the conventional nuclearfamily with a male breadwinner. It istoo complex and inflexible formodern society, where more womenwork than ever before.

n We must challenge assumptions thatpeople with health conditions anddisabilities, women with dependentchildren, and older people cannotwork or do not want to work.

n Currently there is a one-size-fits-allapproach to our services. They cannotdeliver the innovation and choice ourcustomers rightly desire.

n The current system fails to engagewith employers or to use them tochannel more and better jobstowards disadvantaged people.

18 At the same time, the UK’s economyand labour market have also changedhugely over the past twenty years.Globalisation and increased competitionmean that the skills of workers, and theflexibility of companies and institutions,have never been more important. Thedecline of manufacturing industry andthe rise of the knowledge economypose huge challenges – but also offergreat opportunities – to bothcommunities and individuals. Britain’sstrength as a global economic player,given the changing patterns ofinternational trade and the emergingeconomic superpowers of China andIndia, means that we will need toprovide opportunities for all of ourpeople to work.

19 The Government has a critical role toplay in supporting people to meet thosechallenges and take thoseopportunities. Far from being old-fashioned, the welfare state has neverbeen more important for economicsuccess and social justice. But a newtype of welfare state is needed to fitthe 21st century.

20 To achieve this we intend to embarkupon a further programme of radicalreform.

n A reformed benefits system willremove perverse incentives, balancerights and responsibilities and combineback-to-work help for those who canwork with support for those whocannot, while respecting the rights ofdisabled people.


20

■ A modernised delivery system –with the public, private andvoluntary sectors workingtogether – actively engages withemployers. This will strengthen ourrelationships with other deliveryorganisations and employers so thatwe can offer an effective, efficientand comprehensive service to thosein work but who are at risk of losingtheir job, to those who findthemselves without work and tothose who are moving back intowork.

■ We will provide a new unifiedmenu of support, accessible to allpeople who find themselves out ofwork. It will provide a personalisedmenu of services tailored to theneeds of the local economy.

■ A new initiative for cities will makebetter use of existing resources bydeveloping high-performancesolutions to help people preparefor and find work.

■ A radical reform of the HousingBenefit system will make it simplerand more flexible, and will addresssome of the perverse incentives ofthe current system.

■ Over the longer term there will be amuch simpler benefits system.The next stage of benefits reform willfurther incentivise work and easetransitions in and out of work, whileensuring effective support for thosewho cannot work.

Why does this matter?21 It is an achievement that people today

are living longer and healthier lives,but two years from now the number ofpeople over State Pension age willovertake the number of children for thefirst time. If we are to support such afuture, ensure continuing growth andprosperity for all, reduce pensionerpoverty and meet our goal oferadicating child poverty we mustincrease the number of people who arein work, able to support their childrenand able to save for their retirement.We compete in an increasingly globaleconomy, and therefore we must makethe best use of our most valuable asset– the talents of individuals. We cannotafford to lose the contribution of thosewho in the past were dependent onlong-term benefits.

22 Ensuring that all our citizens have boththe right and the opportunity to jointhe world of work is a fundamentalresponsibility of any moderngovernment. Entering the world ofwork confers multiple advantages thatgo beyond the very real increases inincome that employment brings.Our ambition is to lift people out ofdependency and liberate the talent andcapability of everyone. The Governmentwill help people achieve success forthemselves and their families. We willbalance rights with responsibilities andwill assist individuals, and therefore ourbroader society, to respond to thechallenges of demographic change andglobalisation.


21

23 Increasing the number of people inwork is good for the individual, goodfor families, good for communities andgood for Britain.

■ It is good for individuals and theirfamilies and communities because itincreases income and independenceand increases choice. There is alsoevidence that it improves their health.

■ It is good for Britain because peopleare independent of benefits and theeconomy can grow more quickly.

24 Making a reality of employmentopportunity for all supports the nationaleconomy, builds local communities andimproves prospects for families andindividuals over their whole lives.That reality is at the heart of modern,dynamic economies and is vital toincreasing prosperity and security forindividuals and families. Employmentopportunity is the means to tacklepoverty, enabling people to provide forthemselves, for their children and fortheir future retirement.

25 The next three chapters focus on ourspecific proposals for ill or disabledpeople (Chapter 2), lone parents(Chapter 3) and older workers(Chapter 4). Chapter 5 describes howJobcentre Plus, in partnership with theprivate and voluntary sectors, willdeliver these ambitious plans. Chapter6 describes our reforms for HousingBenefit, while Chapter 7 sets out ourlonger-term ambition for a simplerbenefits system.


Helping ill or disabled people

Chapter 2

24

Chapter 2Helping ill or disabled people

1 There are currently over 2.7 millionpeople on incapacity benefits.2 Weknow that around 80 to 90 per cent ofthose who come onto benefits expectto work again,3 yet many never do. Thelonger a person remains on benefits,the less chance they have of leaving.Currently the benefits system reinforcesthis by offering more money the longersomeone is on benefits and byrequiring people to prove their ongoingincapacity, rather than activelyencouraging and supporting people totake steps towards a return to work.

2 We are proposing a range of measuresin three key areas:

■ increasing the number of people whoremain in work when they fall sick orbecome disabled;

■ increasing the number leavingbenefits and finding employment;and

■ better addressing the needs of allthose who need extra help andsupport.

3 We will achieve these aims by takingsteps on prevention and proactiveintervention; transformation of thegateway to the new allowance;mandatory engagement and supportwith all but the most severely ill ordisabled people to get them back towork; and raising the expectations ofeveryone involved in the process.

4 This approach will be underpinned bya new Employment and SupportAllowance, which will simplify thecurrent system and replace the oldincapacity benefits for all newclaimants.

The challenge5 The proportion of the working-age

population in receipt of incapacitybenefits (or older equivalents) hasincreased from around 3 per cent in the1960s to over 7 per cent today. Almostall of the increase occurred betweenthe late 1970s and mid-1990s, whenthe caseload rose from 0.7 million to2.6 million people. Since then, caseloadgrowth has slowed, and, after overtwo decades of substantial growth,overall numbers fell by 41,000 inthe 12 months to May 2005, to2.74 million. This challenge is faced bymany OECD countries, not just the UK.4

New claimants of incapacity benefits6 More than half of new claimants are

out of work immediately before theycome onto incapacity benefits.A quarter of all those who make aclaim for incapacity benefits do sowithin 90 days of finishing a Jobseeker’sAllowance claim, and around a tenthstart within 90 days of finishing anIncome Support claim. Of newclaimants, 32 per cent have not beenin work during the previous two yearsand 43 per cent have received an


25

out-of-work benefit during the previoustwo years.5 This is of major concern asa poor work record is one of the bestpredictors of whether people will makean early return to work.

7 A significant proportion of newclaimants come onto incapacity benefitsfrom employment. Seventeen per centof those entering incapacity benefitsreceive Statutory Sick Pay immediatelybefore starting their incapacitybenefits claim and 12 per cent wereself-employed.

8 So, in order to maximise the number ofpeople staying in work rather thanmoving onto benefits, we need a broadstrategy that provides tailored help andsupport to address the different routesonto benefits and deals with a varietyof barriers to work – not just ill healthor disability.

Time on benefits9 The increase in the number on

incapacity benefits that occurredbetween the 1970s and the mid-1990sis largely explained by a decline in theproportion of people leaving benefitswithin the first 18 months andconsequently increasing numberswho remain on the benefits long-term.Currently just over half of the caseloadhas been on benefits for more thanfive years.

10 This is not because people withtransitory health conditions do notrecover quickly and return to work –in fact, the majority do. Almost60 per cent of people who started toreceive incapacity benefits in 2004left within a year. However, for theremaining 40 per cent who do notreturn to work quickly, the prognosisis bleak – only 22 per cent of claimants

Chapter 2: Helping ill or disabled people

Figure 2.1: Incapacity benefits caseload 1979 to 2005, excluding Incapacity BenefitShort Term (Lower)

Source: Office for National Statistics, Department for Work and Pensions Information Directorate, Work and PensionsLongitudinal Study

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

1979

1980

1981

1982

1983

1984

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1986

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1990

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Year

Cas

elo

ad

26

already claiming for a year will leavewithin the next year and 29 per cent ofthem will still be receiving benefits afteranother eight years. This is the result ofa system that, rather than helpingpeople with health conditions back intowork, simply allowed them to remainon benefits with little or nointervention. Early intervention iscrucial to ensure that people do notbecome dependent on benefits.

Characteristics of incapacity benefitsclaimants11 The stereotype is that incapacity

benefits claimants are overwhelminglyolder men, formerly employed in themanufacturing industries, with badbacks, living in Northern England,Scotland or Wales. It is also argued thatmany neither want nor expect to workagain and that there are no jobsavailable for them.

12 In fact, over 40 per cent of claimants arewomen, over half are under 50 andnearly 40 per cent have a mental health

condition (compared with 25 per cent inthe mid-1990s). And incapacity benefitsare a national problem because thereare at least 150,000 claimants in eachregion. Of course, problems are worse insome regions than others, and similarlyfor some groups of people more thanothers. For example, the scale of thechallenge is typically more concentratedin some of the poorest and mostdisadvantaged areas, and among peoplewho often face other disadvantages,such as low skills. But our strategycannot be ‘one-size-fits-all’. It must be:

■ inclusive – it must address the needsof women and men, young and old,urban and rural areas;

■ national – it must cover all parts ofthe country;

■ personalised – it must address thedifferent health, skills and supportneeds of different claimants; and

■ relevant – it must reflect the needsof the local labour market.


Figure 2.2: Claimants of incapacity benefits by duration of claim (May 2005)

Source: Office for National Statistics, Department for Work and Pensions Information Directorate, Work and PensionsLongitudinal Study

Under 3 months (5%)

3–6 months (4%)

6–12 months (7%)

1–2 years (10%)

2–4 years (15%)

4–6 years (13%)

6–8 years (11%)

8+ years (35%)

27

Structural problems13 The vast majority of people – around

80 to 90 per cent – making a claim forincapacity benefits want and expect toget back into work. It is the system thathas failed them, by not providing thehelp and support they need. There areseveral shortcomings in the system as itcurrently stands.

■ Little is done to prevent peoplemoving onto incapacity benefits.

■ The gateway to the benefits is poorlymanaged – with claimants receivingincapacity benefits before passing themain medical test.

■ The benefits trap people into alifetime of dependency – the longer aperson remains on benefits, the lesschance they have of leaving.

■ There are perverse benefit incentives –paying more the longer people claim.

■ Almost nothing is expected ofclaimants and little support is offered.Those who try to plan their return towork through volunteering andtraining perceive that they run therisk of proving themselves capable ofwork and therefore losing theirentitlement.

■ The very name of the benefit sends asignal that a person is incapable andthat there is nothing more that canbe done.

Progress so far14 We have introduced a major

programme of measures for those withhealth problems and disabilities,including the New Deal for DisabledPeople and increased rights through the

Disability Discrimination Act. Thesemeasures involve public, private andvoluntary sector organisations.

Pathways to Work15 A key element of our approach has

been the Pathways to Work pilots,which are the first major step by anygovernment to delivering enhancedsupport for people facing healthproblems or disabilities. They provide aco-ordinated approach to addressingthe barriers that people face when theyhave an illness or disability, rather thansimply compensating them for thedisadvantage they face. The pilots offera dual approach to assistance, providingpeople with financial support while alsofacilitating their return to independenceand the ability to earn the means tolive. These pilots have placed the UK atthe forefront of the developed world byactively engaging with this group in aneffective way.

16 The pilots combine a balanced packageof rights and responsibilities, which aimsto target a number of the health-related, personal and external barriers toreturning to work. The programme isbased on a wide-ranging review of bothnational and international initiatives andevidence. It consists of five broadstrands of activity designed to addressthe various weaknesses in the existingframework of support, as follows:

■ a new, much more intensiveframework of mandatory work-focused interviews delivered byspecially trained personal advisers;


28

■ better access to existing return-to-work support and entirely newprogrammes, delivered in partnershipwith the NHS, to help individuals tomanage their health conditions;

■ improved financial and non-financialincentives to prepare for and findwork;

■ active involvement of employers inhelping people to prepare for andprogress in work; and

■ work to change prevailing attitudesheld towards people with illness ordisability among other keystakeholders, particularly GPs andemployers.

17 Early evidence from the pilots is veryencouraging. We are engaging

significantly greater numbers ofclaimants and substantially improvingtheir prospects for work. The evaluationso far demonstrates an increase ofaround eight percentage points inthe number leaving benefits in the firstsix months of their claim comparedwith national rates.6

18 Customers, personal advisers,employers and service providers haveresponded very positively to the pilots.This is the first large-scale interventionfor people with an illness or disability todeliver such positive results. We willcontinue to review the pilots to ensurewe learn from the emerging evidenceas we develop the next phase ofreform. We will also seek to ensure ourproposals deliver the pilots in innovative


Figure 2.3: Proportion of customers leaving incapacity benefits within six monthsof their claim start

20%

25%

30%

35%

40%

45%

50%

Apr

May Jun Jul

Aug Sep

Oct

Nov

Dec Jan

Feb

Mar

Apr

May Jun Jul

Aug Sep

Oct

Nov

Dec Jan

Feb

Mar

Apr

May Jun Jul

Aug Sep

Oct

Nov

Dec Jan

Feb

Mar

Apr

May Jun Jul

Aug Sep

Oct

Nov

Dec Jan

Feb

2001 2002 2003 2004 2005

Start ofphase 1

pilots

Start ofphase 2

pilots

Month of benefit claimPathways phase 1 Pathways phase 2 National (excluding Pathways)

Source: Incapacity Benefit reforms Pathways to Work pilots performance and analysis, DWP Working Paper No. 26Note: The data presented are produced from the National Benefits Database and do not include a proportion of short-term incapacity

benefits claims. Therefore the percentages shown are lower than the actual rates. However, trends over time will be consistent.

29

and more cost-effective ways as we rollout to the rest of the country.

Our future strategy19 Helping those facing ill health or

disability is fundamental if we are tomeet the employment challengeidentified earlier. We will reduce thenumber of people moving onto thenew benefit, increase the numberleaving benefit quickly, and betteraddress the needs of all those on thebenefit, including additional paymentsto the most seriously disabled people.The measures we propose – reform ofthe gateway, improvements toworkplace health, increased support forclaimants and removal of the perverseincentives in the system – should, overtime, significantly reduce the numberclaiming incapacity benefits. It isdifficult to model the precise impact ofthese measures. If, however, theGovernment, employers, localauthorities and health professionalscome together to tackle this challenge,we can aspire to reduce the number ofincapacity benefits claimants by1 million over the course of a decade.

Reducing the number ofpeople making a claim forincapacity benefits: preventionand proactive intervention20 Our first priority must be to reduce the

likelihood of people developing healthproblems that may result in themhaving to give up work and becomingdependent on benefits. Where theydo develop health problems, we wantto help them manage these so that

they can remain in work and achievetheir potential.

21 This means that we must work inpartnership with employers, employees,health professionals and insurers todevelop a comprehensive package ofsupport which develops healthyworkplaces, retains employees in work,and maximises the effectiveness ofhealthcare in rehabilitating people.Central to this package of support isHealth, work and well-being, whichwe published in October 2005.7

This established a groundbreakingpartnership with the health departmentsand the Health and Safety Executive.We are working with key stakeholders to:

■ create workplaces where we protectthe health and well-being ofemployees and optimise theopportunity for people to improvetheir own health and well-being,as outlined in the workplacecomponent of the Choosing healthWhite Paper;8

■ ensure all employees have access tocompetent occupational healthadvice and support;

■ support and engage healthcareprofessionals so that they recognisethe importance of work for theirpatients’ well-being;

■ make sure investigation andtreatment for health problems can beaccessed in a way which will helppeople to remain in work and avoidunnecessary absence;

■ identify ways to improve theprovision of, and access to,interventions for managingcommon mental health problems


30

that can lead to long-term ill healthwith the consequent impact on workand well-being;

■ ensure the development ofappropriate return-to-worksupport, building on the actionsoutlined in the Framework forvocational rehabilitation;9

■ lead by example in supporting theNHS, Government and localauthorities as employers to becomeexemplars of good occupationalhealth practice; and

■ continue to challenge anydiscrimination in employment thatexists against long-term sick anddisabled people.

22 This strategy underpins all the keyelements of our welfare reform plans.

23 To further support the strategy, we willappoint a National Director forOccupational Health to help us bringabout the fundamental changes weneed in the health of people ofworking age, placing this importantagenda at the same level as issuessuch as heart disease and cancer.

Developing healthyworkplaces24 Occupational health and safety is an

integral part of workplace well-being,as well as a key part of effectivebusiness management. A clear messagefrom a series of case studies carried outby the Health and Safety Executive isthat there are business benefitsassociated with good health and safetymanagement initiatives.10

25 We will work with trade unions at local,regional and national levels to build onthe successful work that they havealready undertaken in partnership withemployers to protect employees betterfrom health risks in the workplace. Inparticular, we will seek to develop theconstructive and supportive role ofsafety representatives.

