Speech

Social Market Foundation

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Speech by the Rt Hon Chris Grayling MP, Minister for Employment, DWP.

Introduction

Good morning and thank you for inviting me to join you all today.

Today, I’d like to talk to you about the Government’s plans for welfare reform, which form three legs of a stool - the Work Programme, Universal Credit and reform of incapacity benefit.

As I’m sure many of you know, the welfare reforms we are introducing are the most far-reaching in 60 years.

The reason for that is fairly straightforward.

The existing system - which has evolved piecemeal in the intervening years - is no longer up to the job it was originally designed to do.

The system has failed far too many people for far too long and the result is clear:

Today in the UK, there are:

  • 5 million people on out of work benefits - a number that was stubbornly high even before the recession when it stood at 4 million
  • 2.6 million working age people claiming incapacity benefits - of which some 850,000 have been claiming for a decade and
  • almost 2 million children in this country are growing up in workless households - one of the worst rates in Europe.

In far too many cases, the root cause of these terrible statistics is the welfare system itself and the benefit dependency it has bred.

That is why the reforms we are introducing are so extensive - some might even say, radical - and why we are moving at such pace.

Certainly, the Government has had to make some tough choices.

But I have been pleased to see the amount of cross-party support for the changes we need to deliver.

And the need for these reforms to be able to last for a significant period of time to get the results we all want to see.

In one sense, this is understandable.

Because if you believe that we need a welfare system that supports people through tough times - and this Government certainly does - then you know that waste, inefficiency and perverse disincentives to work are hugely damaging in the public eye.

That is true no matter which side of the political fence you sit on.

Every news story about someone on benefits living in a house in Chelsea that is completely unaffordable to anyone with an average job erodes trust in the system.

Few people would argue that the present system is fit for purpose.

So the question then becomes - how do we best forge ahead with the changes we need?

IB/ESA

The answer lies in the three legs of the stool I mentioned and I’ll run through them quickly in turn.

First - reforming incapacity benefits.

The fact is that under the old system people could easily end up abandoned to a life on long-term benefits.

People were simply categorised as “incapable” and left to find their own way.

No expectation that they would ever work again.

No proper support to get them back into the workplace.

And worst of all, no hope left for the individual that their lives could improve.

That has to change if we want to make a dent in the unacceptable - and financially unsustainable - numbers of people on long-term benefits.

So over the next 3 years, we will reassess 1.5 million people using the Work Capability Assessment, which looks at what people can do, rather than what they can’t.

This process has already started in Burnley and Aberdeen - and the idea is to finally provide real support for those who can make the journey back to work rather than park them on long-term benefits.

This is not about asking severely ill people to work - those who need our support can continue to rely on it.

But the process will allow us to engage with many people who were all-to-often completely ignored by the old-style incapacity benefit regime.

Work Programme

The second leg of the welfare reforms is the Work Programme that you’ve been discussing this morning, so I won’t dwell on this for too long.

What we are about to deliver is one of the most ambitious welfare-to-work schemes ever witnessed in this country and I’m sure we all recognise the challenges:

  • how do we support the hardest-to-help?
  • how do we match the professionalism and financial savvy of larger providers with the local knowledge and expertise of smaller groups?
  • how do we get the best value for money for the taxpayer? And
  • above all how do we transform the lives of people for the better?

I believe that the Framework we have in place answers many of these questions already.

And based on the high level of interest we’ve seen from bidders, we are also well on our way to delivering a Programme that works for those we are trying to help - as well as for the taxpayer.

The key here is the Black Box approach we are taking to the Work Programme.

There are lots of organisations with lots of expertise taking part. We are saying - you design it and we will pay you if you succeed. Not trying to manage everything from Whitehall.

Crucially, we are introducing payment-by-results.

This means that they will only get paid if they find the right job for the right individual. Because if they try to shoehorn people into jobs they don’t want, they won’t stay and the Providers won’t get paid.

Providers can make a transformational difference and from what we’ve seen of the bids so far we have had a good mix of providers - a Coalition if you will - that matches business scale with local knowledge.

