Westminster Hall

  Westminster Hall

Thursday 17 May 2007

[Janet Anderson in the Chair]

Government Employment Strategy

[Relevant documents: Third Report from the Work and Pensions Committee, Session 2006-07, HC 63 and the Government’s response thereto, First Special Report from the Committee, Session 2006-07, HC 492.]

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Michael Foster.]

14:30:00

Mr. Terry Rooney (Bradford, North) (Lab)
I welcome this opportunity to debate our report on the Government’s employment strategy and the Government response to it. I start by thanking all those who submitted written evidence to the Committee, the witnesses who gave oral evidence, our specialist advisers, and my hon. Friends and colleagues on the Committee. In particular, I should like to thank the staff and users of Rosemount lifelong learning centre in Glasgow, which is in the Speaker’s constituency. We had a tremendous experience when we visited the centre. In addition, the Committee visited New Zealand in the course of its inquiry.

The scope of our inquiry was to look at the Government’s target of an 80 per cent. employment rate. We focused in particular on ethnic minorities, the over-50s and lone parents. Needless to say, I will not cover the entire report or the responses, not least because I want my hon. Friends and colleagues to get in.

Sadly, I start by saying that all members of the Committee were disappointed by the Government response. That is in stark contrast to the Government response to our report on the Child Support Agency, which they published yesterday and which is a splendid document. An awful lot of the issues that we flagged up were downplayed in the Government’s response, so it was particularly discouraging when they were subsequently flagged up in the Freud report and positively welcomed by Ministers. In fact, I think that David Freud is guilty of plagiarism, because there were no original ideas in his report that were not in ours, but there we are.

The city strategies initiative was launched by the Government last autumn. We know that if we can solve the problem of the employment rate in the UK’s major cities, we would easily meet the 80 per cent. target. Great store was set by the new localism and getting all the agencies together to act in concert on the massive pockets of deprivation. However, the submissions that have come in from cities have, frankly, been disappointing. The initiatives are not innovative and are not really focused on addressing the challenges. Although the city strategies seem a good way forward, further work needs to be done to educate those local partners on how they can make a difference in their communities.

A particular concern was the employment rate among ethnic minorities. We need to be careful about that, because the employment rate among people of Indian or Chinese descent and in many other ethnic minorities is way up there, level with that of the indigenous population. However, the rate in the Pakistani and Bangladeshi populations is quite low, and extremely low among women in those communities. There was therefore concern about ending the ethnic minority outreach grant, which was merged with the deprived areas fund. There is no real evidence either way as to whether the transfer has been successful. However, we were concerned that a specific pot of money to address those low employment rates had been submerged into a general fund. To return to the city strategies, the large ethnic minority populations are in our big cities. If the city strategies are weak, our response to the needs of ethnic minority communities will also be weak. That is a real concern for us.

We made great play in our report of the fact that one of the biggest contributors to a lower employment rate is the lack of skills and low skills. We welcomed the report by Lord Leitch, which was published during the course of our inquiry and which sent some challenging messages to the Government. The Government’s response was again a bit weak and slightly evasive, although perhaps because the Department for Work and Pensions is not totally in control of the situation. In particular, reference was made to the “Train to Gain” programme for those in employment. “Train to Gain” is fine, but it is for the under-25s. It does nothing for those who are over 50, which is a particular problem, nothing for most women or most lone parents, and very little for ethnic minorities. The message is mixed.

Mrs. Joan Humble (Blackpool, North and Fleetwood) (Lab)
When we discussed the Leitch report, we did so from the point of view of those out of work. Does my hon. Friend share my concern that we did not receive satisfactory answers to our questions about how people who were out of work would engage with the skills agenda in Leitch and how that would impact on their benefit entitlement?

Mr. Rooney
There are two issues there. Leitch focused on upskilling people who are in work. To that extent, there is not much in that agenda for those who are out of work. However, there are also impediments in the benefits system to those who want to do out-of-work training.

As it happens, just last week we visited a Prince’s Trust project that runs a programme called Team, which is recognised nationally by the DWP as a work-related training programme. Notwithstanding that, nine different benefits centres in London were making the lives of participants on that programme a misery, and in some places they told participants that they had to leave the programme and go on the new deal. Part of Team’s 13-week programme is a one-week residential. However, if participants did not sign on during that week, their benefits were stopped, even though Jobcentre Plus knows that that one-week residential is part of the course.

That lack of consistent interpretation of the rules among different offices is worrying. I do not suggest for a moment that we should finance people in education through the benefits system, and I do not think that the Committee does, either. However, where people undertake training or learning that will lead to a qualification for a job, that needs to be reflected in their benefit status. A lot of the rules are very unclear about how that is supposed to happen.

The engagement of employers is also a serious issue. The National Employment Panel does a fantastic job, and I think that Cay Stratton is brilliant. However, I suspect that as an organisation its position now is, “Well, you would say that, wouldn’t you?” I wonder whether we need to breathe new life into the process, because there is now a lot of evidence that employers are getting a bit bored by the issue. At the end of the day, however, the employers are, after all, the ones with the jobs—not the Department, Jobcentre Plus or the Select Committee. We need to re-energise the engagement with employers, in respect of both what level of skills they want people joining their companies to have and what ongoing support is needed once they get into work.