26 We have, through the Health andSafety Executive, established specificprogrammes running over the nextthree years to improve the preventionof workplace injuries and occupationalill health, and to improve themanagement of sickness absenceand return to work. These includeprogrammes focusing onmusculoskeletal disorders and stressmanagement. And, by 2008, theHealth and Safety Executive’s stressmanagement standards will beextended to cover those parts of thefinancial and public sectors where thereis greatest need to focus attention.

27 We also intend to use the evidencebase on how employers benefit froma healthy workforce to develop aframework based around the healthyorganisation, which we want to linkin to the next scheduled review of theInvestors in People standard in 2007.

28 Small and medium-sized enterprisesneed more help to face particularchallenges in the management ofoccupational health, safety, sicknessabsence and return to work. That iswhy the Government, through theHealth and Safety Executive, is pilotinga new service in England and Wales –Workplace Health Connect.


31

29 We have already announced that thefirst pilots will begin in February 2006,with a national helpline for allemployees and small and medium-sizedenterprises, and local focused supportfor 40 per cent of small and medium-sized enterprises. But we want to gofurther. Through 2006, we will buildprovider capacity and learn quickly fromthe pilots. Based on this experience andanalysis, our intention is to cover two-thirds of small and medium-sizedenterprises by early 2007; and,following evaluation, we hope to beable to move to national coverage by2008, subject to availability ofresources.

30 In Scotland, Safe and Healthy Workingis already providing a problem-solvingservice for Scottish small and medium-sized enterprises, and we will look toensure that Workplace Health Connectmeshes with this service. In NorthernIreland, a long-term, cross-cuttingworkplace health strategy, Working forHealth,11 has been in place since 2003.This has been taking forward a range ofinitiatives to reduce the incidence andseverity of work-related illness byexploiting the workplace as a settingto tackle health issues and healthinequalities.

Workplace Health Connect Workplace Health Connect willdeliver advice on occupational health,safety and return to work to smalland medium-sized enterprises inEngland and Wales. It will consist ofan advice line with an associatedwebsite and a workplace-focusedregional problem-solving service withsignposting to specialist help.

The vision for Workplace HealthConnect is that:

■ everyone working in small firmswill have free access to consistent,high-quality advice on creating ahealthy workplace;

■ employees and employers will worktogether to improve their workingenvironment and help colleaguesreturn to work when they havebeen ill; and

■ businesses will be more profitableand everyone will enjoy theeconomic and health benefits ofbeing in work.


32

Supporting attendance –reducing sickness absence31 Sickness absence has a significant

impact on employers, employees andthe benefits system. Absence fromwork because of illness or injury costsUK business approximately £12 billioneach year in direct costs alone, andeven more in indirect costs. As theConfederation of British Industry says,12

it is in employers’ interests to addressthe enormous cost of sickness absence,and the associated implications for theworkplace.

32 Government can play its part byfacilitating speedy and effectiveinvestigation and treatment, whileemployers can also help by interveningearly when an employee goes off sickand by operating effective sicknessabsence management programmes inline with best practice. For example,there is good evidence that one of themost effective ways to returnemployees to work after a period ofabsence is to encourage them to startback on a modified basis (for example,by working part-time or adjusting someof their duties).

33 The Labour Force Survey indicates that,on any one day, about 2 per cent ofthe working population is absent fromwork for health reasons.13 The majorityof those off sick return to work quickly– around 60 per cent of absence is forless than five days.14 But the evidencesuggests that those on longer-termabsence may account for a greaterproportion of working time lost to anemployer and so represent a highercost.15 And around 120,000 people

each year move across to incapacitybenefits after a spell of sick pay.

34 Many of these individuals will neverreturn to the workplace, with adevastating impact on themselves, theirfamily and the local economy. Yet mostof these individuals report potentiallymanageable conditions, such as mentalhealth or musculoskeletal disorders,usually of no more than moderateseverity. Research shows that theyretain a desire to work, and there issome evidence on effective ways ofaiding their recovery (such as earlyintervention and modified returnsto work).

35 We want to do more to help employersacross the public sector become moreefficient and productive by adoptingbest practice in sickness absencemanagement. Through the MinisterialTask Force on Health, Safety andProductivity, we are promoting bestpractice in the public sector and makingsure that the issue remains high on themanagement agenda. Progress hasalready been made. The most recentfigures show encouraging reductions inabsence for both the Civil Service andlocal government.16 However, we needto sustain these improvements, so wewill be considering what additionallevers and incentives can be developedto drive improved performance amongthose organisations with above-averagelevels of sickness absence.

36 We also know that absence from workcan be a particular problem for smalland medium-sized enterprises. We areworking with the Federation of SmallBusinesses on the development of itsmonitoring indicator on absenteeism


33

for small and medium-sized enterprises,which is to be launched on its websiteearly in 2006.

Supporting attendance –incentivesEmployers’ Liability CompulsoryInsurance37 We know that incentives play an

important part in helping employersfocus on effective sickness absencemanagement. To incentivise employersand to reduce risk in the workplace, sothat fewer workers are injured andthose who are out of work are helpedto return as quickly as possible, theseincentives must be as simple as possibleto understand and loaded in favour ofactive, early intervention. Employers’Liability Compulsory Insurance is theinsurance that employers must have tocover their liability to their employeesfor bodily injury or disease sustained inthe course of their work. Creatinghealthier workplaces will not onlyreduce the number of employees absentbecause of ill health but can also resultin lower insurance premiums and reducethe financial impact of sickness at work.Employers who can demonstrateexcellence in the area of workplacehealth are more likely to attract andretain high-quality employees.

38 The Government has worked with theinsurance industry (through theAssociation of British Insurers) and theHealth and Safety Executive to ensurereduced risk in the workplace isreflected through liability insurancepremiums. For example, we havedeveloped a health and safetyperformance indicator for small and

medium-sized enterprises to helpinsurers identify good health andsafety performers when insuranceterms are set.

39 The Department for ConstitutionalAffairs is considering how thefunctioning of the Employers’ LiabilityCompulsory Insurance market could beimproved through its Better Routes toRedress strategy. And the Associationof British Insurers has recently launchedproposals for reform in this area.We welcome this engagement andwill continue to work closely with theinsurance industry, together withemployers and trade unions, toencourage the development ofproducts which help maximise thechance of a speedy return to work.

Question 1:What else should we consider to givethe right incentives to employers toprovide increased health support totheir workforce?

Engaging and supporting –GPs 40 GPs are a patient’s first, and often only,

contact with healthcare professionals.As such, GPs clearly have a pivotal rolein providing support and advice aboutfitness for work and bringing about achange in current attitudes to work forpeople with a health condition ordisability. Members of the medicalprofession, and GPs in particular, areoften seen as ‘gatekeepers’ to sick payand benefits. This tends to focus thedoctor’s attention on the patient’songoing limitations, rather thanencouraging both to think about


34

rehabilitation, including how anappropriate return to or move intowork might be achieved, with all thehealth benefits this brings.

41 Maintaining a good relationshipbetween doctor and patient is clearlykey to the effective working of ourhealth service. This relationship is basedon trust. Work can and should be seenas a route to health, offering increasedsocial contact, financial security andself-esteem. The idea that peoplefacing illness or disability should beprotected from work, whatever theiraspirations, is outdated and can oftenbe detrimental to the individual – theopposite of the outcome the GPintended.

42 We need to support healthcareprofessionals in bringing about aculture change in the way work isviewed by families and individuals.GPs, in particular, have a key role toplay in making this change. A numberof initiatives are planned to help themwork with patients, to ensure theyunderstand the importance of work inrecuperation and the negative impactsof being out of work and can supportand assist people to remain in or returnto work.

43 Initiatives supporting GPs and primarycare teams in their role include:

■ identifying specific interventions thatimprove outcomes with a direct linkto incapacity benefits and seeking toincorporate performance againstthese specific measures withinprimary care contracts – to reward

primary care staff who take activesteps to support individuals to remainin or return to work;

■ in conjunction with the healthdepartments, taking steps to supportGPs and their teams in recordingsickness certification as part of goodmedical practice;

■ reviewing the format of the medicalcertificate (FMed 3) to make it moreuser-friendly and to support GPs inproviding more comprehensive androbust fitness-for-work advice;

■ using the tools that all of the abovewill provide for evaluation and auditof the impact on entry to StatutorySick Pay and movement ontoincapacity benefits of practice andprimary care trust (and theirequivalents) populations;

■ piloting of an occupational healthadvice line for GPs to help in themanagement of working-agepatients;

■ a national education programme forGPs on health and work;

■ establishing GPs with special interestin occupational health within primarycare trusts or practices; and

■ developing further online learningmodules and other relevant coursesfor GPs on fitness-for-work issues.

Engaging and supporting –other healthcareprofessionals44 Employees who have health conditions

sometimes interact with a wide rangeof other doctors and healthcare


35

professionals. We want to buildpartnerships with all the UK’s healthprofessions to ensure that a work focusis included in these interactions –so that patients and their healthprofessionals understand the healthbenefits of work and so supportindividuals to remain in, or returnquickly to, work.

45 Our plan of work in this area includes:

■ development of a competencytraining framework for inclusion inthe undergraduate training of alldoctors;

■ working with the Academy ofMedical Royal Colleges and individualcolleges and faculties to incorporatecompetencies in health and work inthe postgraduate training of doctorsin all specialities;

■ with the Royal College of Nursing,development of an online learningmodule on work and health fornurses;

■ supporting the College ofOccupational Therapists, which isdetermined to push forward stronglyin this area; and

■ working closely with the CharteredSociety of Physiotherapists to improvethe work-focused messages given bytheir staff.

Question 2:How can we best share the evidence forthe role of work in recuperation andgood practice regarding sicknesscertification to medical professionals?

Engaging and supporting –access to employment advice46 We also want to ensure a stronger link

between GPs, other healthcareprofessionals and direct employmentadvice. One of the ways in which weare doing this is by trialling placementof employment advisers in GPs’surgeries, learning from and buildingon the experience of existing examplesthroughout the country.

47 We know that even where GPs believean individual, with the right support,could get back to work, often norelevant support services are available.We believe that active back-to-workservices available to GPs, either withintheir surgeries or by some other means,may enable us to reach out to more ofthose people who are getting medicalcertificates from their GP but getting noaccess to support via their employer.

48 We will be piloting this approach insome Pathways to Work areas by usinga co-ordinated service to provide vitalinitial advice, support and reassuranceon the full range of work-related issuespatients may raise, and to refer them toappropriate provision. Access would bevoluntary and open to any patient ofworking age by self-referral orrecommendation from a healthprofessional. This would mean peopleon Statutory Sick Pay as well as benefitsclaimants could access wider servicesincluding condition managementprogrammes. We will work with thelocal health networks on what areappropriate referrals. We will also raisethe profile of this service elsewhere, for


36

example, within local NHS pain clinicsand community mental health teams.

Engaging and supporting –workforce planning/resourcing49 It will be important to ensure that

we have the right mix of key healthprofessionals, especially in the areasof greatest need. Clearly this is notsomething that can be solved instantly.But we need to bring together relevantresource planning professionals acrossthe public, private and voluntary sectorsto address this problem. We believe thatthere is a great willingness on the part ofprivate sector employers to work withus, including by providing training wherenecessary, to improve the position.

Statutory Sick Pay reform50 The other key incentive that can impact

on an employer’s ability to managesickness absence is Statutory Sick Pay.Statutory Sick Pay is a minimum amountthat employers are required to pay andemployees are entitled to receive whenthey are unable to work because of ahealth condition or disability that lasts forfour or more days in a row. It is payablefor up to 28 weeks and is paid at a singleweekly rate which is currently £68.20(£70.05 from April 2006). When theyhave particularly high levels of sicknessabsence, employers can sometimesreclaim a proportion of these StatutorySick Pay costs from government.

51 Many employers (covering about90 per cent of employees) have theirown occupational sick pay scheme. Insuch cases, the employer must ensure

their scheme is at least as generous asStatutory Sick Pay (often it is muchmore generous). But whether or notthey have their own occupational sickpay scheme, employers are still requiredto keep additional and complex recordsas though Statutory Sick Pay werepayable, particularly when employeesend up moving across to incapacitybenefits.

52 Much of this complexity does nothingto support an employer to managesickness absence more effectively.Rather it is connected to rules withinStatutory Sick Pay such as the need to:

■ ignore the first three days of sickness;

■ link together periods of sickness lessthan eight weeks apart, even wherethat absence occurred with aprevious employer; and

■ not pay Statutory Sick Pay in manycases where a sick employee waspreviously claiming incapacitybenefits.

53 Employers tell us that they would,therefore, like to see changes toStatutory Sick Pay, with fewer rules,complications and requirements forrecord keeping, to ease regulatoryburdens imposed upon them. Wesupport this as we believe that,particularly for small firms, a muchsimpler approach will enable employersto focus on the issue that truly matters –encouraging their employees backto work.

54 The Government has already respondedto the concerns raised by givingemployers more help to navigate theirway through the current scheme.


37

55 In particular, we have worked withHM Revenue and Customs (who haveresponsibility for ensuring employers’compliance) in recent years in order to:

■ introduce CD-Rom and web-basedStatutory Sick Pay calculators toenable employers to work outwhether an employee is entitled toStatutory Sick Pay and, if so, thepayments required and the amountof Statutory Sick Pay they may beable to recover. They also significantlysimplify the completion of StatutorySick Pay forms;

■ introduce a new service within ourHM Revenue and Customs EmployerHelpline to help employers calculateStatutory Sick Pay entitlement overthe phone (by April 2006);

■ use feedback from employers tooverhaul and simplify HM Revenueand Customs Employer Guidance,ensuring that it meets their needs;and

■ market these tools to all employers,particularly smaller ones, to reducethe number of firms completingcomplicated paper-based calculationsor relying on paper-based guidance(and to provide better support tothose who choose to continue todo so).

56 We will continue to work withemployers, their representatives andHM Revenue and Customs to developand further improve all of these areas.

57 But we also need to go further.We believe the following changes areappropriate.

58 We propose to introduce a muchsimpler way for employers to assesswhen entitlement to Statutory Sick Payarises and when the maximum periodof entitlement has been reached byabolishing:

■ the requirement to link periods ofsickness separated by no more thaneight weeks;

■ the need to link together periods ofsickness with a previous employer;

■ the need to apply the current threewaiting days before an employee canfirst become entitled to Statutory SickPay; and

■ the complex rules that preventemployers from paying Statutory SickPay where they have previously beenclaiming incapacity benefits.

59 We believe this will mean a much simplersystem for employers to administer,where Statutory Sick Pay becomespayable on the first day a person is sickfor work and where the maximumperiod when Statutory Sick Pay is payableis 28 weeks from that date.

60 Alongside this, we also want to shift theresources we currently use tocompensate some employers for highlevels of sickness absence and investfurther in additional support for(particularly small) employers to managesickness absence more effectively. Weplan to do this by abolishing the overlycomplex percentage threshold scheme.We propose to use the money saved tosupport small employers in other waysthat would help them to get sickemployees back to work quickly (in linewith the key elements of the prevention


38

package) and we welcome respondents’views on how we could do this mosteffectively.

Question 3:Does this simplification package forStatutory Sick Pay provide incentives forimproved absence management andmeet the need for reduced bureaucracy?How could the redirected sums of thepercentage threshold scheme be mosteffectively utilised?

Jobseeker’s Allowance rules61 The need for early intervention does not

only arise where people are already inwork. We are also keen that, whenpeople on Jobseeker’s Allowance fallsick, they do not automatically switch toincapacity benefits, particularly wherethe illness is of a short-term nature.People need to receive the benefit thatis of most direct relevance to their usualstatus. We therefore propose to makefull use of the current rules wherepeople on Jobseeker’s Allowance areallowed two spells of short-term sicknesswithin a 12-month period. Instead ofmoving across early, Jobseeker’sAllowance recipients will have to exhaustthese permitted spells of short-termsickness before claiming incapacitybenefits. This will be supported by moreproactive sickness managementarrangements within Jobseeker’sAllowance, including ‘return from illness’interviews and, where necessary, revisionof the Jobseeker’s Agreement andreferral to specialist assistance.

Reducing the number ofpeople making a claim forincapacity benefits:transformation of thegateway62 The current Personal Capability

Assessment process – alreadyrecognised by the OECD as being oneof the toughest in the world17 – is usedto assess individuals claiming incapacitybenefits. It is often viewed simply as ahurdle that must be cleared to receivebenefits and, as a consequence, itfocuses on incapacity rather thancapability.

