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Social Security (Flexible New Deal) Regulations 2009

Volume 710: debated on Monday 27 April 2009

Motion to Take Note

Moved by

That this House takes note of the Social Security (Flexible New Deal) Regulations 2009 (SI 2009/480).

Relevant Document: 12th Report from the Merits Committee.

My Lords, it is my pleasure to move the Motion on the Order Paper, namely to move that this House takes note of the Social Security (Flexible New Deal) Regulations 2009. In so doing, I draw attention to my entry in the Register of Members’ Interests. I am a non-remunerated, non-executive director of the Wise Group in Glasgow. It might be worth reminding myself that this is a Motion to take note, not a Prayer. That is deliberate, because the House should be able to comment and seek further and better particulars from Ministers on statutory instruments that are important, without taking the full-blown normal method of objecting to them that has served the House from time immemorial of moving a Prayer to reject them. That would be the wrong thing to do. But having regard to the valuable work of the Social Security Advisory Committee and the Merits Committee in raising a number of legitimate points gives the House the opportunity, through a Motion of this kind, to ask for clarification, which is the purpose of this Motion in my name. I hope that the House will be able to take advantage of it and to get the Government’s policy intention clearer.

In particular, two issues which run through the report from the Merits Committee and the Social Security Advisory Committee’s work exercise me. The stated policy intention was generated before the economic circumstances took quite a steep downturn. The provenance of this policy was in late 2006 and early 2007. The commissioning strategy was published in February 2008. These were times when the economic auguries were in a much better position and we were more confident that the state could provide policy and public expenditure in a way that perhaps is now more suspect. The policy in the budget in particular underpinning this policy deserves scrutiny, just so that we can reassure ourselves that we understand what the Government are trying to do and are confident that the money is available now to do it.

As noble Lords will know, contracts for phase 1 of the Flexible New Deal have been delayed. The announcement has been delayed for the very good reason that the department has realised that the targets set out in phase 1 policies were unachievable in the circumstances, as opposed to when they were originally put in place. I hope that the Minister will say that we will get the results of the successful bidders shortly, which is what I expect. If we do not get the results of the providers who will provide an essential service starting in October 2009, there will be a question mark about whether the providers acting in good faith can deliver the policy in the time available to them. In addition, not only would phase 1 be delayed, causing providers some difficulties, but the operation of and submission of the bids for phase 2 would fall hard on the heels of the announcements of the successful contractors for phase 1. A lot of activity is going on against a background of economic change for the worse. That all puts pressure on everyone, in spite of the fact that everyone recognises that, ultimately, we are all trying to do the same thing and help more people into work.

Undoubtedly, it is true that the caseload for the next three to five years is set to expand. It is bound to expand because of the increased worklessness that is already in the system. It is inevitable and impossible to predict, but everyone can be confident that unemployment levels, however they are measured, will go up over the next 12 months, which was unexpected when the policy was put to bed originally. In addition, noble Lords will also know that the on-flow of lone parents to the JSA will increase. Later this week, we will discuss that at Second Reading of the Welfare Reform Bill.

Perhaps I may remind colleagues of what they probably know intellectually: in 2010, employment and support allowance claimants will be encouraged—if that is the right word, as some of them will not be given much choice—to apply and may find themselves on jobseeker’s allowance as well. There is a whole anticipated increase in the on-flow to jobseeker’s allowance. All that puts pressure on Jobcentre Plus, which, under the Flexible New Deal, has to administer the first 12-month period in three phases for the clients referred to them.

In the few moments available to me this evening, I should like to say that I concur with the sentiments of the Social Security Advisory Committee, as no doubt do other noble Lords, on some of the salient points made in its valuable report. However, based on my experience with the Wise Group in Glasgow, I should like to make some suggestions which are significant but in parallel to the recommendations of the SSAC. My strong advice to the Government is that if there is a capacity problem and more people are coming on to JSA, it would be sensible to start with working with the willing. Of course, we have to provide services for all customers, but if there are challenging capacity pinch-points, my experience indicates that you get further faster if people volunteer to come down and engage with the department in trying to find work for themselves. They are already motivated and have that activation factor which is essential to make progress.

