Speech by the Rt Hon Chris Grayling MP.
In the UK we have the best part of five million people on out of work benefits.
This number has fluctuated but has remained between four and six million for more than a decade, in good times and bad.
Within that number there are people who have never worked.
People experiencing many of the deep rooted social problems associated with long periods out of work.
There are generations of families who have lived their whole lives on benefits, people with drug and alcohol addictions, ex-offenders; people living on the fringes.
There are small areas in the UK where we have very high levels of benefit dependency. Places like Merthyr Tydfill in Wales (23 per cent) and Knowsley in the North West (22 per cent) where almost a quarter of people aged 16 to 64 claim out of work benefits.
Long term benefit dependency is rife - of the 2.6 million claiming incapacity benefits, over half have been on benefit for at least five years, and a third have been on benefit for ten years or more.
We believe, that with the right support, many of these people can work but they have never been given the chance.
We have had labour market activation schemes for years in the UK.
But we have still not solved the problem of long term benefit dependency.
This can not continue.
We decided we needed a total revolution in the way we incentivise people to leave state benefits and get into work.
To this end, we have developed a radical new programme to support long term unemployed people into sustainable jobs, called the Work Programme.
And it is entirely unlike anything that has gone before.
The Work Programme draws upon the best of private, voluntary and third sector expertise to deliver truly tailored support based on individual need.
However, the UK Government has not stipulated what this employment support should look like - because we don’t need to - we are paying private providers almost entirely for their success in helping people find and keep jobs.
We want providers to innovate and find what works for different people.
They are the experts and now they are free to use the methods they know will deliver.
We are already seeing this innovation begin to take shape.
One provider I visited earlier this week is creating integrated employment centres right across the UK, bringing in specialist support to deal with drug addiction and homelessness alongside the back to work help.
Another is bringing in ex-servicemen and women to act as mentors and be positive role models for claimants. This Heroes to Inspire scheme is developing soft skills like motivation and punctuality - it truly is an inspiration.
The Work Programme has a unique payment structure which recognises that some people will require more help to find and stay in work than others.
Maximum payments for supporting people into sustained employment will range from around £4,000 for typical jobseekers to almost £14,000 for the hardest to help, reflecting the differing levels of support required.
The contracts are long, up to seven years and include financial incentives for maintaining, as well as securing, employment.
Longer contracts mean providers have more certainty and are more willing to invest in provision.
Differential payments means they can invest in people.
We have worked hard to find the right balance. This has to be a good deal for both taxpayers and providers financially, as well as getting the right support for those who have fallen out of work.
We are happy for providers to make a profit, but only if they do well at getting people into work. We don’t want them to be able to make money inappropriately from the taxpayer when they don’t succeed.
What we’ve developed is a contract structure that runs like this.
For the first three years there will be a small and declining up front payment made for each claimant referred to the Work Programme. After three years it’s 100 per cent payment by results.
The next payment only comes after someone has been in work for six months if they are a typical jobseeker or three months if they are from one of the harder to help groups.
The rest of the fee is paid in instalments that last up to two years for the hardest to help. And if the person drops out of work those payments stop.
So we waited to see if we had got that balance right. And if the private and voluntary sectors were really willing to buy into the principle of payment by results.
We now know that the 18 prime providers and hundreds of sub-contractors - from a mix of public, private and voluntary sectors - are willing to make that investment - to the tune of £580 million in the first year alone.
This is £580 million investment risk shifted from the Government’s books on to the private sector.
This is a powerful indication that payment by results can deliver exciting, innovative programmes that simultaneously provide an effective service and are good value for the tax-payer.
The Work Programme started last month, and I believe it will transform the lives of many of our most vulnerable people.
But what we have created with the Work Programme is not just a system of back to work support, but a blueprint for the provision of Government services.
We have built something that can go much further than tackling unemployment, and we are now looking at developing a sophisticated system of social interventions based around the payment by results model, with the Work Programme at its core.
For example, around £200 million of the Department for Work and Pensions’ allocation from the European Social Fund for England has been ear-marked for developing whole family provision which will focus on intergenerational worklessness.
These are troubled families, often with multiple problems, and often already being supported in different ways by a host of local services. Simply providing back to work support to an individual family member is not going to transform the lives of the entire family, we have to do more.
There are some 800,000 individuals, including around a quarter of a million children, living in households where no-one has ever worked.
Using the DWP’s framework and a similar non-prescriptive, payment by results structure as the Work Programme we are using some of the money DWP receives from the European Social Fund to strengthen the work being done on the ground, and break down the barriers to work many of those families experience.
This is just the beginning; we hope to use the Work Programme blueprint to develop work in other areas such as rehabilitation of drug addicts and ex-offenders.
The framework we have developed to deliver the Work Programme is flexible enough to allow other parts of government to use it to provide services including at a local authority level.
Alongside this we are completely changing our approach to supporting disabled people through the benefits system.
For too long we have focused not on what people can do but on what they can’t.
This has left 2.6 million disabled people on out of work benefits, many of whom could work, if given the right support.
We do not believe that it is acceptable to write people off to a lifetime on benefits because they have a health condition or disability.
Many people with health conditions are able to sustain and progress in employment.
We have a new benefit to support disabled people which recognises that there are some people who simply cannot work and will always need unconditional state support.
But there are many others who, if given personalised support could move into work.
We are currently going through a process of re-assessing many of the 2.6 million people currently claiming incapacity benefits with a new emphasis on what they can do.
If someone is found able to work they can access the specialist provision available through the Work Programme to enable them to start making that move into employment.
Finally, the Welfare Reform Bill, a major piece of legislation currently going through our Parliament will deliver a complete overhaul of the benefits system - creating a single Universal Credit.
This will simplify welfare provision and make it more responsive to changes in people’s circumstances.
As part of these reforms we are developing a real time tax and benefit system, smoothing the transition between benefits and work and making work pay.
This will mean we can make the system more responsive, so people are able to work more hours and keep more of their pay without losing all of their benefits.
Universal Credit will make it easier for people to understand what they are entitled to and crucially how much better off they will be in work.
These changes will develop continuity of state support for people moving off benefits and into work.
Essentially, we are making the welfare system in the UK more active so that everything we do is geared towards supporting people to leave benefits and find sustainable work.
All of this has started a new era for social intervention and public service delivery.
I think it will revolutionise the way we support the most vulnerable in the UK and I believe it could have far reaching implications for welfare to work provision in Europe and the rest of the world.