Address to welfare providers

A speech by Lord David Freud, Minister for Welfare Reform.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
The Rt Hon Lord Freud


Good morning.

First of all, thanks to Chris for outlining our ambitions for radical welfare reform.

As you’ve heard, it is absolutely vital that we press ahead with these reforms as quickly as possible.

For one thing, as Iain Duncan Smith pointed out in his speech last Thursday, the country quite literally cannot afford to go on like this.

But just as importantly, we need to take this opportunity to tackle poverty and long-term worklessness while there is a real appetite for radical change in government and across the country.

That is not to underestimate the scale of the challenge.

No-one doubts there are problems within the current benefits system.

The incentives are inadequately aligned and the system actually reinforces unemployment and the poverty trap, rather than fighting it as it should.

There are real issues with the link between risk and reward for those who want to make the journey back to work.

And there are inherent problems with a system that does not concentrate enough on outcomes as the key measure.

That adds up to the central challenge for everyone here today as we work together to address the underlying issues that have left so many lives blighted by entrenched worklessness and poverty.

There is some good news though, because we now have a government that is committed to making the changes we need and a Secretary of State who is prepared to champion the reforms in Cabinet.

Our reforms will be radical, but they are based around a simple premise: re-establishing responsibility and fairness as the cornerstone of our society.

What this means for you as providers, or potential providers, is equally simple: we will pay you a fair rate, but that rate will be set by outcomes, not by input.

At the same time, we will free you from the pressures of political tinkering so that you can get on with the job, making the most of your own expertise and business practices.

In this way, we will fix the system so that it works better for you, works out cheaper for taxpayers, and works harder for those who are hardest to help.

Work programme rationale

This is the rationale behind the Government’s single Work Programme.

We believe the present system does not do enough to help people get back to work and keep them there. Too often the system itself is responsible for ‘churn’ - people moving off benefits, into unsustainable work, back on to benefits, and back into unsustainable work, endlessly cycling between the two.

Moreover, the present system lumps people into a series of almost arbitrary categories. Not only that, but it fails to draw an adequate distinction between those who are work ready and simply need a job, and those who need substantial help to get back into the labour market.

The new Work Programme will be different.

It will be designed to allow you, the people who work at the coalface, to run your own operations as you see fit and provide more personalised help where that works for the individual.

If a jobseeker requires eight escalating stages of support rather than six, it will be up to you to make that decision.

If a jobseeker needs intensive support from day one and is referred to you, it will be up to you to decide what support they get. One programme also means you can tackle the collective issues of family members in a coherent way - rather than splitting them up into different programmes.

Sustainability will be at the heart of the Work Programme. You will be expected to handle the journey into work and the early stages within a new job - when those hardest to help are in the most fragile position.

Necessity of dialogue

This must involve a radical shake-up of the system - and it must happen quickly.

But despite the scale of our ambition and the pace of change, I want to assure everyone here that this will be a two-way process.

As you know, I have been in constant dialogue with you over the last year - through bodies like ERSA and the CBI - and that process will continue.

We want to bring you all with us and we are open to any ideas that will help us get the process moving quickly.

We have a very clear idea of where we are going. But we haven’t nailed down all the steps we need to get there. The obvious example is the question of how we start up the system.

Fundamentally, that is why we are here today - so we can start that process of open and honest dialogue. We will need to create a provider-based regime that preserves and embraces the best of what we have, while building the new framework we need to move forward.

Provider capital

Many of you already know my views about the type of changes we need to make.

To keep up the pace of progress we envisage, we will need well-capitalised and well-resourced groups that are prepared to take up the challenge of competition in this area.

Given the greater off-flows we expect to see through migration from Incapacity Benefit to ESA (Employment and Support Allowance) under the new Work Capability Assessment, we will need companies with the scale to make an impact.

And in view of the difficulties that we are all familiar with in targeting support to some of the hardest to reach, we will also need groups that already have - or can co-opt into consortia - the skills and expertise needed to provide real change to people’s lives.

