Full employment has always been a Labour goal. Today, we’re closer to it than for a generation with 2.5 million more people in work than in 1997 and growth in employment among disadvantaged groups stronger than the average.
But there is much further to go. To get to the Government’s target of an 80% employment rate will require another 2 million people to find and stay in work. This prompted the Government to commission David Freud to look at the next steps needed.
While full employment has been a public policy goal for more than 100 years, it took Mr Freud less than 100 days to produce his answers. The headlines focused on his recommendation to require lone parents to seek work when their youngest child was aged 12 rather than the current 16. He also recommended that private and third sector companies be given responsibility for helping all those on benefit for 12 months or more into work.
While I think Freud’s right that we need to focus more on outcomes rather than processes, that previous approaches have too often been inflexible and ‘one size fits all’, I argue he’s wrong on two key fronts.
The first is too great a focus on compulsion. Leave aside that, because most lone parents have younger children and those with older children tend to work anyway, the lone parent measures will have no impact on employment or child poverty. A focus solely on compulsion scarred the welfare debate in the 1980s and risks stigmatising people as ‘scroungers’ (in 1980s terms) or part of a ‘can work, won’t work’ culture (in today’s terms). The lesson of the last decade is that those out of work do want to work, when offered personalised support. Lone parents are a great example, their employment rate has risen 12 percentage points since 1997. We risk stigmatising lone parents again for no employment or child poverty gain.
The second is too much focus on the private sector. The private sector already delivers more than one third of Welfare to Work provision and can bring innovative creative solutions to people’s problems. But we must avoid a dogmatic obsession, which would risk losing so much of what is good in the public sector. And it’s not clear why regional private monopolies sub-contracting with local providers, as Freud suggests, will be any better than Jobcentre Plus contracting directly with providers.
Again, the real lesson of the last decade is to give front line staff, public or private, freedoms and flexibilities to tailor help for individuals. This has driven the success of the New Deal, employment zones and the recent fall in the numbers claiming incapacity benefit, helped by the flexible support available through Pathways to Work.
So what is the next step toward full employment? The Social Market Foundation this week published a report (available at www.smf.co.uk) calling for the New Deal to be replaced by a system of Personal Employment Accounts, based on a similar scheme currently being piloted in seven US states.
Under this system, claimants would be given a ‘virtual budget’, worth £1,500 to £3,000, based on the current cost of the New Deal. Together with a personal adviser, jobseekers could decide for themselves how to spend the cash on services like training, help with CV writing or travel. If any cash was left over when the claimant found a job, it could be retained to spend on in-work training.
We’ve heard a lot about choice in the public services. Individual budgets, allowing people to decide the package of services they want, are already being trialled or considered in a range of health services. But not, so far, in welfare reform.
Introducing Personal Employment Accounts would bring greater choice into the benefit system. It would also elevate the debate on choice beyond a narrow focus on choice of provider, toward a fuller view of choice, giving people the chance to decide for themselves what support they receive, not just who provides it.
We’ve made such great strides in welfare reform over the last decade, bringing us closer to full employment. But we will not take the next steps on that journey by stigmatising benefit claimants, focusing on complusion or becoming fixated on a false public-private sector divide. Instead we need to develop a more personalised welfare system, focused on outcomes not processes, putting power in the hands of those out of work rather than taking it away. Only then can we achieve full employment.