63 We intend to transform the currentassessment process within the gatewayso that it:

■ provides a professional assessment ofan individual’s eligibility for financialsupport based on their functionalcapability;

■ identifies those people who arecapable of taking part in work-relatedactivity and the support andinterventions required to help themget back to work; and

■ identifies people who are so limitedby their illness or disability that itwould be unreasonable to requirethem to undertake any form of work-related activity in the foreseeablefuture. This group, which will replacethe existing ‘exempt’ group isdescribed more fully below.

64 We will work with health professionals,personal advisers and disability groups(including the Disability RightsCommission and the Disability


39

Employment Advisory Committee) toensure that the transformed assessmentprocess is fair and equitable inapplication and operation.

65 People will need to satisfy the PersonalCapability Assessment before theybecome eligible for the additionalEmployment Support or Supportcomponent of the new allowance (asdescribed later in this chapter). Untilthey do so, they will receive the basiclevel of Jobseeker’s Allowance. We willalso develop proposals so that theassessment distinguishes betweeneligibility for the benefit and capabilityfor work. While the former will bedetermined on the basis of evidenceprovided by medical practitioners, thelatter could be assessed by other healthprofessionals as well.

66 Everyone who wants to work, whatevertheir health condition or disability, shouldget the necessary help and support toenable them to work as soon as they areable to do so. For the majority of people,the prospects are good with the rightadvice and help. However, we recognisethat for people with the most severefunctional limitations, it would beunreasonable to expect that they engagein work-related activity.

67 This group of people will fall into thenew category of people who receive theSupport component of the Employmentand Support Allowance, andconditionality will not be imposed onthem. It will differ from the current‘exempt’ group, which it will replace, inthat it will not be based on the natureof the specific illness or disability theindividual has, but on the severity of theimpact of that condition on the

individual’s ability to function.For example, blind people are currentlyconsigned to the exempt group whereasmost blind people, with support, arecapable of and indeed wish toundertake suitable work. Our proposalswill correct this anomaly.

68 Although it is likely that the majority ofindividuals in this new category willnever be able to work again, werecognise that for some their situationmay change such that return to someform of appropriate work may becomean option. In these circumstances,individuals will be provided with thesupport necessary to help them achievethis if they wish. This group currentlycarries the working title of ‘reservedcircumstances’ but we are seeking amore suitable name as part of ourconsultation process.

69 Following completion of theassessment, the report to the claimant’spersonal adviser will include arecommendation regarding anappropriate timescale for review. Thiswill take into account the anticipatedtime for improvement in an individual’sfunctional capability, assuming thatappropriate health interventions havebeen undertaken. Recommendationsfor such interventions will also havebeen included in the report to thepersonal adviser. Review of progress willnormally be no later than 12 monthsfrom the date of the previousassessment unless the person’scondition suggests that a review in thattimescale would be inappropriate.

70 We acknowledge that for many peoplethe term Personal CapabilityAssessment has rather negative


40

implications and we therefore intend tochange the name to reflect theenabling purpose of the assessment.

Mental health conditions71 Around 40 per cent of all claimants are

on incapacity benefits because of amental health condition. Theseconditions can vary widely and becomplex and challenging.

72 To respond to the needs of theseindividuals, we have invested heavily intraining for personal advisers and incondition management programmes inPathways to Work areas. We intend todevelop our work with health services tomeet the particular needs of this group,many of whom are likely to requireongoing support, whether they enterwork or remain in receipt of benefits.Given the changing pattern of mentalhealth, we need to ensure that themental health component of the newmedical assessment reflects the type ofconditions prevalent today. Accordingly,we are convening a group of experts inthis field to undertake a comprehensivereview of this and makerecommendations.

Appeals process73 We recognise that a robust and

independent appeals process is anintegral part of any fair system ofassessment. The current system generatesa very high number of appeals, many ofwhich are successful. We believe thatimprovements can be made so that theneed for appeals is minimised. We intendto review the appeals process to:

■ ensure that claimants have a clearerunderstanding of the basis for the initialdecision, thus reducing claims resultingfrom a lack of that understanding;

■ incorporate a comprehensivereconsideration process as part of theinitial assessment of any appeal tofurther reduce the number of appealsneeding to progress to tribunal, withclear feedback to appellants; and

■ ensure that all new evidence is,wherever possible, included in thereconsideration process rather than attribunal.

Increasing the numberof people leaving incapacitybenefits quickly: engagementand support for newclaimants74 The way that the welfare state interacts

with people who are claiming benefitsbecause of a disability or healthcondition needs to change. Building onthe success of the Pathways to Workpilots, we need to engage people tosupport those who are able to workback into employment and useemployer resources and expertise toimprove access to job vacancies.

75 At the same time, we need to continueto offer support to people who areunable to work in either the long or theshort term, while offering incentives toencourage people to prepare to workif they can. Where people are unlikelyto be able to work for the foreseeablefuture, we will offer them unconditionalsupport.


41

A new Employment andSupport Allowance76 The Pathways to Work pilots have

demonstrated that, with the right helpand support, many people onincapacity benefits can move back intowork, reinforcing our view that labellingpeople on incapacity benefits as‘incapable of work’ is wrong anddamaging. This, coupled with thecomplexity and structure of incapacitybenefits, works against our intention tohelp people focus on their aspirations.So our next step is to replace incapacitybenefits with an entirely newEmployment and Support Allowance.

77 We propose that the new allowancefocuses on how we can help peopleinto work and does not automaticallyassume that because a person has asignificant health condition or disabilitythey are incapable of work. It is vitalthat the Employment and SupportAllowance is built on the principle ofrights and responsibilities.

78 The new allowance will:

■ be an integrated, contributory andincome-related allowance, replacingcurrent Incapacity Benefit and IncomeSupport on the grounds of incapacity;

■ not automatically label someone asbeing ‘incapable of work’;

■ not automatically go up the longersomeone is on benefit, once theindividual is in the main phase;

■ provide underlying and targetedfinancial support for those withneeds arising from health problemsor disabilities;

■ reward those who take steps to makea return to work possible, where thatis reasonable; and

■ do much to remove the complexitysurrounding existing benefits.

The assessment phase79 When an individual applies for the new

allowance with appropriate evidencesuch as a medical certificate, they will


Figure 2.4: The new Employment and Support Allowance

Extra disability premiums where appropriate

Sanctions Additional

payment for work-related

activity

Basic allowance set at basicJobseeker’s Allowance level

Additional payment for most severely ill/disabled

Assessment phase of 12 weeks

New PCA within

12 weeks

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enter an assessment phase lasting threemonths. Individuals will have theirfunctional capability assessed todetermine their entitlement. While thisprocess is undertaken, they will receivethe assessment phase benefit, set atJobseeker’s Allowance basic rates(subject to income tests whereindividuals do not meet thecontribution conditions).

80 During the assessment phase, we will notmake any judgement about the mostappropriate benefit for that individual.That said, we will ask all claimants toundertake a work-focused interview aftereight weeks – as is the case at present –so that we can offer individuals theopportunity to access all the help that isavailable through Jobcentre Plus, forexample, existing employmentprogrammes. In this way, we can ensurethat support is available before benefitassessment is finally determined.

81 We will undertake to complete theassessment, including the revisedPersonal Capability Assessment (asdescribed above) within three months.

Employment and support –the main phase of theallowance82 If the new Personal Capability

Assessment confirms that a person iseligible for the new benefit, they willautomatically move on to the mainphase of the allowance. For mostpeople, where a return to work (full-or part-time) is feasible in the short ormedium term, they will receive theEmployment Support component of thenew allowance. This will be conditional

on drawing up a personal action planfocused on rehabilitation and eventuallyon work-related activity. This work-related activity group will be paid at ahigher rate than during the assessmentperiod. The additional amount will fixthe total received by a claimant at arate above the current long-term rate.

People with the most severedisabilities and healthconditions83 People with the most serious disabilities

and health conditions would not berequired to undergo such activity as acondition for the allowance, thoughthey would be able to engage on avoluntary basis. After the assessmentphase, they will be paid the Supportcomponent, and receive more moneythan they do now.

Continuous engagement84 To help the work-related activity group

engage, we will continue, as inPathways to Work, to utilise thesupport and encouragement of ourpersonal advisers. We will also useprivate and voluntary sector expertise toprovide personal advice and support forindividuals to help them back to work.

85 We anticipate that, given support tobuild up their capacity, most claimantswill be capable of and would benefitfrom some form of activity oremployment, which would oftenincrease over time as personal adviserswork with claimants to build up theirindividual capacity for work. As welearn more about what works, as thePathways to Work approach is


43


Activity type Examples

■ Activities to stabilise health conditions(including mental health problems), forexample use of cognitive behaviouraltherapy

■ Assessing childcare options

■ Managing financial situation

■ Stabilising housing situation

Stabilising life

■ New Deal for Disabled PeopleJob Brokers

■ Additional support from other specialistJobcentre Plus advisers, such as DisabilityEmployment Advisers, New Deal 50 plus,New Deal for Lone Parents, or similarexternal programmes

■ Independent job searches

Jobsearch assistance

■ Undertaking a basic skills programme

■ Over-50s ‘confidence in workingÕprogramme

■ Jobcentre Plus or external trainingprogrammes

Improving employability

■ Condition management programmes

■ Progress to Work programme

■ NHS Expert Patients programmes

Managing health in work 18

■ Work trials

■ Voluntary work

■ Permitted work

■ Preparation for self-employment

Work tasters

Figure 2.5: Examples of activity suitable for inclusion in claimants’ action plans

44

established across the country and asresources permit, we will ask everyoneapart from those with the most severedisabilities and health conditions toengage in work-focused interviews,produce action plans and engage inwork-related activity, or see theirbenefit level reduced.

86 Opposite are some examples of whattype of activity might be considered assuitable for inclusion in the action plan.This list is not exhaustive, nor should itbe seen as prescriptive.

Question 4:Do the types of ‘suitable activity’we have set out provide a sensible rangeof activities that could be undertaken inorder to fulfil an acceptable action plan?

87 If individuals do not participate, as inPathways to Work, their benefit will bereduced in a series of slices. Ultimately,if people continue not to comply, thebenefit will return to the level seenduring the assessment period.

88 Claimants will, as now, have a right ofappeal at appropriate points in thedecision-making process.

What about fluctuating conditions?89 Not only do health conditions vary

widely, but they can fluctuate inintensity. We need to have a systemthat can be flexible to the claimant’schanging condition and both advisersand employers will need to deal withthese challenges.

90 There are three broad scenarios wehave to prepare for:

■ a person who has an illness that hasa varying impact on them on a dailyor weekly basis;

■ a person whose illness worsens, butis likely to improve again, or whoneeds a spell in hospital; and

■ a person whose condition progresseswith significant impact on theirfunctional capacity, and which isunlikely to improve again.

91 For the first two groups, we proposethat personal advisers should, whereverpossible, agree appropriate actionwhich reflects these variations. In asmall number of cases, it may benecessary to allow a gap until thecondition has improved sufficiently toenable some form of activity to re-commence. For the third group,personal advisers will look to establishwhether they should move into thereserved circumstances group.

Additional costs of disability92 As well as the higher amount of benefit

paid either in recognition of the work-related activity an individualundertakes, or the unconditionalsupport they need, many claimants willcontinue to be entitled to some of thedisability-related benefits that currentlyexist. For example, Disability LivingAllowance provides a non-contributory,non-income-related and tax-freecontribution towards thedisability-related extra costs of peoplewho require personal care and/or havemobility difficulties. Because it is paidboth in and out of work, it remains


45

available to disabled people who areable to return to work. We do notintend to make changes to DisabilityLiving Allowance as part of thesereforms.

93 For those receiving the means-testedpart of the new Employment andSupport Allowance, we propose thatthe current basic Disability Premium inIncome Support be replaced by the newEmployment Support and Supportcomponents. This will provide a‘something for something’ contract,recognising an individual’s right tosupport and responsibility to act withintheir capabilities. We also recognisethat, for many disabled people, theextra support currently providedthrough the Enhanced DisabilityPremium and Severe Disability Premiumis important. We anticipate that peopleon the income-related strand of theEmployment and Support Allowancewho meet the relevant criteria willcontinue to get the additional helpcurrently provided through thesepremiums.

Question 5:Is the combination of Disability LivingAllowance plus the Enhanced DisabilityPremium/Severe Disability Premium forthose on low incomes, the right way totarget support towards disabled peoplewith the greatest needs?

Contributory benefitadditions94 The current benefits system is complex

and enshrines outmoded concepts thatdo little to support those with a healthcondition or disability back to work.

95 The new Employment and SupportAllowance aims to tackle this andprovide a modernised and simplerbenefit. We propose that theEmployment and Support Allowanceshould not contain age additions. Thesesend the message to young people whoare disabled early in life that societydoes not think it is a worthwhile aimfor them to aspire to participate in theworld of work. Instead, the new benefitwill incentivise those incapacitated earlyin life to consider their capabilities andhelp them reach their goals.

96 We also propose that the Employmentand Support Allowance should notcontain adult dependency increases,which enshrine a system of ‘dependent’spouses, rather than the equalpartnerships of today.

Question 6:Do you agree that these proposedsimplifications more accurately reflectthe principles underpinning our modernsociety?

What happens if peopletry working?97 It is clear from our research that many

people facing an illness or disabilitybelieve that to be on incapacity benefitsyou need to be incapable of any workand, worse still, that showing anypotential for work risks disallowance.19

Alongside this, the name of the benefitclearly associates the claimant withbeing ‘incapacitated’ in some way.

98 These are not fair or helpful associationsas they focus on what is limiting theindividual, rather than focusing on their


46

potential. The new system will notequate a person’s health condition ordisability with incapacity to work. Ratherthe enhanced medical assessment andpersonal adviser processes will helppeople focus on what they could do,given the right support.

99 It is vital that a person making the movefrom benefits into work has the rightfinancial security to back them up.Not least, people need to know theywill be supported if things go wrong.The ‘linking rules’ in incapacity benefitspreviously allowed individuals to returnto the same level of benefit they wereon before going back to work(providing they still met the associatedconditions) for the first year of being inwork.20 But they were complex andclaimants had to apply for them.

100 We recognised the importance of doingbetter than this and making it easier forpeople to return to their previousbenefit levels. We announced in the2005 Budget that we will double thelinking period to cover the first twoyears of being in work and we willmake the process automatic. Thesechanges come into effect from October2006. We will transfer linking rules tothe Employment and Support Allowanceand will continue to consider, in thelight of evidence, whether we canimprove them yet further.

101 Even with the security of the linkingrules, we appreciate that moving intowork can be a daunting prospect formany reasons. We also need to makesure there are the right incentives totry working. This is why there are anumber of options for people to try outwork before leaving incapacity benefits.

For example, claimants can undertakeunlimited voluntary work, and variousforms of part-time paid work.

102 Volunteering is one of the key ways anindividual can build up confidence andgain valuable work-related skills after aperiod out of work. People onincapacity benefits can alreadyundertake unlimited voluntary work forcharities and voluntary organisationsand we intend to extend this provisionto the new Employment and SupportAllowance.

103 The recent Russell Commission reporton youth action and engagementrecommended that young people onbenefits and their families should notsuffer a financial barrier when theyvolunteer. The Department for Workand Pensions and the Home Office areworking together to communicateexisting rules more effectively tovolunteer-involving organisations,local authorities and young people.

104 Key to making these changes have animpact is ensuring that people areaware of the opportunities. We areissuing detailed guidance to our staffabout how to encourage claimants tovolunteer without affecting theirbenefit entitlement.

105 For people currently on bothincome-related and contributoryincapacity benefits, it is possible to earna certain amount of money withoutaffecting benefit entitlement. Peoplecan undertake some part-time andtemporary work or engage in worktrials without their benefits beingaffected. This allows people a periodof financial stability while they adjust


47

to working (via a small number ofhours a week) and move towards moresustained employment. This option hasoften been a vital tool to build up anindividual’s confidence to make that laststep into work. But in their presentform, these rules are not as effective aswe would like in acting as routes intowork, and are underused.

106 We are looking at this provision,alongside the measures outlined above,to see what improvements we canmake to ensure that we offer theclearest possible incentives into workin the new Employment and SupportAllowance. We are already moving inthis direction. For example, we haveannounced changes to permitted workthat will improve the support andguidance available from personaladvisers and we have also announcedthat we are going to make it easier forpeople on incapacity benefits toundertake test-trading (preparationfor self-employment) while retainingtheir benefit, as we believe that self-employment offers one of thebest and most flexible routes back intothe labour market for people withhealth conditions and disabilities.

107 These improvements will be carried intothe new benefit and we will continueto look for further ideas to help peopletake opportunities without fear of theirbenefits being removed.

108 We will also need to ensure that workpays for people moving intoemployment. We would thereforeenvisage the roll-out of the ‘Return toWork Credit’ in new Pathways toWork areas.