The best providers will do extremely well - especially if they find sustainable jobs for the hardest to help. There’s up to £14,000 available for each person in this category and if we have to pay that out because they have managed to get people in this group into sustainable jobs, then I will personally be delighted.

In short, we have fundamentally changed the terms of engagement.

So if a provider says they’re good at getting people into work, they can go out and prove it and get well paid.

It’s that simple.

And if they succeed and get people into sustainable jobs, then the successful providers will be worth every penny.

Universal Credit

The third leg of the stool is the Universal Credit.

The Universal Credit is fundamental to our welfare reforms, because this is how we will make sure that works pays and remove some of the complexity that leaves so many stuck in the benefits trap.

Under the present system, the poorest in our society often face the biggest risks if they get the chance to take a job or take on extra hours.

Just navigating your way through the maze of red tape is daunting enough. In fact, some of the experts find it quite difficult to work out if someone will be better off taking on extra hours.

But by incentivising work and making sure it pays with a simple taper through Universal Credit, we will strip away much of that complexity - reducing administration costs along with the opportunities for fraud and error that currently cost £5 billion per year.

In the process, these plans will lift an estimated 350,000 children and 500,000 adults out of poverty.

Building Growth

The Welfare Reform Bill to get these reforms in place will be introduced shortly - and taken together, the three legs of these reforms will make a huge difference to the lives of millions of people.

But even then, we know we have far more to do beyond reforming the welfare system.

We have to drive economic growth. And we have to support the sustainable, private sector recovery that will create the long-term jobs we need to help people make the most of their lives and contribute to society.

In the short-term, this means driving down the deficit that would act as a brake on growth and completely scupper any economic recovery.

It means tackling the rise in youth unemployment, which we know has risen over the past decade - so it’s not just an issue for this recession.

It means preparing young people to make the transition from education and training to Higher Education and work.

And it also means that we need to put the right employment support in place across the board so that we can build up the skills and experience needed to sustain growth across the economy.

All these issues feature at the top of the Prime Minister’s agenda.

That is why the Government is:

  • undertaking a Growth Review that will examine what each part of government can do to support growth and investment and
  • slicing through red tape to help businesses get on with growing income instead of filling out forms. For example, I have the responsibility for this across HSE, where we are working to get health and safety back to a more common sense approach.

This is also why my Department is supporting a host of measures such as:

  • Work Clubs
  • Work Together
  • Enterprise Clubs
  • the New Enterprise Allowance to help unemployed people move off benefits into self-employment where we aim to create up to 40,000 new businesses by 2013 and
  • getting the Prince’s Trust into Jobcentres so that we can help build volunteering partnerships across the whole of the sector.

And, finally, to help young people in particular we are:

  • offering personalised support to help their transition to work
  • launching a new Work Experience programme
  • making access to skills provision a priority across the country and
  • at the same time, increasing our investment in apprenticeships where we have just announced support for more than 50,000 additional apprenticeships - the kind of jobs that we know can help people build careers and build sustainable growth in the economy.

All these schemes are part of a wider commitment right across government to make sure that we are giving young people the right support to make the transition from schoool to work, no matter which path they take to get there.

Conclusion

Employment support, welfare reform and economic recovery all have to be achieved together to ensure that we get the right result for the country… for the individuals we want to help… and particularly for the young who are at the beginning of the journey through their working lives.

No-one pretends for a second that it will be easy - but it has to be done.

Without a credible deficit reduction plan, we won’t get back to sustainable economic growth.

Without a coherent Work Programme, we won’t provide pathways for people to get back into work.

And without radical welfare reform, we won’t create the incentives we need to make work pay for the poorest and start dismantling the benefits trap.

On the other hand, if we make progress in all these areas we create a virtuous circle - one where deficit reduction spurs investment, which creates the jobs we need to get people off benefits, which helps them out of poverty, and helps them contribute to further economic growth.

This is the prize - and I hope that everyone in this room will work with us to make it a reality.

Thank you.