With a big increase in the caseload, it makes a lot of sense to concentrate on working with the willing. There is an opportunity cost to working with the recalcitrant part of the customer client group and great opportunity costs in working with people who are reluctant to engage with the department or with providers. Therefore, it is best to start by thinking about helping those who try to help themselves first. Once those customers have been dealt with, it would be sensible to move on and to deal as a priority with the other sections of the customer base.

Well-being, as defined by Carol Black in the valuable work she has done and continues to do with mental health and intermittent illness, is a very important part of this programme. It would be really sad if it was to get lost in the crush of the incoming on-flow of new customers. If I had control over the Government’s programme, for people who genuinely suffer medical conditions with an intermittent dimension, I would guarantee that, for a period of time, six months or a year, they would not be prejudiced in their benefit claim if they fell out of work. It is the one thing that gets them out of the door and motivates them to take the big step of moving into the first stage employment opportunity that I hope they will be offered. But at the moment a lot of them are very reluctant and will continue to be reluctant to go into work because of the lack of a guarantee that their benefit position would not be prejudiced by taking the chance.

Local discretion is very important in providing the skills, the healthcare and the childcare to give people the active support that they need if this programme is to work. We need to remind ourselves that this is a centrally driven programme in terms of its policy. Its implementation will be successful only if it is delivered skilfully and sensitively at the local level. Open access to personal advisers at stage 3 should be added. I know that there are constraints on resources and that there is a three-hour access to stage 3 for customers. I do not think that that is enough. If more open access to personal advisers could be made available at stage 3, my experience from working in Glasgow suggests that that could pay dividends if it was possible.

Continuing support for early-stage employment is essential. I guess that that is more appropriate for stage 4 than for stage 3. The new providers offering these skilled services—the not-for-profit, social enterprise and private sector providers—must be required to make sure that they do not abandon people once they cross the threshold of work for the first time. A lot of first-time workforce job entry customers find it very difficult to survive the first six weeks to the 13-week stage of their employment.

I turn to my wish list. We keep forgetting about the employers. I understand that the Government have done some valuable work with the Access to Work scheme, and I welcome the fact that the spend has been doubled, but it does not begin to take us to the point where jobseekers can be confident that they can go to an employer with a package that includes the valuable assistance which the Access to Work scheme can provide. In its absence, job opportunities cannot be secured.

I want to make a couple of brief points before I conclude. Although it is not a departmental responsibility, I am concerned about the findings set out in a report produced last year by the CBI entitled Towards a NEET solution. It looks at young people in the 15 to 19 year-old age group who are not in employment, education or training and considers ways of tackling the problem. However, in giving the United Kingdom a very poor rating, at number 23 out of 28 OECD countries, it has some really important things to say. I shall quote one sentence:

“Even if the Government’s target of reducing the percentage of young people not in employment, education or training from 10 per cent to 8 per cent by 2010 is met, the UK will still lag behind major OECD competitors, and that means significant costs for taxpayers”.

This is true, and I urge the Minister and his department to think carefully about how to work with colleagues in education, skills and other parts of the Whitehall hierarchy to address the issue. These young people could be unemployed for a lot longer than some of the others in the customer base and therefore will cost more to put right in the long run.

We must evaluate or set up a continuous assessment of how the Flexible New Deal is going. The target of a proper evaluation in 2012-13 is all very well and important for a proper longitudinal study, but that will be far too late to look at what is happening as the programme evolves. At the beginning it is impossible to judge what the circumstances will be, so evaluation is important. Also, we all have to think about stage 5. I am frightened about Workfare. I understand that the proposal is still open to consultation and no doubt we shall talk about it with the department later in the year. I look forward to engaging in the debate because, as I say, I am worried about some of these proposals.

I conclude simply by saying that, for ease of reference, paragraph 5.9.1 on page 51 of the Flexible New Deal White Paper sets out estimates that I think were generated in different times. The savings are estimated at around £400 million in JSA payments over the next 10 years. It also mentions savings on departmental expenditure of approximately £32 million per annum, and the money to be used to assist the hardest-to-help customers on to stage 3. I wonder if that estimate is anything like appropriate now. I turn to the implementation costs which are listed at £30 million to around October 2010. Again, is that figure still apposite and appropriate? The paragraph finally goes on to talk about having access to European Social Fund money during the programme period of 2007-13.