Question 7:How do you think that we can bestimprove work incentives within the newEmployment and Support Allowance sothat individuals have the opportunity totry out periods of work and progress tofull-time work where possible?

Addressing the needs of allthose on the benefit:engagement and supportfor existing claimants109 The benefit structure and conditionality

requirements outlined above will onlyapply to new claimants. Existingclaimants will remain on their currentbenefit level. However, many existingclaimants will have potentiallymanageable conditions, which may havechanged or improved while they havebeen on benefits. We propose to workmore proactively with this group ofpeople, balancing their responsibilitiesto prepare for a return to work with theneed to treat them fairly.

110 The Pathways to Work pilots have,since February 2005, been extended torequire some existing claimants to takepart in three mandatory work-focusedinterviews, and will be extended tocover more of the caseload on amandatory basis in the pilot areas fromApril 2006. And, as has been the casein all of the original seven Pathways toWork pilots from their inception,anyone already on incapacity benefitsmay volunteer for the support we offer– support that we will highlight toindividuals so that they are fully awareof what is available to them, forexample by providing information atmedical examination centres when


48

claimants attend for review. This will beespecially important for people whosehealth condition has changed orimproved.

111 In addition to this option ofvolunteering for help, in time we willincrease the frequency with whichclaimants are assessed and have toattend work-focused interviews.As resources allow, we will, over time,consider extending work-focusedinterviews to existing claimants toensure that they are aware of theopportunities available to them,including Pathways to Work supportas it becomes available. This will bein addition to the regular PersonalCapability Assessments that peoplewill undergo to gauge whether theircondition has changed or improved.

112 It is estimated that around 1.2 per centof expenditure on incapacity benefitsis overpaid through fraud and error –this is one of the lowest rates across thebenefits system. Despite this relativelylow level of fraud and error, we are notcomplacent and we continue to seek todrive out all types of error in incapacitybenefits, as we do with all otherbenefits, through our current anddeveloping range of policies aimed attackling fraud and error.

113 The more proactive and more frequentengagement with future claimantsthat is envisaged under the newEmployment and Support Allowancewill itself reduce the risk of fraud anderror creeping in. It will help ensurethat the level of benefit in paymentremains correct over time.

114 But we recognise that there may be aminority of claimants who, althoughable to undertake some work, will seekto prolong unnecessarily their time onthe protected level of incapacitybenefits. It is important, therefore,in the interests of fairness to genuineclaimants and to the taxpayer, that weidentify any such cases and reviewthem. Therefore, in line with our coreprinciple of balancing rights withresponsibilities, we will complement theexisting routine case review (currentlyheld at varying intervals) by introducingthe additional safeguard of randomlyselected, ad hoc case checks, to becarried out by a dedicated team whichwill be specially created for thispurpose. Where these checks producedoubt about the nature or extent of anindividual’s incapacity, a fresh PersonalCapability Assessment will be required.

115 This process will provide confirmationto the genuine claimant of theappropriateness and correctness of theirongoing entitlement and also assuranceto the taxpayer of the integrity andsecurity of the benefit.

116 Building on these measures, andlearning from the evidence gained,we will set out later a strategyspecifically aimed at the barriers facedby existing claimants. A key part of thisstrategy will be the initiative on cities,described in Chapter 5. We will discussour developing strategy, as well as waysof ensuring fairness for existingclaimants, with stakeholders.


49

Addressing the needs of allthose on the benefit: raisingexpectations117 Disabled people looking for work face

a range of barriers – discrimination,policy design and delivery, physical andenvironmental barriers, and a lack ofempowerment. We need to changethe current culture and raise theexpectations of employers, healthprofessionals and disabled peoplethemselves that these barriers can beovercome.

118 Since 1997, we have set aboutimplementing the most profoundextension of disability rights thiscountry has ever seen. We havestrengthened civil rights for disabledpeople in such areas as access to goodsand services, and to public transport,and we established the Disability RightsCommission in April 2000 to helpdisabled people understand andenforce their rights.

119 In October 2004, we extended theemployment provisions of the DisabilityDiscrimination Act 1995 to provideprotection against discrimination for anadditional 600,000 disabled workers.A further 7 million jobs and 1 millionemployers were brought within thescope of the employment provisions ofthe Act. Most recently, amendmentsmade to the Disability DiscriminationAct in 2005 require public authoritiesto promote equality of opportunity fordisabled people. The legislation willensure greater opportunities fordisabled people to work by tacklingdiscrimination in recruitment andemployment.

120 The Prime Minister’s Strategy Unitreport Improving the life chances ofdisabled people21 sets an ambitious20-year vision to bring disabled peoplefully within the opportunity society. Theradical programme of service deliveryreform set out in this report; theDepartment of Health’s Green PaperIndependence, well-being and choice;22

and the forthcoming Department ofHealth White Paper Well-being in ourcommunities: A new direction willincrease the opportunities available todisabled people to take fuller controlof their lives.

121 The Strategy Unit report proposed anew cross-government Office forDisability Issues, to act as a focal pointwithin government and drive forwardthe implementation of the overallstrategy. This was established on1 December 2005.

122 The report also recommended measuresincluding:

■ improving support for families withyoung disabled children;

■ helping a smooth transition intoadulthood by, for example, removing‘cliff edges’ in service provision;

■ improving the support and incentivesfor entering and staying inemployment; and

■ encouraging more employers torecruit and retain disabled peoplewhile making the Government’swelfare-to-work initiatives respondmore effectively to the needs of bothemployers and disabled people.


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123 The Government is developingindividual budget pilots in 13 localauthorities in England. These will buildon the existing direct payment schemesoperated by social services departmentsto give severely disabled people andothers more choice and control over thesupport provided by different agencies.The aim will be to ensure that peoplewho receive support or services areat the centre of the process and havethe power to use their budget in a waythat best suits their own particularrequirement.

124 The pilots will look at practical ways ofstreamlining assessments and poolingfunding streams, including socialservices support, the Supporting Peopleand Access to Work programmes,and Disabled Facilities Grantsfor housing adaptations. Just asimportantly, the pilots will also belooking at support arrangements,including effective advocacy fordisabled people, to ensure that theyare confident in managing theirbudgets independently.

125 Each local authority is trialling a differentmix of services, client groups andsupport to test out different potentialarrangements. Severely disabled peoplewho receive incapacity benefits will beamong the service users involved inthese pilots. This means that, as the pilotprogramme works to develop viablemodels of individual budgets, the needsand requirements of this group will betaken fully into account. We will alsoensure more broadly that we join upthe developmental work on individualbudgets and the continuingdevelopment of the welfare reformprogramme.

Delivering the reforms126 Given the significant resource

commitment that these reformsrepresent, we will clearly wish to ensurethat we base our reforms on the bestpossible evidence. As well as buildingup the evidence base through rollingout the Pathways to Work pilots to therest of the country, we will wish tobuild up increased conditionality on thebasis of what evidence tells us is mosteffective. We would envisage doing thisfrom 2008. However, many of the othermeasures outlined in this Green Paperwill be implemented across the wholecountry before the new Employmentand Support Allowance comes intofull effect.


Helping lone parents

Chapter 3

Helping lone parents

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Chapter 3Helping lone parents

1 The lone parent employment rate hasseen significant improvement since1997 and is at a record level of56.6 per cent. However, the number oflone parents out of work and claimingIncome Support remains high. There isa continuing disparity, with lone parentemployment rates lagging behind thoseof partnered mothers.

2 This has a significant impact on poverty.Most non-working lone parent familiesare poor, as defined by living in a low-income household, and they areparticularly likely to experiencepersistent poverty and deprivation.The Government is helping to makeprovision available to enable loneparents to work, but in return webelieve that lone parents have aresponsibility to make serious efforts toreturn to work, especially once theiryoungest child reaches 11. Moving intowork can improve their own lives, andthe lives of their children too.

The challenge3 Helping lone parents return to the

labour market is the most effective wayto ensure their social inclusion and thebest route out of poverty for them andtheir children. Additionally, the increasein sustainable employment that resultsin the long term raises the productivepotential of the economy, and thesegains are spread more evenlythroughout society.

4 There are some 1.8 million lone parentsof working age in Great Britain, ofwhom fewer than 170,000 are lonefathers. Of the total, 787,000 loneparents are on Income Support,230,000 fewer than in 1997. Inaddition, a small number claim becausethey are sick or disabled, or claimJobseeker’s Allowance. A significantproportion of lone parents move fromIncome Support to incapacity benefitswhen their youngest child reaches 16,which is why we need to have acoherent package of reforms for bothgroups.

5 In spring 2005, the lone parentemployment rate reached 56.6 per cent, an increase of just over11 percentage points since 1997. Thisis the highest lone parent employmentrate on record, and for the first timeever there are now over 1 million loneparents in work – 318,000 more thanin 1997. Despite this success, thenumber of lone parents out of workand claiming Income Support remainshigh, both historically and in relationto other countries.


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6 In the UK, lone parents, especially lonemothers, are much less likely toparticipate in the labour market thanpartnered mothers with children of thesame age. Around 72 per cent ofpartnered mothers are in employment,compared with 56.6 per cent of lonemothers and 70 per cent of lonefathers. There are a number of reasonswhy a higher percentage of lonefathers are in work than lone mothers.These include that, on average, theyhave fewer and older children, are olderthan lone mothers (87 per cent are over35, compared with 58 per cent of lonemothers) and have higher qualifications.

7 Most non-working lone parent familieslive in a low-income household, andthey are particularly likely to experiencepersistent poverty and deprivation.

International comparisons are notaltogether straightforward, as thedefinition of a lone parent varies fromcountry to country. But key features ofall countries with a high proportion oflone parents in employment includethe availability of good-quality,affordable formal childcare, and strongrequirements to seek work combinedwith financial incentives to do so.Additionally, the international evidenceshows that stricter conditionality canhave a very limited benefit if it isapplied without childcare support andincentives to work. Strongerrequirements can be crucial in gettinglone parents off benefits, but themacroeconomic environment is a keydeterminant of their participation inthe labour market.

Chapter 3: Helping lone parents

Figure 3.1: Employed lone parents aged 25 to 49 in 20031

Source: EurostatNotes: 1 Figures are for all lone parents aged 25 to 49 in employment in 2003, excluding those who are self-employed.

2 Unreliable or uncertain data.3 Eurostat estimate.

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Finding work is the surest way out ofpoverty because:

■ a change in labour market status andearnings accounts for roughlytwo-thirds of exits from low income;

■ non-working families are four timesmore likely to experience severehardship than those working; and

■ achieving the 70 per cent lone parentemployment target would lift around300,000 children out of low income,which would make a significantcontribution to our target to halvechild poverty by 2010.

Progress so far8 Since 1997, we have made huge strides

in developing the support available tolone parents. The lone parentpopulation is not static: people movein and out of lone parenthood.The Government has made significantinvestment to help parents stay inwork, return to work and balance thedemands of work and family effectively.The National Childcare Strategy, theNational Minimum Wage, tax creditsand the introduction of flexible, family-friendly policies in the workplacebenefit all parents.

9 In April 2001, we started to roll outmandatory work-focused interviews toall lone parents. These ensure that theyknow about the opportunities availableto them and the benefits of work.About 750,000 lone parents havejoined the New Deal for Lone Parents toaccess help, supported by their personaladviser, and 410,000 have moved intowork. The New Deal for Lone Parents,launched nationally in October 1998, is

a voluntary programme that helps loneparents achieve job readiness through arange of provision. The New Deal isvery effective: one in two lone parentsmoves into work with the support oftheir personal adviser.

10 The success of these initiatives hasencouraged us to go further –introducing an additional interview atthe six-month stage for new claimants.From October 2005, we extended thisto quarterly interviews for lone parentswhose youngest child is aged at least14, to prepare individuals for thetransition to employment when theirchild reaches school leaving age.

11 We continue to keep our programmesunder review, and to make changeswhere this will help lone parents moveinto or stay in work. For example, weare considering options for changingthe ‘notional earnings’ rule, which canact as a disincentive to lone parentstaking part in some programmes.This will enable participants to accessa wider range of local training andsupport without their benefitentitlement being affected. We alsowant to work proactively withemployers to develop work tasterprogrammes for lone parents.

12 We want to support lone parentsto help keep them in work and stopthem moving or returning to a life onbenefits. We will explore new ways ofincreasing the support that JobcentrePlus can give to lone parents who aremoving into work or are already inwork. And we will ensure that loneparents know they can contactJobcentre Plus for advice on the fullrange of support that is available to


55

them – including help with housingcosts, tax credits, childcare and more –before making important decisionsabout balancing work and their familyresponsibilities.

13 The programmes we have developedgive lone parents more choices than everbefore. In England, we have established524 Sure Start local programmes,offering a range of early learning,childcare, health and family services toover 400,000 children in the mostdisadvantaged areas. These also provideinvaluable support and advice to parents.

14 Our ten-year childcare strategy, Choicefor parents, the best start for children,23

will build on this achievement through anetwork of 3,500 integrated children’scentres across the country – one in everycommunity. Networks of ExtendedSchools will provide wrap-aroundchildcare to suit the needs of workingparents. Our commitment to providing,by 2010, an out-of-school childcareplace between 8am and 6pm for allchildren aged 3 to 14 will be of realbenefit in enabling parents – particularlylone parents – to go to work, knowingthat their children have a safe andstimulating place to go. By 2010, therewill be over 2 million sustainablechildcare places for children up to 14.These reforms will ensure thatappropriate high-quality care is availableso that parents have greater choice inbalancing work and family life.

15 Since devolution, the Scottish Executivehas built on the childcare strategyintroduced by the UK Government in1998 – Meeting the childcare challenge –A childcare strategy for Scotland.24 It alsoaims to make high-quality, accessible and

affordable childcare available in everyneighbourhood. In addition, the Workingfor Families Fund supports parents indisadvantaged groups and areas withaffordable and accessible childcare, toensure that this is not a barrier to theirentering education, training oremployment.

16 The Welsh Assembly published achildcare strategy for Wales25

in November 2005, building onachievements to date in developing andexpanding the availability of locallyaccessible, affordable and good-qualitychildcare in Wales. The Genesis Walesproject, funded by £12.5 million ofEuropean Structural Funds, is providinga comprehensive package of advice,guidance, support and childcare forpeople wishing to access work, trainingor learning opportunities.

17 The Secretary of State for NorthernIreland has announced plans for a newdrive to deliver access to high-quality,affordable childcare to help thosebringing up a young family enter orreturn to work. In addition, as part of aChildren and Young People’s FundingPackage, there will be an expansion ofthe Sure Start infrastructure, bringing arange of social and pre-school provisionto children and families in the mostdisadvantaged areas. This will becomplemented by a major initiative todevelop Extended Schools, offeringhigh-quality, structured activities beforeand after school, tailored to meet theparticular needs and circumstances ofthe pupils and their families andcommunities.

18 The Employment Act 2002 introducednew legislation in the UK specifically


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to help working parents. Since 2003,parents with young and disabledchildren have received more supportthan ever before to balance childcareand work in ways that benefiteveryone: employers, employees andtheir children. Rights to request flexibleworking and increases in maternity andpaternity pay and leave all assist parentsin achieving a balance between homeand work responsibilities.

A more radical approach19 Lone parents are naturally concerned

that if they go to work their childrenshould be well looked after. This is truenot just for those whose children aretoo young to go to school, but also forlone parents with school-age children,who need to be assured that they willbe well cared for after school andduring the holidays. It is right that theGovernment should help makeprovision available to enable loneparents to work, but in return webelieve that lone parents have aresponsibility to make serious efforts toreturn to work, especially once theiryoungest child reaches 11. This willimprove their own lives, and the livesof their children too.

Extending opportunityMore frequent work-focused interviews20 Our roll-out of compulsory annual

work-focused interviews to lone parentswho are claiming Income Support hasshown that such interviews help loneparents think about work, and many goon to prepare for it by joining the NewDeal for Lone Parents. So our next stepis to build on this success by furtherincreasing the frequency of theinterviews.

21 We propose, as resources allow, to:

■ hold mandatory interviews everythree months with lone parents whohave been claiming Income Supportfor at least a year and whoseyoungest child is at least 11;

■ introduce six-monthly interviews(twice as frequent as now) for all loneparents who have been on benefitfor at least a year and who are notrequired to take part in morefrequent work-focused interviews;and

■ pilot providing more intensive supportfor lone parents during the first yearof their claim. During this time manypeople are still adapting to theirchanged circumstances and will needmore help.


Figure 3.2: Planned new interview regime

Age of youngest child

Mandatory six-monthlyinterviews

Mandatory quarterlyinterviews

110

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Work-Related Activity Premium22 We recognise that regular contact with

a personal adviser may not in itself besufficient to encourage lone parents toreturn to work. Making the move frombeing on benefits to working can be abig step, so we intend to pilot a newincentive to ensure that lone parentsare better off if they take serious stepstowards preparing for work. Thisincentive will focus, at least in the firstinstance, on all lone parents whoseyoungest child has reached the age of11. When the youngest child beginssecondary education, many loneparents feel more able to think aboutreturning to work but need support toenable them to turn this aspiration intoa reality.