Consortia formation, financing and management will, I am convinced, lie at the heart of the successful operation of the sector.

So if you represent a medium or larger organisation, you might want to accelerate your thinking about how you can work with partners with resources in other areas or locations. Many of you, I know, have already elaborated strategies in this area.

We’re already seeing the emergence of groups with strong skill-sets and a solid reserve of capital; groups which are in a financial position to compete and invest in moving their customers into work.

At the same time, increased competition will be fairly rewarded by a payment-by-outcomes system that will foster innovation and creativity. And we will base our payments more firmly on keeping people in employment.

This is how the Government and the taxpayer can finally harness the dynamism and initiative that is evident in the organisations represented in this room today.

There is a unique opportunity to combine the best of the third sector, the voluntary sector and the private sector to reinvigorate our welfare-to-work system.

Industry policing

The new Work Programme will herald a fundamental recalibration of the role of the state in welfare provision.

Yes, we’ll continue to make benefit payments and support the most vulnerable.

Yes, we’ll continue to hold a stake in your relationships with Jobcentre customers.

But we will not tell you how to run your businesses and we won’t meddle in your operations.

We are determined that the “black box” approach, as it has been called, will really mean that we will judge you by your results and pay you accordingly.

Some of you will remember that this proposition was at the heart of my report three years ago, when I recommended greater private and voluntary sector involvement in the welfare system.

We have moved in the right direction since then, but there are still too many top-down Whitehall rules instead of a framework that frees your ability to apply your own approach to get Britain working.

These changes will allow you to individualise your services like never before.

This implies greater specialisation. Some of you will concentrate in helping lone parents into work; or providing intensive support for ethnic groups in your area who suffer particular disadvantages.

All we want to focus on, and pay you for, is your record of getting people off benefits and into sustainable work. And this really is a big change - we care as much about your record of keeping people in work as we do your record of getting them there in the first place.

Challenges ahead

I don’t underestimate the challenges ahead. We’ll have to work out a different kind of pricing structure to establish rates of payment to providers - one which reflects the cost of supporting different types of jobseekers.

There will be the added challenge of former Incapacity Benefit claimants flowing onto ESA through the Work Capability Assessment - or making a claim for Jobseeker’s Allowance.

Rolling out the Work Programme across the country will be a challenge, especially with regards to managing the transition. As Chris said, we intend to provide you with specific propositions shortly.

We’ve made good progress with our plans, but we want to hear your suggestions before we finalise them. After we’ve reflected on today, officials will be writing to all providers and bidders, spelling out the implications programme by programme and competition by competition.

Communications officials will be on hand to deal with your enquiries, and we’ve even set up a dedicated email address so we can provide effective Questions and Answers. The address is:



I want to close by reassuring you that those providers who have done well and are moving into the Work Programme with a legacy of strong performance are in a good position for the future.

For smaller providers, we will examine ways to provide you with the support you need, and encourage ideas that help you to access the capital you need, so that you can play a full part in the Work Programme.

Welfare reform is at the very top of the Government’s agenda - it was right at the top of last week’s Queen’s speech - and it is a personal goal of mine.

Many of you know me. I hope I have begun to earn your trust - at least for the consistency of my message. I want to make the system work well and work for everyone - just as Chris does, just as the new Secretary of State does, and just as the entire Coalition Government does.

Because welfare reform is the key to so many of this country’s problems; and you are the key to welfare reform. We, as a government, believe in the values of freedom, fairness and responsibility, and these ideas embody the thinking behind the Work Programme.

So please, engage with us during this collaborative reform process. Talk to us, to DWP officials, and amongst each other. Voice your concerns and make your suggestions.

This is a pivotal time for welfare in this country. I urge you all to help us implement the reforms we so desperately need, and play a part getting Britain back to work.

Thank you.

Published 2 June 2010