My point is simply this: all these estimates were good at the time, and I am sure that they were properly researched, but I do not believe that they are valid any more. I hope to be put right about this during the course of the debate but, if not, I want to make a final plea to the Minister. Will he ask for some updated figures and arithmetic, particularly after the phase 1 contracts under the Flexible New Deal are known? Perhaps he would write to colleagues who take part in the debate—here I should say that I am grateful to note that the Conservative Front Bench is to take part—to see whether a sensible update could be made on some of the figures that lie behind the provenance of this policy. It is too important to get wrong. On that basis, I commend the Motion to the House.

My Lords, I thank the noble Lord, Lord Kirkwood of Kirkhope, for giving us the opportunity to debate the Flexible New Deal regulations. He is right to point to the changed circumstances that form the background to this debate. We face rapidly rising unemployment and the Flexible New Deal is likely to have to be very flexible indeed in order to cope with the demands that will be placed upon it. My focus will be on the department’s ability to meet this demand and on the management of the budget within the department. I will therefore ask several questions, the answers to which I do not expect the Minister necessarily to have to hand, but I agree with the noble Lord, Lord Kirkwood, that it would be useful if, after studying Hansard, the Minister could provide answers where it is possible to do so.

I turn first to the background. As the Minister knows, the number of unemployed people increased by 177,000 over the last quarter and by 486,000 over the year to reach 2.1 million, yet the Government will not allow many people to retrain after 18 months of claiming jobseeker’s allowance. Why is that? The noble Lord, Lord Kirkwood, mentioned NEETs. We know that there has been a dramatic rise in the number of young people classified as such. I note also that the Red Book talks of a rise of £300 million in 2009-10 to £900 million in 2010-11. Has the department the capacity to handle this? Will the department have the resources to be able to maintain the employment guarantee for young people? Demand for the Flexible New Deal could be 300 per cent higher than first indicated. How has the Minister responded to the impact of the economic downturn on Flexible New Deal demand, and can he assure the House that delivery of the new deal will not be delayed in some areas?

I turn now to some specific questions. How much is FND1 projected to cost and what has been allocated for it in the Budget? The new structure is 40 per cent service charge, 40 per cent for getting someone into a job for 13 weeks, and another 20 per cent for sustaining the job for 26 weeks. However, is it true that the bulk of the 40 per cent charge—35 percentage points—will be paid in the first year? If so, how much will be in the budget for the first year and how much in subsequent years? I note the Red Book figures for the Department for Work and Pensions. Can the Minister put these on the record and explain what these sums are for specifically, in particular the much-increased figure for 2010-11 of £1,080 million? Given that these are long contracts, does it still make sense in the current crisis to send people back to Jobcentre Plus after a year with the FND providers? During the worst of the downturn, will this not incentivise the providers to do very little with these people since otherwise they will send them back before the job opportunities provided by the upturn kick in? What does Jobcentre Plus have in its budget for the proposed work for the dole programme when these people do come back?

What are the implications for FND of the Budget unemployment guarantee for those aged 18 to 24 who have been on JSA for more than a year? Will these people be withdrawn from the FND programme? How many of them are projected? I understand that currently only 5,755 people aged between 18 and 24 have claimed JSA for 22 months or more. Is that figure correct, and by how much is it expected to grow over the next few years?

The Merits Committee drew the House’s attention to a number of aspects and raised many issues to which the Minister may wish to respond. Above all, it points to the absence of an impact assessment, and although the Explanatory Memorandum states that the final evaluation will involve an impact assessment, how can it be evaluated when no current assessment exists? Sizeable sums are involved here and this is an expanding area of government spending at a time of austerity. What safeguards does the department offer us that it will be money well spent and within the capacity of the department to manage and control?

My Lords, I was going to start with the issue of the impact assessment but I do not think that I need to echo what other speakers have said—otherwise the debate would be very repetitive. We do not often get an impact assessment from the DWP, and that hampers the work of the Merits Committee, of which I am a member. I was also going to ask about the future jobs fund which was announced in the Budget and how it would fit with the Flexible New Deal.