23 Of lone parents with a youngest childaged at least 11, 68 per cent arealready in work. Nationally, there are150,000 lone parents on IncomeSupport with the youngest child agedbetween 11 and 16. This group facesfewer childcare constraints than thosewith younger children, and it isreasonable to ask them to considerundertaking activities appropriate totheir individual circumstances which willprepare them to re-enter the labourmarket. The OECD has said that “onceemployment and childcare support isavailable on a comprehensive basis, itwould be reasonable to oblige soleparents on Income Support to makeuse of it”.27 By 2008, half of all familieswill have access to school-based carefor 5 to 11-year-olds. By 2010, allparents of school-age children will haveaccess to care from 8am to 6pm all yearround. There will be 2,500 children’scentres by 2008 and a further 1,000 by

2010, providing services for children ofpre-school age.

24 It is therefore reasonable to expect morelone parents to take advantage of thesupport available to them and to takesteps to help themselves and theirfamilies. In February 2005, weannounced our intention to ask loneparents with older children to engage insome work-related activity, inpreparation for returning to work. Inrecognition of this participation, we willpay a premium in addition to IncomeSupport, and we suggest this should be£20 a week. We will test this paymentto lone parents who have been onbenefits for at least six months andwhose youngest child is aged 11 or over.Getting the new premium will beconditional on the lone parentundertaking work-related activity agreedwith a personal adviser.

25 We recognise that for some loneparents, for example those withadditional caring responsibilities,work-related activity may not be animmediate option. Participation willtherefore be voluntary – if a lone parentdecides not to do any work-relatedactivity, their entitlement to IncomeSupport will not be affected, but theywill not qualify for the extra payment.We will assess the effectiveness of thepilot before moving further.

26 We expect that the majority of loneparents of older children will be keen totake advantage of the new financialincentive, and will want to work witha personal adviser to improve theirreadiness to work. But we also knowthat many lone parents on benefits withchildren younger than 11 are keen to


58

work, and making the new premiumavailable to them could encourage themto take active steps to return to thelabour market.

Question 8:Would it be reasonable to extend theWork-Related Activity Premium, and theassociated requirement to take stepsback to employment, to lone parentswith children younger than 11? If so,what age should be the cut-off point?

27 The nature of the work-related activitywill vary according to the needs of eachindividual lone parent. We know that

some lone parents with older childrenwill have recent work experience andwill need relatively little help andsupport to get them back to work.But others will have been on benefitsfor some time and will need to moveforward more gradually. Lone parentswill need to identify their barriers towork and the steps that will benecessary to manage or remove them.

28 We envisage that the Work-RelatedActivity Premium will be payable for upto six months. However, we recognisethat lone parents who are somedistance from the labour market may


Activity type Examples

n Help from a personal adviser

n Information, advice and guidance

n External agencies

n Independent job searches

Jobsearch assistance

n New Deal for Lone Parents

n Basic skills training

n Confidence building

n Mentoring

n Labour market orientation/employerawareness

n Health management, for example NHSExpert Patients programmes

n Work-related training

n Wider Jobcentre Plus and externaltraining programmes

Improving employability

n Work trials

n Structured voluntary work

n Preparation for self-employment

Work tasters

Figure 3.3: Examples of work-related activities suitable for lone parents

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need to undertake a sequence ofactivities, each building on the previousone, to bring them closer toemployment. Others may need toundertake training that runs beyondthe end of the six-month period –perhaps because a particular course isnot available in the early part of thework-related activity period. We willtherefore consider, when a personaladviser and the lone parent haveagreed a course of activity that will runbeyond six months, whether thepremium should be payable for alonger period.

Question 9:In what circumstances do you think itwould be reasonable to extend thesix-month Work-Related ActivityPremium period?

Partners29 There is now widespread agreement

that the programme for supporting andhelping lone parents into work is vitalfor them, for their children and for ourdrive against child poverty. But we stillneed to do more for the partners ofpeople on benefits who are not in workthemselves and are not engaged in ouractive welfare-to-work programmes.

30 We have moved a long way from themodel of a household with a singlebreadwinner and a dependent spouse.While some partners will not be ina position to consider work, forexample because of substantial caringresponsibilities, there are significantnumbers who, with the right support,could move into full time or part timework. They will be able to contributeto raising the standard of living forthemselves and their families, and to

enjoy the wider benefits of working.It is clearly right that people who arepartners of benefits claimants and whohave not reached State Pension ageshould be helped to return toemployment, or have the opportunityto access the world of work for thefirst time.

31 In April 2004, we introduced theenhanced New Deal for Partners, and arequirement that partners of peoplereceiving benefits should be asked toparticipate in a work-focused interview.These interviews are currently beingintroduced across the country, linked tothe opening of Jobcentre Plus offices.Partners of people receiving WorkingTax Credit or Pension Credit, andworking less than a certain number ofhours a week, can also access help.

Making a difference32 Our policies are already making a

difference to the lives of people andtheir families in all sectors of society.Building on the evidence we havegained so far, we believe that theenhanced support and incentivesproposed in this chapter will createthe right environment for lone parentsand partners to make their owninformed choices and find their routeback into work.


Helping older workers

Chapter 4

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Chapter 4Helping older workers

1 By 2024, an estimated 50 per cent ofthe adult population will be over theage of 50, due to the combination ofincreased life expectancy and low birthrates. But although people are livinglonger than ever before, they arespending a relatively lower proportionof their lives in work than previousgenerations. Unemployment amongpeople over 50 is low, but inactivity ishigh and many people leave work earlydue to ill health. Those out of worktend to face greater barriers inreturning to work than other agegroups.

2 The overall effect is that employmentrates among those aged between 50and State Pension age are lower than inthe population as a whole. Theconsequences of this are far-reaching,both for the economy and for theability of individuals to make provisionfor later life.

3 Many people want to carry on workinginto their 60s. Indeed, around 1 millionpeople already work past State Pensionage. For those who want to worklonger there remain structural, personaland cultural barriers. The culture ofearly retirement persists, as doesdiscrimination against older people. Weneed to increase the average age ofretirement by providing incentives andsupport to help people to return towork more quickly and to stay in workfor longer.

4 We have already made good progressand intend to build on this.Employment rates among the over-50shave steadily improved, and the gapbetween the overall rate and the ratefor older workers has reduced. We areconsidering a variety of options in lightof the Pensions Commission’s reportand will set out our proposals forreform in spring 2006. Moreimmediately we wish to boost supportfor people returning to work andprovide better information to peopleabout the work and retirement optionsavailable to them. To do this we will:

■ align our additional employmentsupport for the long-termunemployed with that for youngerage groups by requiring people agedbetween 50 and 59 to take upadditional jobseeking supportthrough New Deal 25 plus;

■ improve back-to-work support forJobseeker’s Allowance claimants andtheir dependent partners who areover 50;

■ pilot face-to-face guidance sessionswith people approaching or over 50,to deliver tailored and relevantinformation on working, training andplanning for retirement; and

■ work with employers to extendflexible working opportunities toolder workers.


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The challenge5 The ageing population presents us with

two major challenges:

■ how to support the growing numbersof pensioners in retirement, given thedecreasing proportion of workers inthe population in future, whilemaintaining a strong and competitiveeconomy; and

■ how to enable individuals to build theincome they need to meet theiraspirations for retirement.

6 Our aim to support and encouragepeople over 50 to stay in workaddresses both of these issues by:

■ increasing the proportion of thepopulation in work, which willimprove the affordability of pensionsand generate growth in theeconomy;

■ increasing the length of working life,although not the proportion of lifespent in work; and

■ giving people the opportunity togenerate more income both in workand in retirement, and potentiallyreducing the period of time that anysavings need to cover.

7 The last 50 years have brought dramaticand welcome increases in life expectancy.Paradoxically, the same period has alsoseen a steady decrease in the averageage at which people stop working, atrend which has only recently reversed.The result is that the average percentageof life spent in retirement by adult menhas increased from 18 per cent in 1950to 31 per cent in 2005.

8 These changes pose large challengesfor society and for the individual. Earlywithdrawal from the labour marketmeans that the economy loses skills andproductivity.27 For the individual, his orher ability to save enough for a long,comfortable retirement – both throughNational Insurance contributions andprivate pensions – is limited. Many leavethe workforce without planning fortheir later life. Of those people retiringvoluntarily before State Pension age,we know that only a third consider thefull financial effects of that decision.

Chapter 4: Helping older workers

Percentage of male adult life spent in retirementDue to rising life expectancy, today’s average male who works to 64 will spend the sameproportion of his life in work and in retirement as someone retiring at 67 in 2050. In 1950the average male retired at 67 and spent a much lower proportion of his life in retirement.

1950 2005 2020 2050

Retirement age 67 64 65 67

Years of life expectancy at 10.8 20.4 20.9 21.8retirement age

Percentage of adult life 18% 30.7% 30.8% 30.8%(18+) spent in retirement

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9 The trend for people to spend longer ineducation and start work later meansthat time spent in work will be furtherreduced if we do not reverse the trendof early retirement.

10 There are 8.8 million people agedbetween 50 and the State Pension age(60 for women and 65 for men) inprivate households in Britain. Of these,nearly 30 per cent (2.6 million) are notworking, 1.4 million are claimingsickness and disability benefits, andjust over 140,000 are claimingJobseeker’s Allowance. Additionally,over 250,000 are dependent partnersof benefit claimants, many of whomare women.

11 Looking below these figures shows amore complex picture with differentfeatures for different age groups. Morepeople aged 50–59 are economically

inactive due to ill health than due toretirement or unemployment.Employment levels are high amongpeople in their early 50s (around 80 per cent), but there is a steep shiftfrom employment to inactivity from age59 onwards. The most common timefor the change from employment toretirement to occur is between the agesof 60 and 65. As people approach 65part-time work becomes as commonas full-time work, which indicates theimportance of opportunities for flexibleworking during the transition toretirement.

12 We know that people who work up tothe State Pension age are much morelikely to continue in work beyond thatage. Around 1 million people areworking beyond the State Pension agetoday, many in part-time work andself-employment. Our policies need to


Figure 4.1: Economic activity by age in Great Britain

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Source: Office for National Statistics, Labour Force Survey, autumn 2004

Inactive: retired Unemployed Inactive: sick, disabled or injured Part-time employed Inactive: looking after family or home Full-time employed Inactive: others

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reflect the different circumstances andfeatures of these age groups.

A million older workers13 Having an additional 1 million older

people in work is a challenging butachievable aim, but it cannot beaccomplished overnight. This is anaspiration for the long term, for beyond2020. The timescale takes into accountthe fact that the equalisation ofwomen’s State Pension age with that ofmen at age 65 (rising graduallybetween 2010 and 2020) will be criticalin securing more older people in work,and it also corresponds with the periodwhen the ratio of pensioners to thosebelow the State Pension age isprojected to start rising.

14 The signs for the future are good, withthe next generations of older people likelyto benefit from improving health, higherlevels of qualifications and greaterflexibility in the workplace. Withproportionally fewer younger people inthe labour market, demand for olderworkers should grow. But growth willdepend on the continuation of a stableeconomic environment and good labourmarket conditions, and could beconstrained by employers and individualsnot responding to demographic changes.If employment rates were to remainconstant from 2004 to 2025, the changein the age structure of the populationalone could decrease the proportion of 16 to 69-year-olds in work from69.2 per cent in 2004 to 67.5 per centin 2025.28

15 As unemployment among the over-50sis low, future long-term increases inemployment will need to come from

retaining people in work for longer andfrom the economically inactive. Theinactive are the furthest from the labourmarket and so can be the hardest tohelp. For those who are unemployed,more effort will be needed to ensureaccess to jobseeking support. Olderpeople in employment will need theflexibility to work in a way that suitstheir personal circumstances.

16 There are a number of potential barriersto employment growth which willneed to be considered and addressed.These barriers fall into three groups:structural, personal and cultural.

Structural barriers17 Decisions about work and retirement

can be influenced by the availability ofdifferent sources of income and theirassociated conditions and rules.Individuals may also respond tofinancial incentives or barriers. Theseinclude the structure of the tax andbenefits system, the role ofemployment programmes and therules of pension schemes.

Personal barriers18 Many factors affect the decision to

retire, but surprisingly few peopleconsider the financial implications.Key factors include:

■ health and disability issues – the mainreason for people leaving workbefore State Pension age. Half ofpeople claiming incapacity benefitsare over 50, and reforms aretherefore particularly relevant to thisgroup;

■ caring responsibilities, which peakbetween the ages of 45 and 65;


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■ a lack of flexible workingopportunities, which makesretirement a ‘cliff edge’, with adramatic shift from full-time work tofull-time economic inactivity; and

■ lower levels of formal qualificationand less propensity to train(employment rates are lower amongthose with no qualifications).

Cultural barriers19 Individuals’ and employers’ attitudes to

and decisions about work andretirement are influenced by a numberof cultural factors. We find, forexample, that:

■ people assume that their own lifeexpectancy will be lower than officialestimates. The average man reaching50 today can expect to live foranother 33 years to age 83, and theaverage woman another 36 years toaround 86;

■ individuals have unrealistic aspirationsfor early retirement, which areunlikely to be realised withoutsensible planning and significantsaving, and they also worry thathealthy time in retirement will belost to work;

■ some employers have outdatedprejudices about the capabilities ofpeople over 50, which can lead todiscriminatory or inflexibleemployment practices and to peoplefeeling forced out of work;

■ many employers and individualsmistakenly believe that older peoplemust leave the workforce to ensurethat there are enough jobs foryounger workers. In fact, morepeople working means more growthin the economy, resulting in morejobs for workers of all ages.


Figure 4.2: Difference in employment rates between the working-age population andpeople aged between 50 and State Pension age (spring of each year, Great Britain)

56%

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16 to State Pension age 50 to State Pension ageSource: Labour Force Survey

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Progress so far20 Good progress has been made in recent

years on improving employment ratesamong older people. Although we havenot returned to the high employmentrates of the 1970s, recent years haveseen steady improvement. Since 1997,the employment rate for people agedbetween 50 and State Pension agehas risen by six percentage points, from64.7 per cent in spring 1997 to70.7 per cent in spring 2005.

21 In recent years the gap between theemployment rate of older people andthe overall rate has declined.Employment rates for men agedbetween 50 and State Pension ageare higher now than since the early tomid-1980s. The proportion of people inthis age group receiving unemploymentor incapacity benefits is lower now thanit was in the late 1990s. There are nowaround a million people over the StatePension age in work.

22 We are also doing well in comparisonwith other countries. In 2004 onlySweden and Denmark among EUmembers had a higher proportion thanthe UK of people in employment aged55–64.

23 The 2002 Green Paper Simplicity,security and choice: Working and savingfor retirement29 sets out a number ofinitiatives that we have now introducedor are in the process of introducing.

24 The New Deal 50 plus has supportedover 150,000 job entries since April2000. Back-to-work help is nowavailable to people claiming PensionCredit (from age 60). Our ‘Age Positive’

campaign has influenced employers bypromoting the business case for age-diverse workforces, and every year seesincreasing demand from employers forinformation about adopting non-ageistemployment practices.

25 This year will see the introduction oflegislation which, for the first time, willgive people the right to challenge agediscrimination in the workforce and willmean that employers will have to treattheir staff fairly, whatever their age.We will also be introducing a defaultretirement age of 65, below whichemployers will not be able to forcepeople to retire (unless it can beobjectively justified). Employers will alsohave a duty to consider requests towork beyond age 65.

26 We have already made it clear that,ultimately, we envisage a future inwhich people have complete freedomof choice over when to stop working.Indeed, many employers are alreadyrealising the benefits of operatingwithout a retirement age. The defaultretirement age will be carefullymonitored, and in 2011 we willundertake an evidence-based review.If this review suggests that we shouldabolish the default retirement age,then that is what we will do.

27 Alongside these measures, theCommission for Equality and HumanRights, due to be established by late2007, will provide effective guidance toemployers and individuals on goodpractice in employment with respect toage, and will support implementationof the legislation. The Arbitration andConciliation Service will provideguidance in advance of the Commission


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coming into being. Our ‘Be Ready’campaign, launched in May 2005 anddelivered in partnership with businessgroups and trade unions, has alreadybegun to influence employmentpractices and raise awareness of theforthcoming legislation.

28 In April 2005, more generous optionsfor delaying taking the State Pensionwere introduced. For the first time,these included the option to take alump sum, making it more desirable toput off retirement for longer. For thosewishing to work more flexibly in thetransition to retirement, we will alsobe introducing changes to the ruleson non-state pensions, so that(where schemes allow it) people candraw part of their pension whilecontinuing to work for the sameemployer. This change will come infrom April this year.

29 In the medium term, structural changesare also planned, including raising theearliest age at which a (non-state)pension can be taken, from 50 to 55 by2010. Equalisation of the State Pensionage, due to take place between 2010and 2020, will see the State Pensionage for women rise gradually to 65, inline with that for men. This will affectthe 3.7 million women who will reach60 between 2010 and 2020. As thePension Credit entitlement age will risesimultaneously, some men will beaffected too.

30 These initiatives offer support toindividuals and employers to enablelonger working among the over-50s,and provide the framework for furthergrowth. However, to meet the long-term challenges of an ageing

population, more may need to be doneto achieve even higher levels ofemployment. This is why we haveannounced our aim of having 1 millionadditional older people in work.

Pensions Commission reports31 In its first report the Pensions

Commission highlighted the role thatextending working life has to play inachieving a sustainable future forpensions and for our economy. TheCommissioners recently published theirsecond report, suggesting a number ofactions the Government should take tosecure higher employment for olderpeople in the future. These includeoptions to gradually raise the StatePension age above age 65 beyond2020 and to improve awareness abouta range of other issues.30

32 We are considering these options alongwith the other proposals in the report,and will be announcing our responselater in the spring.

Next steps33 In the long term, to ensure that we

achieve the cultural and behaviouralchanges necessary for us to meet ouremployment aspiration, we need to:

■ continue to identify and, whereappropriate, remove any existingbarriers and provide greater incentives(financial or otherwise) to stay in work;

■ continue to ensure that older benefitrecipients have the same access tohelp and support in finding work thatyounger people do;


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■ help employers to examine theirrecruitment and retention practicesand encourage them to supportflexibility in employees’ workingpatterns up to and beyond the StatePension age; and

■ provide information to individualsand raise their awareness to enableinformed decision making in relationto work and retirement.

34 We need to focus on measures thatensure people are able to return to thelabour market easily after spells ofunemployment, ill health or caring,but crucially we also need to focus onmeasures that create the rightenvironment for retaining older peoplein work.

35 This is not about everyone having towork until the age of 70 – many wouldnot be able to or would not want to dothat. This is about providing peoplewith support and information to enablethem to make sensible choices aboutwhen and how to retire, based on theirown circumstances and aspirations. Formany people approaching retirementnow, working even a year or so longercould have a beneficial effect, bothbefore and after retirement. In thelonger term, we need to find asustainable balance between workinglife and retirement which will ensurethat people have the opportunity toprovide for an adequate income inlater life.

36 We know that to achieve this we needto remove the ‘cliff edge’ betweenwork and retirement, allowing peopleto combine work with the otherimportant elements of their plans for

later life. We will also consider how tooffer incentives to overcome existingbarriers and how to support peoplewho continue to work in later life.

37 We recognise that our aspirations forincreased employment among olderpeople can only be achieved througha joint effort by the Government andemployers working in partnership.Many employers are already leadingthe way with enlightened employmentpractices. These encourage older peopleto continue to make an importantcontribution to their workplace, andhelp them realise their own aspirationsfor a flexible or phased retirement. Wewant to build on this best practice andcontinue to support employers who stillhave a way to go in achieving agediversity.

38 In the medium term, bringing the StatePension age for women in line withthat for men by 2020 will be a crucialfirst step towards our goal of higheremployment. In the lead up to andduring the change, it will be importantthat our back-to-work support is seento be relevant to and effective for theover-60s. We will set out detailed plans,alongside related changes to otherservices and benefits that are currentlylinked to the State Pension age.

39 In the short term, we are proposingchanges to support individuals furtherin seeking work and planning theirworking life.


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Improving labour marketinterventions 40 Jobseekers in their 50s should be

confident of receiving at least the samelevel of help to get back into work asjobseekers in their 30s and 40s.We therefore want to align ouremployment support for older long-term unemployed people with that foryounger age groups, by requiringpeople aged 50–59 to take up theadditional jobseeking support availablethrough New Deal 25 plus. At present,the New Deal 25 plus intensive back-to-work activity is voluntary for peopleaged 50–59 who have been claimingJobseeker’s Allowance for about22 months, whereas for people aged25–49 it is mandatory.

41 The pilots announced in Simplicity,security and choice: Working andsaving for retirement are alreadyshowing that requiring people aged50–59 to take up additional jobseekingsupport can effectively help more ofthem get back into work and awayfrom benefit dependency. We thereforepropose to extend mandatory help ofthis kind nationally.

42 For workless couples the evidencesuggests that there is more chance ofone or both partners finding work ifboth are actively seeking it. We aredetermined to ensure that olderpartners of benefit claimants arenot excluded from the rights andresponsibilities that other jobseekershave. Nor should they be at risk ofreceiving less support in their efforts tofind work. At present, when a couple

without dependent children is worklessand one partner was born after 1957,each partner is treated as an individualjobseeker. We propose to extend thisregime to include older couples as well.

43 Each year over 50,000 jobseekers aged50 or over fail to access the support towhich they are entitled through NewDeal 50 plus, leaving many at risk ofdrifting into long-term worklessnessand benefit dependency. We propose toimprove the chances of older jobseekersfinding work sooner by piloting asystem to ensure that every eligiblejobseeker takes advantage of theadditional personal adviser supportoffered through this programme.

44 One of the core elements of New Deal50 plus is a unique in-work traininggrant of up to £1,500, designed toaddress the skills and careerdevelopment needs of older peoplereturning to work. The grant isclaimable for up to two years after aneligible customer has moved into work.Take-up has been relatively low, butevidence suggests that those who haveaccessed the grant have found it veryuseful. We propose increasing theinvolvement of the information, adviceand guidance services in promoting the50+ In Work Training Grant and insupporting those people over 50interested in taking it up.


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Communicating choiceson working and whento retire 45 Information and guidance are needed

to help people understand the range ofopportunities available to them andplan effectively for later life. We willpilot face-to-face guidance sessionswith people approaching 50 or over 50,to deliver tailored and relevantinformation on working, training andplanning for retirement.

46 With implementation of agediscrimination legislation due inOctober 2006, individuals will haveincreased rights in planning when theyretire, and many employers are nowoffering a range of working patterns tohelp retain or recruit older people.Together with the option to defer theState Pension, and the possibility ofcombining part-time work with apension income to ensure a flexibletransition into retirement, thesemeasures offer a range of opportunitiesand choices for individuals. There is alot to take in and to decide, and theguidance sessions will be flexible inoffering different approaches toindividuals depending on their needs.

47 The pilots will help us to have a betterunderstanding of the issues that peoplerequire most help with when planningtheir working lives, and will enable usto identify the type of information andsupport that individuals will need tomake sensible choices.

Flexible working 48 Older people have said that they require

more flexible working practices to allowthem to balance work with otherconstraints such as health problems,caring responsibilities and outsideinterests. Greater flexibility also helpsthe transition from work to retirementand could keep people in work forlonger.

49 Almost half of employees have accessto flexible employment arrangementsbut others often face the stark choicebetween full-time work or full-timeinactivity. We will build on the successof our ‘Age Positive’ campaign toencourage employers to realise thebusiness benefits of adopting moreflexible approaches to retirement, givingindividuals more choice and moreopportunities to stay in work for longer.


Delivering welfare reform

Chapter 5

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Chapter 5Delivering welfare reform

Working in partnership1 Delivering this radical programme of

reform requires much more than justlegislation and policy change – itrequires a delivery network that iseffective, accessible and flexible.Through its network of new offices andcall centres and its front-line personaladvisers, Jobcentre Plus delivers anintegrated and accessible work-focusedservice to all of its working-age clients.Since 2000, we have beensystematically testing the impact ofopening up the design and delivery oflabour market support to private- andvoluntary-sector competition.

2 Jobcentre Plus now has contracts witha range of service providers to deliverin-depth work-focused support andtraining across the country through theNew Deal, and through programmestailored to meet the particular needs ofharder-to-help client groups. Theseorganisations can bring a distinctiveapproach to service delivery, based ontheir specialist knowledge, experienceand skills:

■ Thirteen Employment Zones providesupport to unemployed adults, youngpeople who have already beenthrough the New Deal, and loneparents. Independent evaluationshows that Employment Zones, whichadopt a more individually tailored andflexible approach, deliver significantly

better job outcomes than forcomparable New Deal 25 plusparticipants.

■ Twenty-four Action Teams for Jobshave helped jobless people in themost employment-deprived areas ofthe country find and remain in work.They work on an outreach basis andhave flexibility to provide whateversupport is thought necessary to helppeople move into work: for example,they might provide debt counselling,work clothes, or help with childcarecosts.

■ A network of New Deal for DisabledPeople Job Brokers across England,Scotland and Wales provides supportand services to incapacity benefitsclaimants who want to work. Theaim is to achieve lasting paidemployment.

3 This approach brings unprecedentedlevels of individual choice into thesystem. For example, in most areas ofthe country, benefits claimants have achoice of providers offering job-brokingservices. There is also a greater degreeof choice within Jobcentre Plusprogrammes than ever before. InPathways to Work pilots, clients have awide choice of different options.Working with their personal adviserthey can tailor work-related activityaccording to their health condition andspecific barriers.


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4 This activity could include conditionmanagement programmes(commissioned by NHS trusts), job-broking and work preparationservices provided by New Dealproviders, and job-broking servicesprovided by Jobcentre Plus. Thiselement of choice is very popularand is highly valued by clients.

5 While it is important that nationalstandards of service provision areupheld, the Government recognisesthat specific barriers to work differbetween local areas and individuals,and that they may not easily betackled with a one-size-fits-allapproach. In taking forward ourreforms, we need to ensure that weprovide the best possible service forour clients, the best possible recruitsfor employers, and the best possiblevalue for the taxpayer.

6 Our vision is that:

■ clients will be seen by a skilledpersonal adviser (either fromJobcentre Plus or from a private- orvoluntary-sector provider) who willoffer advice appropriate to theirindividual circumstances;

■ the client and personal adviser willagree an action plan to help theclient prepare for work;

■ where appropriate, as part of anyagreed action plan, the personaladviser will refer the client to furthersupport, chosen from a range ofprogrammes and delivered by a mixof public-, private- and voluntary-sector providers; and

■ clients will have access to a full rangeof job and career opportunitiesthrough the effective engagement oflocal employers.

7 The Government wants to ensure thatservice providers are given sufficientflexibility and discretion to tailor itspolicies to suit the specific needs ofindividuals and employers they serve.We want to draw on the wealth ofexperience of those working in othersectors, and we are looking for greaterinvolvement on the part of voluntary-sector and private providers in thefuture reform agenda. They are oftenbest placed to support our clients,particularly those with a healthcondition or a disability, by providingthe specialist services they need.

8 Building on the success with the NewDeal for Disabled People and otherinitiatives, we wish to develop furtherour services for incapacity benefitsclaimants. We will therefore invite newvoluntary-sector and private providersto manage Pathways to Work in newareas. This will allow new andinnovative approaches to be tested.We will need to ensure that support ofsufficient quality is available to a widerange of claimants, delivered withmaximum flexibility. Our objective willbe to focus providers on improving jobentry and retention, rather than simplyasking them to replicate existingPathways to Work provision. We hopethat such contracts will be in placefrom 2007.

Chapter 5: Delivering welfare reform

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Question 10:Does utilising voluntary sector andprivate providers in this way soundsensible? Would outcome-basedpayments incentivise providers to meetthe challenges of delivering Pathwaysto Work and the new arrangementsdescribed in Chapter 4?

The menu of support9 We will continue to customise the

support we give to all claimants,ensuring that it is tailored to individualneeds, that it provides real choice, andthat it is relevant to the needs of thelocal economy. Where appropriate, wewill provide help early in a benefit claimto help secure a quick return to work,while acknowledging that not everyoneis able to return to work quickly. Makinga new claim for benefits must becoupled with effective support, whichlooks at the person’s individualcircumstances and barriers to work,and assesses the help they need toreturn to work.

10 Over the years, a number of differentprogrammes have been developed tomeet the needs of people who are outof work. We must not lose the valuegained from a variety of approaches,but we need to be sure that they areeffective and that they fit with our newvision of a reformed, coherent welfarestate. We need to make sure that thesupport offered to help people moveinto work is easily accessible,appropriate, efficient and effective –this is why we have embarked on awide-ranging review of the help weoffer through Jobcentre Plus and ourpartner providers.

Review of disabilityemployment services11 We are reviewing our employment

services for disabled people and intendto consult on our proposals later in theyear. We plan to promote greaterinclusion and equality by ensuring thatmainstream services are accessible tomore disabled people. Better tailoredsupport will enable people to realisetheir potential and achieve – wherethey can – independence in theworkplace. A more coherent range ofspecialist services will respond moreflexibly to the needs of disabled peopleand employers and will make better useof resources.

Tackling worklessness in cities12 Tackling the problems of cities is central

to meeting the Government’s aim ofincreasing prosperity and reducingpoverty and social exclusion. Despiteprogress over the last eight years, thereremain pockets of persistent lowemployment, low skills, poor health andweak overall economic performance.The UK has a relatively small number ofareas with an employment rate belowthe EU average, but nearly all of theseare in major cities. Cities tend to havelower proportions of pupils who leaveschool with good qualifications andhigher numbers who then leavelearning altogether and do not findwork. The diversity and mobility of citypopulations can make it difficult toachieve universal standards ofhealthcare provision. More needs to bedone to address these cycles ofworklessness, underperformance anddeprivation.


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13 Our long-term aspiration is to achievean employment rate equivalent to80 per cent of the working-agepopulation. Nationally, the number ofpeople in work has risen by well over2 million since 1997, with the biggestimprovement in the areas that startedin the poorest positions. Agencies ofcentral, regional and local governmentare already working to tackleconcentrations of worklessness, andthere are many examples of effectivepartnerships at city level. But theresources flowing into cities would havemore impact if we could get theseagencies working together more closely,and align the relevant funding streams.

14 We will pilot a new initiative for citiesto help local partners work together toimprove economic regenerationthrough skills, employment and health.

15 The key aims are to:

■ deliver a significant improvement inemployment rates among those ofworking age, with a particular focuson the most disadvantaged, especiallybenefits claimants, lone parents,older people and people fromminority ethnic groups;

■ ensure that individuals within theseclient groups are better able to bothfind and remain in work; and

■ improve the skills of individuals withinthese client groups to enable them toprogress once they are in work.

16 Each local area will be asked to developa consortium comprising local partnerswith a shared interest in workingtogether to raise local employmentrates and improve the local economy.

This may include local authorities,employers, learning and skills councils,regional development agencies, primarycare trusts and Jobcentre Plus. Partnersin England will use the local strategicpartnership, including the existing LocalArea Agreement infrastructure, to drawthe consortium together. Consortia inpilots covered by the devolvedadministrations will need to takeaccount of local partnership structuresand patterns of deprivation whendeveloping their proposals.

17 Each consortium will be expected to useprivate and voluntary sector providersto deliver additional investment andemployment support under contract. Tofacilitate this, the Department for Workand Pensions will continue to developcontracts that reflect best practiceprinciples and to streamline procurementprocesses. This will allow public, privateand voluntary sector providers to offerchoice to users and tailor their servicesto meet individual needs.

18 The bids from local consortia will needto set out the outcomes they expect toachieve. The Government will thennegotiate a set of outcome targetsreflecting the needs of each localcommunity, including the circumstanceswithin the UK devolved administrations.The Government will allow flexibilityover the way the consortia deployresources to meet outcome targets (forexample, through a process ofalignment or pooling of budgets).

19 The consortia will be required tooperate within the new nationalbenefits structure, including theproposed conditionality arrangementsfor new claimants. Once the new


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benefits structure is in place, theGovernment will consider proposalsfrom pilot areas to trial a range ofconditionality and incentive structuresfor existing claimants.

20 Administration of benefits will continueto be managed by Jobcentre Plus.

21 Successful bids will receive initialinvestment from the Department forWork and Pensions and a financialreward for meeting their aims. Bids willneed to demonstrate robustaccountability arrangements for thedelivery of their agreed targets and theengagement and support of localemployers. As the providers ofopportunities for those currently lockedinto benefits dependency, it will beimportant that employers are closelyinvolved in deciding how best to matchtheir employment needs with the skillsand competencies of potential recruits.

22 A key aim of this initiative will be toprovide a solution that offers themaximum degree of local flexibility, sothat local areas can provide localsolutions to local problems.

Question 11:Will this proposal provide an effectivemechanism to join up the work ofdifferent agencies and make better useof existing funding to tackle theproblems in cities?

Skills23 We cannot expect people to get lasting

and worthwhile jobs if they lack theskills required in the new economy.Around 10 million adults of workingage do not have qualificationsequivalent to a full level 2, and around5 million have literacy skills below level1.31 People without qualificationsequivalent to level 2 lack theunderstanding, competence andknowledge to work productively insectors such as construction and retailand do not have the platform needed toprogress to higher-level skills.Additionally, some people with skills atlevels 1 and 2 will have acquired themyears ago for work that is no longeravailable. By 2012, some two-thirds ofall jobs, both new and existing, areexpected to require qualifications atlevel 3 or higher.