The Social Security Advisory Committee made eight recommendations, some of which the Government have accepted in full and others in part. They have rejected only two recommendations. The first recommendation—that the timing of the delivery of the mandatory back-to-work sessions should be reconsidered in the light of the economic situation—has been accepted, although the Government have simply said that it should be kept under review. Perhaps the Minister can expand on that. After all, unemployment is still rising.

The second recommendation is that there should be well trained staff involved in the decision-making process relating to sanctions to ensure that the process is “expedient and transparent”. This has also been accepted by the Government. Can the Minister assure us that this is not what I call a click-box exercise on a computer but will consist of a proper training programme? How long is the training for those entitled to sanction payments?

The third recommendation is that sanctions for claimants who volunteer for an extension to participation in the Flexible New Deal be removed. The Government have not accepted this recommendation. With jobs currently being scarce in many parts of the country, it seems likely that many claimants will opt for the extension to participation in the Flexible New Deal. It seems very perverse to extend the sanctioning regime to those volunteers—that is, offering choice with a punitive regime.

The recommendation that contracts are to be monitored for what is called “creaming and parking”—that is, creaming off the people who are easier to help into employment while parking the most difficult—is welcome, although it is disappointing that there will be no penalties to ensure that this does not occur. The quality of personalised support for those furthest from the jobs market is key here, and one hopes that the increased numbers needing help will not compromise the standard of service.

The strongest recommendation is that the DWP should delay the introduction of the second phase of the Flexible New Deal, due to start in October next year, until phase 1 has been thoroughly evaluated, the results published and the design of FND reviewed in the light of prevailing economic circumstances. The Government have just as strongly rejected this recommendation, saying that it would mean delaying access to personalised support for people in phase 2 areas. Who is right in this stand-off? There are good arguments on both sides. Perhaps a compromise would be an interim evaluation, carried out as quickly as possible, so that any redesign can happen before October next year.

I thank my noble friend for raising this matter in this new procedure, which I hope will catch on throughout the House.

My Lords, I thank all noble Lords who have contributed to the debate and the noble Lord, Lord Kirkwood, for the manner in which he introduced it. He is right: it gives us an opportunity to talk about an important programme—the Flexible New Deal—and to pick up on some of the points raised by the Merits Committee and the SSAC.

A lot of questions have been posed about the Red Book. Unfortunately, I did not bring my Red Book with me tonight; I left it on my bedside cabinet. However, I will review the record and respond in writing to some of the points raised by the noble Lord.

The purpose of the regulations is to introduce a new regime for those claiming jobseeker’s allowance that increases the level of job-search activity that they are expected to undertake the longer they remain out of work and claiming the benefit. In return for this, customers will receive more support tailored to their individual needs as their claim progresses. This will culminate in a person being required to take part in the new employment programme, the Flexible New Deal, where they will receive intensive, personalised back-to-work support from a contracted provider to help them move into a job and to improve their lives.

This change represents the Government’s long-term strategy for tackling unemployment and with the current escalation in the numbers having to claim out-of-work benefits, it is even more vital than before to provide as much help as possible. Both noble Lords, Lord Kirkwood and Lord Taylor, referred to the changed circumstances since the programme was initiated and conceived. Far from being the wrong time to introduce this programme, the time could not be more right. We must improve our offer of employment support to customers who unfortunately find themselves out of work as a result of the downturn. Support for these customers cannot be delayed; instead, it will be enhanced. The Flexible New Deal, together with the six-month offer which became available at the beginning of this month and the future jobs fund announced in the Budget and to which the noble Baroness, Lady Thomas, referred, will help us to achieve this.

We propose to introduce the Flexible New Deal in two phases across Britain: 28 of the 48 Jobcentre Plus districts introduced the new jobseeker’s regime from 6 April this year and we expect to see contracts for the Flexible New Deal start in October. With that in mind, we expect to be able to announce the successful bidding organisations, about which the noble Lord, Lord Kirkwood, inquired, towards the middle of next month, in May. The remaining districts in Great Britain will introduce the proposals under phase 2 from April next year. This will creates the opportunity for organisations unsuccessful in the first round of contracting to re-tender for the contracts in the second phase.

A couple of points were raised about where we are with the contracts and I shall try to deal with them now. In answer to the question of whether the Flexible New Deal has been delayed in its start, the answer is no. We still plan to go live from October, but the extra time needed for the additional bids means that this will be challenging, particularly if a winning bidder does not already have a presence in a contract area.

The noble Lord, Lord Kirkwood, asked about revising targets. We have very clear goals in the welfare-to-work arena to help more people and more of the disadvantaged in society back into work, and the Flexible New Deal performance expectations published in the ITT set out a clear view of where we want to be and what we are seeking to buy through the Flexible New Deal.

As to the funding model to which the noble Lord, Lord Taylor, referred, he is right that the upfront fee has increased to 40 per cent because of the downturn and the recognition that a higher upfront fee was necessary to make the business economically viable for providers. So there is a 40 per cent job payment made when the customer moves into a job, and a 20 per cent sustainable employment payment.

I outlined the timing in which we propose to introduce the Flexible New Deal and I shall try to deal with some of the points around funding. The changes were originally designed to be introduced with no additional resource allocated by the Government, as the noble Lord, Lord Kirkwood, said, under the current spending review. In addition, the development and implementation costs were approximately £16.5 million. However, the recent increases in the numbers of people becoming unemployed demand a rapid response from Government and accordingly the Chancellor announced an additional £1.3 billion for the department in last November’s Pre-Budget Report. A further £300 million of new funding was announced following January’s jobs summit and in addition the day 1 offer, a £40 million package of support, will help 350 newly unemployed customers—the “willing”, in the noble Lord’s terms—including professionals and executives, who have a good chance of finding a new job quickly but require specialist support to update their job-search skills.

The Government believe that the economic situation now demands even greater investment to help people back to work. To meet that demand, as noble Lords will be aware, the Chancellor announced in his Budget last Wednesday a further £2.8 billion over the next two years for the department. These are the figures in the Red Book to which the noble Lord referred. Of this new money, £1.7 billion will enable Jobcentre Plus and the department’s employment providers to deal with the higher numbers of people becoming unemployed. This additional funding will also mean that Jobcentre Plus will be able to recruit up to 10,000 more staff on top of the 6,000 new staff already announced in the Chancellor’s Pre-Budget Report, a significant injection of resource.

There will also be a significant new package of support for people—particularly young adults, to pick up again the issue that the noble Lord, Lord Kirkwood, raised—who have been unemployed for 12 months. This package is worth an additional £1.2 billion and will enable the department to guarantee six months of either employment or training to all young people to help others in unemployment hotspots. On the noble Baroness’s point about how that fits together with the New Deal, that is a choice that young people will have. The present levels of unemployment mean that this investment would be required irrespective of whether or not we were introducing the jobseeker’s regime and Flexible New Deal at this time, but this additional resource will address the concerns of the Merits Committee and the Statutory Instruments Committee, which, in its 12th report, mirrored the SSAC’s concerns about the department’s capacity to effectively deliver this change.

The SSAC, as has been mentioned, consulted on the proposals, and its observations and recommendations were published in the Command Paper that accompanied these regulations. The committee’s report was broadly supportive of the proposals and, as published in the Command Paper, the Government have accepted many of its recommendations for the design and delivery of the proposed changes.

We have accepted the recommendation to consider the timing of the back-to-work sessions, recognising that they need to be more flexible and to ensure that they are customer-focused and appropriate. During these important group sessions, customers can learn about the help and services available from Jobcentre Plus and become more familiar with the type of jobs and opportunities in their area. As a result of the SSAC recommendations, Jobcentre Plus district managers will have discretion to deliver these sessions at a time that best supports the customer’s individual needs. We will continue to monitor these sessions to ensure that they remain customer-focused, relevant and effective.

We have accepted the recommendation that staff must be well trained and deployed to ensure that sanctions and decision-making are expedient and transparent, a point that the noble Baroness, Lady Thomas, was keen to hear about. We recognise that well trained staff are central to delivering an effective sanctions regime that encourages customers to engage with their responsibilities and take up the support on offer. Flexible New Deal providers will be responsible for ensuring that their own staff are properly equipped to deliver all aspects of the programme, and the department will work with them following the tender process to ensure that their staff are ready. Jobcentre Plus has implemented a tried and tested approach for key job roles in all delivery arms for new staff, and, in light of the ongoing recruitment exercise to meet the increase in demand on jobcentres, that includes the expansion of training capacity and the revision of training packages. That will enable Jobcentre Plus to ensure that it can train the numbers of new recruits coming through its doors.