24 The Government is committed tohelping all low-skilled adults get theskills they need to succeed in work.Only through increasing skills can weachieve our aim of a high-productivity,value-added economy with increasedsocial mobility and social justice. Forthose helped back into the labourmarket after some time out of work,it is vital that their experience of re-entering the workplace is asuccessful one. Success in theworkplace depends on the ability to dothe job. That means having the rightskills, so we need to ensure that theuniversal entitlement to free basic skillstraining and free tuition towards a firstlevel 2 qualification is made a reality


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for all adults, providing all individualswith the opportunity to becomefunctionally literate and numerate.We will continue our joint working withthe UK devolved administrations tosupport low-skilled adults.

25 We are trialling in six areas a newapproach to skills coaching. This isaimed mainly at those receivingincapacity benefits or Income Support.If successful, this approach can play amajor role in identifying those peoplefor whom skills deficits are the mainbarrier to successful employment, andhelp them address these deficits andturn their lives around.

26 At the end of 2004, the Governmentcommissioned Lord Leitch to lead areview of skills. The Leitch Review isdue to report in 2006 on the skillsprofile that the UK should aim toachieve by 2020 in order to drive upgrowth, productivity and social justice.In order to realise economic and socialobjectives, it is important that the long-term needs of business and theeconomy inform the development ofskills policy for those inside and outsidethe labour market. The Review’s interimreport, Skills in the UK: The long-termchallenge,32 shows that the UK needsto be far more ambitious, as at presentit compares particularly poorly withother countries in terms of numbers oflow-skilled adults.

Tackling fraud27 Our strategy for safeguarding the

benefits system was outlined in Beatingfraud is everyone’s business: Securingthe future and A new contract forwelfare: Safeguarding social security.33 34

We followed this up with Reducingfraud in the benefit system:Achievements and ambitions35 outliningour progress and future strategy. Ourlatest estimate shows that between1997 and 2005 we had reducedbenefits fraud by 68 per cent.

28 We created a professional, intelligence-led investigation force, equipped withpowers from the Social Security FraudAct 2001 and the Proceeds of CrimeAct 2002. We developed a range ofsanctions and have introduced the‘Targeting Benefit Fraud’ advertisingcampaign, in a bid to raise awarenessof benefits fraud and to act as adeterrent. We also introduced theNational Benefit Fraud Hotline to makeit easier for the public to report benefitsfraud, and we began data matchingwith local authorities and HM Revenueand Customs.

29 Our strategy for the future includes:

■ expanding our data matching abilityto include data from the privatesector;

■ use of new technology;

■ increased use of risk profiling (withadditional checks on claims identifiedas higher risk as a result);

■ use of the proposed identity cardacross all Department for Work andPensions businesses; and

■ reorganisation of our fraudinvestigators into two areas –Customer Compliance and the FraudInvestigation Service.


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30 This approach will enable us tomaintain the current number of fraudinvestigators and the number ofsanctions imposed, while ensuring thatlower-level fraud is detected andcorrected more quickly than is currentlypossible by criminal investigation. It willalso ensure that claimants are madeaware of their responsibilities.

31 The Fraud Investigation Service willcombine national and regionaloperations in one organisation, centredin areas where we know most fraudoccurs. It will be wholly intelligence led.

Evidence-based policymaking32 The proposals set out in this document

are grounded in evidence from thiscountry and overseas. As we developthe reforms in further detail, we willcontinue to learn from our experienceand from that of others. We willundertake rigorous evaluation of pilotmeasures, and of nationallyimplemented changes, and we willpublish the results openly. Evaluationwill tell us how the changes affectindividuals and society as a whole, andwill determine our next steps. We willensure that statistical data produced bythe Government allow straightforwardcomparison between the totalnumber of cases under the old andnew systems.


A radical new approach toHousing Benefit

Chapter 6

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Chapter 6A radical new approach to Housing Benefit

1 Housing Benefit has long been criticisedas an extremely complex benefit thatdoes little to promote personalresponsibility. Delays in processing, andthe uncertainty that claimants haveabout the level of support that they canreceive, can act as barriers to work. Inaddition, payment is made directly tothe landlord in the majority of cases,which does nothing to assist tenants indeveloping the essential financial andbudgeting skills they need whenmoving into work.

2 We have already made good progressin tackling uneven administration andwe have introduced measures to alignHousing Benefit with other benefits andtax credits. However, more radicalreform is needed to simplify HousingBenefit and ensure it supports ourwider objectives for welfare reform. Thecentral element of Housing Benefitreform is therefore the introduction ofLocal Housing Allowance. Thisapproach is currently being tested in 18local authority areas and we will buildon this experience to develop a schemesuitable for national roll-out across thederegulated private rented sector.

The challenge3 Housing Benefit plays an essential role

in underpinning the Government’s widergoals of tackling poverty, promotingwork for those who can, and addressingsocial exclusion. It provides help with

rental costs for almost 4 million low-income tenants (both in and out ofwork), for people of working age (andtheir families), and for pensioners.However, Housing Benefit reform overthe past 20 years has been largelyreactive and has lacked a long-termstrategic direction. This has led toHousing Benefit becoming an extremelycomplex benefit that does little topromote personal responsibility and canactually act as a barrier to work in somecases. As such, Housing Benefit is oftenseen to undermine rather than underpinthe wider goals of welfare reform. At anannual cost of over £13 billion, HousingBenefit should be doing more to helplift people out of poverty and topromote opportunity.

4 Housing Benefit is also a passivebenefit. Most claimants have theirHousing Benefit paid directly to theirlandlords, which means that they haveno personal responsibility for their rentand many are unaware of how muchrent is actually paid on their behalf. Thisdoes nothing to prepare claimants formoving into work and undermines therelationship between landlord andtenant. In addition, the complexityof the Housing Benefit rules, delays inprocessing and the uncertainty thatclaimants have about the level ofsupport that they can receive, can allact as barriers to work.


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Progress so far5 Radical reform of Housing Benefit is

under way. In 2002, the Governmentpublished Building choice andresponsibility: A radical agenda forHousing Benefit,36 setting out ouroverall strategy for reform of HousingBenefit and our progress up to that time.

6 The most pressing problem was unevenadministration. In too many localauthorities, the delivery of HousingBenefit fell below acceptable standards.There were many reasons for this, butlack of investment, lack of strategicpriority, and the sheer complexity of thebenefit rules all played a part.

7 Over the past few years, we have beenworking with all 408 local authoritiesto improve Housing Benefitadministration, combining clearperformance standards with regularinspection and practical support. Wehave started to see real improvements,and have developed and publishedclear national performance standardsfor Housing Benefit to reflect goodpractice. The Benefit Fraud Inspectoratepublishes reports on its inspections ofHousing Benefit services and hasprovided additional free consultancy toauthorities with the most seriousadministrative problems.

Chapter 6: A radical new approach to Housing Benefit

Figure 6.1: Average number of days taken to process a new claim for Housing Benefitor Council Tax Benefit by quarter

Source: Housing Benefit Management Information System

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Year and quarterPoorest performing 15% of local authorities National average

2002/03 2003/04 2004/05 2005/06

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8 The Government has invested in thePerformance Standards Fund to supportlocal authorities in improving theiradministration of Housing Benefit andCouncil Tax Benefit. More than£161 million is being invested in around370 local authorities, helping them torecruit and train new staff, to developinnovative approaches to streamlineprocessing of claims and to purchasenew IT equipment. While many of ourinitiatives are still in their early stages,the experience so far suggests thatthere is already a positive impact onperformance and on the serviceprovided to customers and landlords.

9 Since 2001/02, the average time takento process new claims37 for HousingBenefit and Council Tax Benefit hasbeen reduced by over three weeks, withsome of the greatest improvementsseen in the poorest performingauthorities. However, there is more todo, which is why the Government hasset a new Public Service Agreementtarget to cut processing times, with afocus on the poorest performingauthorities. We are committed toreducing the average time taken toprocess a Housing Benefit claim to nomore than 48 days nationally, andacross the bottom 15 per cent of localauthorities to no more than 55 days byMarch 2008. We have also set astretching performance standard toprocess new Housing Benefit claimswithin 36 days.

10 The Housing Benefit reform strategy isnot just about improving administrationof the benefit, it is also about continuingto simplify the system and better alignthe rules with those of other benefits,Pension Credit and tax credits. People

who really need the help that HousingBenefit offers may be reluctant to applyfor their entitlements because of thecomplexity of the system.

11 In order to simplify the system we have:

■ eliminated the requirement forHousing Benefit recipients to renewtheir claim every year;

■ made the transition to work simplerby extending entitlement to a four-week ‘run-on’ period forHousing Benefit and Council TaxBenefit to recipients of incapacitybenefits and Severe DisablementAllowance;

■ removed the need for the vastmajority of people moving into workto complete a fresh claim – this isnow treated as a change ofcircumstances;

■ ensured that people are better off inwork by providing for tax creditawards to be taken into account ascurrent income, rather than usingcomplicated attribution/retrospectionrules;

■ made it easier for people claimingPension Credit to claim HousingBenefit/Council Tax Benefit byshortening the claim form from26 to three pages; and

■ introduced a system that allowspeople of working age to make aclaim for Housing Benefit/Council TaxBenefit through Jobcentre Plus at thesame time as they make a claimfor Income Support, Jobseeker’sAllowance or incapacity benefits.This system will be rolled out bythe end of 2006.


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12 However, we can only make limitedimprovements without fundamentaland radical change to the structureof Housing Benefit.

Local Housing Allowance13 Local Housing Allowance is at the heart

of our radical programme for furtherreform in the private rented sector.

14 Local Housing Allowance bases housingsupport payments on a system ofstandard maximum allowances, varyingaccording to the size of the householdand location of the property. Benefitwill be paid to the tenant rather thanto the landlord in most cases.


Objectives of Local Housing AllowanceFairness – Local Housing Allowance bases the maximum amount paid to tenants on thesize, composition and location of the household. Therefore, two households in similarcircumstances in the same area will be entitled to similar amounts of benefits.

Choice – Tenants are able to take greater responsibility and choose how to spend theirincome in a similar way to tenants who are not in receipt of benefits. Like other tenants,they are able to choose whether to rent a larger property, or to spend less on housing andincrease their available income.

Transparency – The current link between Housing Benefit and individual rents is complexand does not set out clearly what level of state support is available for people on lowincomes. A clear and transparent set of allowance rates helps tenants (and landlords) knowhow much financial help is available from the state. Tenants are able to compare howmuch support is available towards their housing costs in different areas and for differentproperty sizes.

Personal responsibility – Empowering people to budget for and to pay their rentthemselves, rather than having it paid for them, helps develop the skills unemployedenants will need as they move into work. Currently, around 40 per cent of Housing Benefitpayments in the private rented sector are made to tenants, with the remainder paidstraight to landlords. The Government believes that, wherever possible, Local HousingAllowance should be paid to tenants, as are most other benefits and tax credits.

Financial inclusion – Ideally, we want people to have their housing payments paid intoa bank account and to set up a standing order to pay the rent to their landlord. This hasthe advantage of being a safe and secure method of payment and provides certainty forlandlords that rent will be paid.

Improved administration and reduced barriers to work – For working-age tenants,Local Housing Allowance provides greater certainty about what help is available in and outof work. A simpler system also helps speed up administration of housing payments, givingtenants more confidence when starting a job that any in-work benefit will be paid quickly.A more transparent system may also improve the ability of individuals to move betweenareas and to take advantage of employment opportunities.

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15 Our objectives fully reflect widerprinciples for welfare reform. Theoverarching purpose is to transformpassive housing support into anenabling provision that placesresponsibility and choice firmly in thehands of tenants and that stronglyencourages financial inclusion and thedevelopment of skills that can helpsmooth the transition into work.

Impact of Local Housing Allowance inpathfinder authorities16 This new and much simpler way of

calculating housing payments fortenants was initially introduced formainstream private rental properties innine pathfinder authorities, the first ofwhich began testing Local HousingAllowance in November 2003.


Local Housing Allowance: pathfinder experience to date■ The introduction of Local Housing Allowance has generally been smooth in all nine of

the original pathfinder authorities.

■ By paying benefit to tenants rather than to landlords, Local Housing Allowance is givingpersonal responsibility for managing rental costs and payments to around 87 per centof the 45,000 tenants in the pathfinder authorities.

■ Procedures for identifying and assessing where payment should be made to the landlord(because the tenant is vulnerable or is in arrears) seem to be working well in eachpathfinder authority.

■ Across the pathfinders, most tenants have payments made into a bank account.

■ Most landlords have not seen an increase in management costs.

■ The baseline survey shows that 61 per cent of unemployed tenants in pathfinderauthorities who are paid directly believe they will move into work, compared with 44 per cent of unemployed tenants who have their benefit paid to the landlord.

■ A minority of landlords appear to be leaving the Housing Benefit rental market. However,other landlords are embracing the new Local Housing Allowance market and there is nonoticeable impact on supply.

■ Landlords are no more likely to require deposits or references under Local HousingAllowance than they were previously.

■ Improved joint working and communication between Housing Benefit departments andlocal stakeholders have been reported, in preparation for the introduction of LocalHousing Allowance.

■ There has been very little impact on homelessness levels, threats of eviction or tenancyterminations on tenants in the pathfinder areas.

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17 A comprehensive and independentevaluation of these nine pathfinders isnearing completion, and seven reportshave been published so far.38 Weexpect final reports to be publishedlater this year.

18 The evaluation is tracking theadministrative and operational impactof Local Housing Allowance as well aswider housing market effects in eachpathfinder authority. It is also takingaccount of the different conditions thatprevail in Scotland and Wales. A seriesof regular surveys and interviews withtenants, landlords, key local authoritystaff, rent officers, Jobcentre Plus staffand welfare organisations is beingcarried out. This information is beingused to identify areas where LocalHousing Allowance policy requiresadjustment, prior to a national roll-outacross the private rented sector.

19 Between April and July 2005, a furthergroup of nine local authorities beganimplementing Local Housing Allowancefor private sector tenants, to enablegood operational practice to bedeveloped prior to implementation ofLocal Housing Allowance nationally.

Issues for consideration before roll-outin the private rented sector 20 Evidence from the evaluation, as well

as the experiences of pathfinderauthorities, highlight three mainelements of the scheme that we needto examine further to ensure that theyfully meet Local Housing Allowanceobjectives. While the general principlesof Local Housing Allowance have beensuccessful, there are issues, such asexcessive cash gains, work incentivesand longer-term financial stability, thatneed to be considered.

Capping Local Housing Allowance 21 In pathfinders, claimants are able to

keep the difference between their LocalHousing Allowance payment and theirrent costs. In some areas, claimants areable to receive large cash sums overand above the amount they need topay their rent. There is a concern thatthis is fundamentally unfair and that itcould have serious implications forwork incentives. We are thereforeconsidering whether the amount ofLocal Housing Allowance that tenantscan receive above the level of their rentshould be capped. This will make thesystem fairer, protect work incentivesand remove any incentive for people toovercrowd their property in order togain financially.

Size criteria22 In the pathfinder authorities, a

claimant’s maximum Local HousingAllowance rate depends on the numberand mix of occupiers in their property.

The current size criteria state that aclaimant’s Local Housing Allowance rateshould be based on:

■ one bedroom each for:

– every adult couple; – any other adult aged 16 or over;– any two children aged under 10;– any two children of the same sex

aged 10 to 15; and– any other child;

■ and

– 1–3 occupiers for 1 living room;– 4–6 occupiers for 2 living rooms;

and– 7 or more occupiers for 3 living

rooms.


88

23 Since testing of Local HousingAllowance began, we have becomeconcerned that the current size criteriareflect neither the reality of theproperty market nor the expectationsthat families not on benefits wouldhave about their accommodation.Properties with three living rooms maybe very scarce and difficult to obtain inmany areas. This contributes in someareas to the large amounts of LocalHousing Allowance that people arereceiving above their rent.

24 We are considering an adjustment tothe size criteria so that a claimant’sbenefit and Local Housing Allowancerates are calculated according to thenumber of bedrooms needed, ratherthan the number of living rooms. This isa simpler, more intuitive approach thatwill more accurately reflect the reality ofthe wider rental market.

Local Housing Allowance rates25 There is concern that the way in which

Local Housing Allowance rates are setdoes not accurately reflect the range ofrental properties of a particular size inan area. In pathfinders Local HousingAllowance is set at the mid-pointbetween the highest and lowest rentsin an area (excluding extreme high andlow rents). This does not reflect theactual distribution of availableaccommodation in any given pricerange – there may be only a smallnumber of properties at the lower endof the market. This method also makesLocal Housing Allowance rates verysusceptible to any changes at the topor bottom end of the market.