We have accepted the recommendation to ensure that sanctions could not be used by FND providers to avoid supporting the hardest-to-help customers, an extremely important issue. We have also accepted in part the recommendation that contracts should be monitored for “creaming” or “parking” of customers. Providers will have to help all customers who are referred to them, which is why customers who have not moved into a job earlier in the programme will have to be provided with a minimum of four weeks’ full-time work-related activity. Providers are required to invest in all customers who walk through their door.

Providers will not be able to sanction customers. They will have to refer any doubts about a customer’s compliance to a Jobcentre Plus decision-maker, who will consider all the available evidence, including the point of view of the customer, before reaching a decision to sanction. There is no easy route for providers to shunt people off their books.

All customers who reach the Flexible New Deal will be in need of intensive support. Most customers will have been unemployed for 12 months and everyone will have been unemployed for at least six months, so there will be no quick wins. Contracts require providers to ensure that customers receive a level of support appropriate to their needs, and the department will monitor that through contract-management procedures.

We accepted in part the recommendation that providers must have a clearly communicated complaints procedure, which is very important.

We did not, as the noble Baroness, Lady Thomas, indicated, accept the recommendation to remove sanctions for customers who volunteer for the Flexible New Deal extension period. Having spent 12 months on the Flexible New Deal, customers can elect, in conjunction with the provider and Jobcentre Plus, to extend the FND for six months. This is a positive option that allows customers to get further support where they have been working well with the provider and perhaps need just a little further help to move into work. It is a choice, but, once it is made, it is important that the customer continue to appropriately engage with the provider. The provider has committed its resources to the customer for an additional six months, and sanctions exist to ensure that those resources are well used. This is exactly the same arrangement that we now have for voluntary participation in existing New Deal options.

The noble Lord, Lord Kirkwood, referred to well-being issues and Dame Carol’s report. That is a debate that we should probably have on another occasion. It is important that these programmes—as with ESA, to which he referred—properly cater for people with medical conditions, particularly mental health conditions, and I am sure that we will be debating that in the Welfare Reform Bill. The noble Lord referred to this as Workfare, not a description that I would accept but one that I am sure that we will debate.

The noble Lord referred to the costs and savings figures, and I will write to him on that. He talked about a short-term transitionary benefit for those moving from ESA into work. We have done a lot of work to improve transitions and give people the reassurances they need to take jobs, such as the linking rules, the rapid reclaim and so on, which we have debated from time to time.

With regard to open access to advisers at stage 3, as much as I accept that it may be beneficial to have a system for open access to advisers at that stage, it would be difficult to manage and place unpredictable demand on adviser resource.

I am sure that I have overshot my time, so I will conclude. I hope that noble Lords will find these reassurances satisfactory. The Flexible New Deal is an ambitious employment programme and now, more than ever, jobseekers need this support. Furthermore, the Government maintain their commitment fully to evaluate these changes against the revised volumes of people affected and the consequential adjustments to costs. In conclusion, therefore, I recommend to noble Lords that the Social Security (Flexible New Deal) Regulations 2009 be allowed to stand so that the full benefits of the programme can be realised by people who unfortunately find themselves out of work at this time.

My Lords, I am grateful to the Minister for his usual courtesy and thoroughness in responding to the debate. I am also grateful to colleagues who have taken the trouble to contribute. The response has been useful, although obviously we will want to study it in some detail. More than anything else, I am reassured that the Government understand that they are in different territory and a different environment from that in which the policy was originally conceived. For example, is the 80 per cent employment target still valid? Until recently, it was safe to assume that 60 per cent of JSA claimants would leave within 13 weeks and 80 per cent would leave after 26 weeks. I do not think that those assumptions are safe any more. Against that, we have to weigh the increased expenditure that has been allocated, which is welcome. It would be very valuable to have answers to some of the important questions that the noble Lord, Lord Taylor, my noble friend Lady Thomas and I have raised. The debate has been useful, but I think that we shall return to this issue and not just in relation to welfare reform; this is a big policy change and colleagues in this House are entitled to continue to hold the Government to account on their flexibility in dealing with the Flexible New Deal in future.

Motion agreed.

Sitting suspended.