26 We are considering setting LocalHousing Allowance rates at the medianrent to ensure that they reflect thedistribution of rents in an area. We alsowant to ensure that there is stability inLocal Housing Allowance rates to givetenants greater certainty about the levelof help they can receive.

27 This means that claimants can beconfident that Local Housing Allowancelevels actually reflect the middle of rentsin the housing market in which theylive. In addition, as the mediancalculation is less influenced by changesat the very top and bottom of themarket, we also expect it to providemore stable Local Housing Allowancerates. This will give greater certainty totenants about the level of help they canreceive in the longer term.

Roll-out across the private sector28 It is important that we move carefully in

planning a roll-out of Local HousingAllowance. The national scheme wouldneed to differ in some aspects from thepathfinder model, in order to takeaccount of the lessons learned from theearly phase. We also want to ensure

The median rent is the rent that ishalfway up the distribution of all rentsin an area. For example, in an areawith 13 available houses with rents of:

£50, £60, £90, £95, £105, £105,£150, £150, £150, £200, £200,£200, £200,

the median rent would be £150 as thisis in the middle of the distribution.In contrast, the mid-point would be£125.


89

that evidence and experience from theongoing evaluation are taken intoaccount as implementation progresses.We are considering ways of applyingLocal Housing Allowance only to newclaimants, so that existing claimants cancontinue to claim Housing Benefitunder the current rules until, forexample, they move house or have abreak in claim. This will ensure the bestchance for a smooth roll-out of LocalHousing Allowance, giving localauthorities time to gradually introducethe system and minimise the risksinvolved in implementing a change onthis scale. It will also enable localauthorities to reassure existing tenants,communicate the benefits of LocalHousing Allowance and encouragethem to take advantage of theimprovements that Local HousingAllowance brings. We want to lookcarefully at the arrangements formigrating existing Local HousingAllowance claimants in the pathfindersonto the national Local HousingAllowance scheme, and wish to discusswith the pathfinders the mostappropriate way of doing this.

29 We will continue to look carefully atprivate sector issues as part of theevaluation process, before taking anyfinal decision on extending the benefitsof Local Housing Allowance across thederegulated private rented sector.

Reform in the social housing sector30 It is essential that Housing Benefit

contributes to the wider welfare reformagenda by supporting our aspirationof an employment rate equivalent to80 per cent of the working-agepopulation, rather than acting as abarrier to work. This is particularly

relevant in the social housing sector,where working-age tenants aresignificantly more likely to be eitherunemployed or inactive than those inother tenures. Social housing tenantsare much more likely than private sectortenants to be claiming Housing Benefit(60 per cent and 22 per centrespectively) and twice as likely to bewithout work. This level of economicinactivity makes it necessary to considerthe case for reform of Housing Benefitin the social housing sector.

31 We are testing Local HousingAllowance private sector tenants in 18local authorities and intend to use thisapproach nationally. However, we needto consider whether a similar approachwould be appropriate for social housingsector tenants, or whether there areother options that will support greaterchoice and responsibility.

32 We are aware that there are significantdifferences between the private rentalmarket and social housing, andbetween the social housing sectors ofthe UK devolved administrations. Manycomplex factors will need to be takeninto account before a decision is madeon exactly how we take forward reformin this sector. Proposals need to bedeveloped with caution and over alonger timescale.

Question 12:How should Housing Benefit be adaptedto meet our welfare reform objectivesfor tenants in the social housing sector?


Long-term benefits reform

Chapter 7

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Chapter 7Long-term benefits reform

1 The present benefits system for peopleof working age is too complex. Themany different rules may make sense inisolation, but together they make for aconfusing and incoherent picture. Thiscomplexity makes it hard for benefitsclaimants to understand their rights andresponsibilities, and hard for staff andadvisers to help people to get theircorrect entitlements. It makes thesystem more prone to fraud and errorand expensive to administer, and oftenmakes it harder to move into work.

2 We need a simpler benefits systemwhich better meets the needs ofclaimants and responds to theweaknesses in the current system thatso often frustrate claimants andstakeholders. We want to:

■ provide a single gateway to financialand back-to-work support for allclaimants;

■ have a system that is simple tounderstand – making clear thesupport people can expect – andsimple to administer;

■ complement our comprehensivemenu of support by creating a clearlink between financial support andresponsibility upon the individualto take steps to improve theiremployment prospects;

■ provide the right financial incentivesfor those moving into work;

■ encourage individuals to take theirfuture into their own hands – weknow that the biggest barrier totaking up a new job for those onbenefits is the fear of the unknownand of falling foul of the benefitssystem; and

■ provide a safety net for those whocannot work and for those who tryout work but encounter too manydifficulties.

3 The reforms set out in this Green Paperwill reduce much of the complexitysurrounding existing benefits for thosefacing health problems and disability.We consider that there may beadvantages in moving in the longerterm towards a single system ofbenefits for all people of working age,with appropriate additions for thosewho have caring responsibilities andthose with a long-term illness ordisability.

4 We currently provide a wide range ofbenefits, established by various piecesof legislation for diverse purposes, anddelivered by separate administrativesystems. Benefits are paid differently toreflect personal needs over differentperiods of time. Benefits often overlapand have complex interactions witheach other and with tax credits.


93

5 The next step is to review the range ofbenefits to identify the challenges tocreating a single system with fair andeffective solutions.

6 The new system must be affordable anddeliverable as well as simpler tounderstand and operate.

Northern Ireland7 The provision of social security in

Northern Ireland is governed by the long-established and widely acceptedpolicy of parity with Great Britain. TheGovernment believes that this shouldremain the basis of future provision inNorthern Ireland and will have regard tothis in implementing any proposals setout in this Green Paper.

Chapter 7: Long-term benefits reform

Consultation arrangements andcontact details

Chapter 8

96

Chapter 8Consultation arrangements and contact details

Working in partnership toimprove our services1 Proposals outlined in this paper are

informed by ongoing informalconsultation with key stakeholders.Indeed, we have been consulting onincapacity benefits reform since 2002,when we published Pathways to work –Helping people into employment .39

Proposals for lone parents, HousingBenefit and occupational health aresimilarly the product of a lengthyprocess of consultation and evaluationof evidence from existing policies.

Formal consultation 2 Publication of this paper signals the

start of a formal consultation period inline with the best practice guidance inthe Cabinet Office’s Code of Practiceon Consultation. A partial RegulatoryImpact Assessment is available atwww.dwp.gov.uk/aboutus/welfarereform

3 The formal consultation period willcontinue for 12 weeks from 24 Januaryto 21 April 2006.

4 Copies of this paper are available ina variety of formats (including audio,Braille, Easy Read, large print andWelsh versions) and can be orderedby contacting:

The Welfare Reform TeamLevel 2The Adelphi1–11 John Adam StLondon WC2N 6HTTelephone: 020 7712 2521Fax: 020 7962 8524Textphone: 020 7712 2492 Email: [email protected](Lines are open Monday to Friday,9am – 4pm.)

Feedback 5 To facilitate the consultation process,

a series of key questions have beenposed throughout the paper and theseare pulled together at the end of thissection. A template is also available atwww.dwp.gov.uk/aboutus/welfarereform

6 The deadline for responses is 21 April2006. Please ensure that your responsereaches us by that date. Please sendconsultation responses to the WelfareReform Team.

7 When responding, please state whetheryou are responding as an individualor representing the views of anorganisation. If responding on behalf ofa larger organisation, please make itclear who the organisation represents,and, where applicable, how the viewsof members were assembled.


97

8 A list of those consulted is availableat www.dwp.gov.uk/aboutus/welfarereform. If you have anysuggestions of others who may wishto be involved in this process, pleasecontact us.

9 The information you send to us mayneed to be passed to colleagues withinthe Department for Work and Pensionsand may be published in a summary ofresponses to this consultation, alongwith a response from the Government.

10 Because of the law about access toinformation that public organisationshold, we may at some time in thefuture share some or all of yourinformation with other individuals orthe general public. If you would notwant us to do this, please explain whyas part of your answer. We will consideryour request if it is possible that yourinformation might be shared. However,we cannot promise to keep yourinformation secret or private. If you areworried about sharing informationabout yourself with other people,please limit what you tell us, or do nottell us anything personal. If you want totalk to someone about this before yougive us your views, please contact theWelfare Reform Team.

11 More information about the Freedomof Information Act can be foundon the website of the Departmentfor Constitutional Affairs at:www.dca.gov.uk/foi/guidance/exguide/index.htm

12 Throughout the formal consultationperiod, we will be facilitating a rangeof events to gather feedback. Detailsof these events will be available at:

www.dwp.gov.uk/aboutus/welfarereform, alongside contact details forthose wishing to participate.

13 We will produce a report ofconsultation feedback. The report willbe available at: www.dwp.gov.uk/aboutus/welfarereform

Consultation questions1 What else should we consider to give

the right incentives to employers toprovide increased health support totheir workforce?

2 How can we best share the evidencefor the role of work in recuperation andgood practice regarding sicknesscertification to medical professionals?

3 Does this simplification package forStatutory Sick Pay provide incentivesfor improved absence managementand meet the need for reducedbureaucracy? How could the redirectedsums of the percentage thresholdscheme be most effectively utilised?

4 Do the types of ‘suitable activity’we have set out provide a sensiblerange of activities that could beundertaken in order to fulfil anacceptable action plan?

5 Is the combination of Disability LivingAllowance plus the Enhanced DisabilityPremium/Severe Disability Premium forthose on low incomes, the right way totarget support towards disabled peoplewith the greatest needs?

Chapter 8: Consultation arrangements and contact details

98


6 Do you agree that these proposedsimplifications more accurately reflectthe principles underpinning ourmodern society?

7 How do you think that we can bestimprove work incentives within thenew Employment and SupportAllowance so that individuals havethe opportunity to try out periods ofwork and progress to full-time workwhere possible?

8 Would it be reasonable to extend theWork-Related Activity Premium, andthe associated requirement to takesteps back to employment, to loneparents with children younger than11? If so, what age should be thecut-off point?

9 In what circumstances do you thinkit would be reasonable to extend thesix-month Work-Related ActivityPremium period?

10 Does utilising voluntary sector andprivate providers in this way soundsensible? Would outcome-basedpayments incentivise providers tomeet the challenges of deliveringPathways to Work and the newarrangements described inChapter 4?

11 Will this proposal provide aneffective mechanism to join up thework of different agencies and makebetter use of existing funding totackle the problems in cities?

12 How should Housing Benefit beadapted to meet our welfare reformobjectives for tenants in the socialhousing sector?

99


1 Excludes Incapacity Benefit short-termlower rate claimants.

Chapter 2: Helping ill or disabledpeople

2 ‘Incapacity benefits’ refers to peopleon contributory Incapacity Benefit orSevere Disablement Allowance andpeople on means-tested IncomeSupport on the grounds of incapacity.

3 Woodward A, Kazimirskia A, Shaw A,and Pires C, 2003, New Deal forDisabled People. Evaluation. Eligiblepopulation survey. Wave one.Interim report, DWP Research ReportNo. W170, DWP.

4 Organisation for Economic Co-operation and Development, 2003,Transforming disability into ability,policies to promote work and incomesecurity for disabled people, OECD.

5 DWP, 2001, The short-term effects ofcompulsory participation in ONE –Survey of clients: Cohort two Waveone, DWP Research Report No. 156,DWP.

6 The OECD has also said that Pathwaysto Work is “a considerable success”(OECD, 2005, Economic Survey of theUK) and the IMF commented that thepilots “have been successful”(www.imf.org/external/np/ms/2005/121905.htm).

7 HM Government, 2005, Health, workand well-being – Caring for our future:A strategy for the health and well-beingof working-age people, DWP, DH,Health and Safety Executive.

8 Department of Health, 2004, Choosinghealth: Making healthier choices easier,Cm 6374, DH.

9 Department for Work and Pensions,2004, Building capacity for work: A UKframework for vocational rehabilitation,DWP.

10 www.hse.gov.uk/businessbenefits/casestudy.htm

11 Health and Safety Executive forNorthern Ireland, 2003, Working forhealth: A long-term workplace strategyfor Northern Ireland, HSENI.

12 Confederation of British Industry, 2005,Who cares wins: Absence and labourturnover survey 2005, CBI.

13 Office for National Statistics, 2002,Office for National Statistics: Labourmarket trends, TSO. The article ontrends and sources of data on sicknessabsence by Barham and Leonard iscontained in the April 2002 publication.

14 Chartered Institute of Personneland Development, 2004, Employeeabsence 2004: A survey ofmanagement policy and practice, CIPD.


References

100

15 Confederation of British Industry inassociation with AXA, 2004, Room forimprovement: CBI absence and labourturnover survey 2004, CBI.

16 From 10 days per employee in the CivilService to 9.1, Cabinet Office analysisof sickness absence in the Civil Service2004, and in local government from10 days to 9.5 based on Best ValuePerformance Indicator returns to theOffice for the Deputy Prime Minister.

17 Organisation for Economic Co-operation and Development, 2003,Transforming disability into ability,policies to promote work and incomesecurity for disabled people, OECD.

18 Not participating in a medicalintervention would not be subjectto benefit sanction.

19 Legard R, Lewis J, Hiscock J and Scott J,2003, Evaluation of capability report:Identifying the work-related capabilitiesof incapacity benefits claimants, DWPResearch Report No. W162, DWP.

20 The exception to this was peopleeligible for Working Tax Credit, whoselinking period was up to two years.

21 Prime Minister’s Strategy Unit, jointreport with Department for Work andPensions, Department of Health,Department for Education and Skills,Office of the Deputy Prime Minister,2005, Improving the life chances ofdisabled people, Prime Minister’sStrategy Unit, DWP, DH, DfES, ODPM.

22 Department of Health, 2005,Independence, well-being and choice:Our vision for the future of social carefor adults in England, Cm 6499, TSO.


23 HM Treasury, 2004, Choice for parents,the best start for children: A ten yearstrategy for childcare, The StationeryOffice.

24 The Scotland Office, 1998, Meeting thechildcare challenge: A childcare strategyfor Scotland, Cm 3958.

25 National Assembly for Wales, 2005,Childcare is for children, Departmentfor Education and Training.

26 Organisation for EconomicCo-operation and Development, 2005,Babies and bosses: OECDrecommendations to help familiesbalance work and family life, OECD.


27 It is estimated (in a Cabinet Officereport from 2000) that the drop inwork rates since 1979 costs theeconomy £16 billion a year in lostoutput.

28 Labour Force Survey Spring–Winter2004 and population projections basedon Government Actuary’s Department2004, GB.

29 Department for Work and Pensions,2002, Simplicity, security and choice:Working and saving for retirement,Cm 5677, DWP.

30 Pensions Commission, 2004, Pensions:Challenges and choices: The first reportof the Pensions Commission;Pensions Commission, 2005, A newpension settlement for the twenty-firstcentury: The second report of thePensions Commission, PensionsCommission.


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Chapter 5: Delivering welfarereform

31. Level 1 – recognises the ability to learnwith guidance and supervision,combined with basic knowledge andskills. Includes GCSEs at grades D to G,level 1 NVQs and vocationalqualifications.

Level 2 – can be general, vocational oroccupational. Provides foundation skillsthat help people get jobs or progress tofurther education or advanced-levelstudy. Includes GCSEs at grades A* toC, intermediate GNVQs, level 2 NVQsand vocational qualifications such asModern Apprenticeships.

Level 3 – provides higher technical,craft or professional skills. Can begeneral, vocational or occupational.Includes certificates for teachingassistants, A-levels, advanced extensionawards and level 3 certificates.

32. HMT, 2005, Skills in the UK: The long-term challenge, TSO.

33. Department of Social Security, 1998,Beating fraud is everybody’s business:Securing the future, Cm 4012, TSO.

34. Department of Social Security, 1999, Anew contract for welfare: Safeguardingsocial security, Cm 4276, TSO.

35. Department for Work and Pensions,2005, Reducing fraud in the benefitsystem: Achievements and ambitions,DWP.

Chapter 6: A radical new approachto Housing Benefit

36. Department for Work and Pensions,2002, Building choice andresponsibility: A radical agenda forHousing Benefit, DWP.

37. Housing Benefit processing times aremeasured in calendar days from thedate the claim is received to the datethe decision is made. This includes thetime taken by tenants to provideevidence and any time needed foraction by third parties. Althoughperformance measures are not strictlycomparable, the aggregateperformance by local authorities isnow equivalent to that delivered byDepartment for Work and Pensionsagencies.

38. These can be found at:www.dwp.gov.uk/housingbenefit/lha/evaluation/index.asp

Chapter 8: Consultationarrangements and contact details

39. Department for Work and Pensions,2002, Pathways to Work: Helpingpeople into employment, DWP.

References

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