John Penrose (Weston-super-Mare) (Con)
The hon. Gentleman is putting the Committee’s case eloquently. Does he agree that one of our other concerns about Leitch was that some of the traditional groups helped by the skills agenda—particularly those in middle or older age returning to work either because they have been caring or fulfilling family responsibilities or because they have been made redundant for a period—are not necessarily well catered for? They tend to have skills that are already above level 2—Leitch made the point that level 3 skills are equally important. Because such people are not in employment and do not have an employer to fall back on, the Government seem to saying, in paragraph 39 of their reply, that they will not help either, and that the cost will fall on the individuals themselves. That means that middle-aged people who are currently jobless and in need of a little reskilling are, effectively, being left in the lurch.

Mr. Rooney
I do not know whether I would go as far as to say that such people have been left in the lurch, but as a group they are not catered for. There is a lot of talk in Leitch and the Government’s response about co-payment, as is so often the case across Government at the moment. Co-payment is fine in employment, but for a person not in employment, it becomes a non-starter. Another deficiency is that Leitch does not recognise that the starting point for people who have been out of the labour market for 10 or 15 years, as lots of lone parents have, should be the soft skills—building their confidence so that they can move back into work. Then we can move on to the academic or vocational qualifications. There is no real recognition of that in Leitch. It has always been difficult to quantify in contracting, but moving somebody a lot nearer to the labour market is every bit as valuable as getting somebody a couple of O-levels or A-levels, because it improves that person’s employability and willingness and ability to work.

In our report on the pathways to work pilots, we made the recommendation, which we repeat in the report, that the Department should retain some of the savings gained from the reductions in benefit payments that result from people moving into work. This time, the Government response makes only a passing reference to that, yet the response to the same suggestion in Freud was extremely positive. The Freud report said that that is the way ahead and where contracting should go, and that the savings made from reductions in benefit payments should be recycled into getting more people into work and added rewards for contractors and providers.

The Committee made a related recommendation. Currently, if somebody is in work for 13 weeks, their job meets the Government definition of sustainable employment. We said that the measure should be at least 26 weeks, and Freud says that it should be up to three years. In their response, the Government retreat into saying that it should be 13 weeks, because the evidence is that by the time somebody has been in work for 13 weeks, most of the barriers have been removed. I am sorry, but that is just not true. If single parents who start work could stay in it for 26 weeks, we would meet the 70 per cent. employment target for lone parents tomorrow.

Natascha Engel (North-East Derbyshire) (Lab)
It was even more interesting to see the Government response to that point. They said that the issue was not even about defining what sustainability in work was. All they said was that all the evidence was that the longer somebody stayed in work, the less chance there would be of their dropping out of the labour market again, and that that was the aim of the Government strategy. The Government never even sought to define “sustainability”, so it was not even clear whether they thought 13 weeks’ employment meant sustainable employment.

Mr. Rooney
My hon. Friend is absolutely right, as is evidenced by the contradiction between the Government response to this report and what happens in employment zones, where there are enhanced payments as long as the person stays in work. If that is right for employment zones, it should be right across the system. Bearing in mind that under the labour laws in this country, a person can be dismissed at any time in the first 12 months of employment without any reason having to be given, defining sustainability with reference to 13 weeks has to be a simple non-starter.

I move on to flexibility. At the moment, the training programmes depend on the benefit that the people are on. In this report and others, the Select Committee has argued that although the new deal has to a great extent been an outstanding success, it is now a 10-year-old product and it is time that it was refreshed and renewed. The Department has run two pilots: building on new deal—BoND—and “Ambition”. Both show that moving to a training programme based on the individual’s needs rather than the benefit that they are on is the way ahead. BoND has been abandoned because it was assessed as too expensive, but “Ambition” is being further piloted and moved forward. There is also the new deal plus for lone parents, which is a much more enhanced product. Our recommendations that we should move towards such initiatives have been downplayed in the Government response, yet Freud says that once somebody has been unemployed for 12 months, they need an individual tailored programme. The Department, the Government and Ministers welcomed Freud as the way forward, yet do not welcome the same things when we say them in our report. As I expect hon. Members have gathered, I am getting a bit paranoid about that.

The simple fact is that the labour market is different from how it was 10 years ago. The type of person in the inactive benefit system is different from the type of 10 years ago, and we need a new approach. I understand that the Government are imminently to make an announcement about flexibility in the new deal. I am looking at the Minister, but his expression is a little blank. If such an announcement is about to be made, why are the Government not a bit more positive in their response to the Select Committee’s excellent report?

I move on to the issue of lone parents, about whom we made a number of recommendations and who are probably the biggest success story of the Government’s welfare to work programme. The employment rate among lone parents has gone from about 43 per cent. to 56 per cent. However, in London it has hardly shifted; it has increased by only about 0.5 per cent. The rest of the country is doing pretty well in getting lone parents into work, but that is not happening in London. That is due to two things: the cost of child care and the cost of housing. I have been checking with people in the child care system in London and it seems that the average cost of full-time child care is between £250 and £300 a week. Even at £250, and even with the full child care tax credit, a person is still left paying £100 a week if they have one child or £260 a week if they have two. That comes from their net income; a lone parent needs a hell of a job to be able to pay those premiums and have enough money left. There is a real issue about the level of child care tax credit in London. Incidentally, the level of take-up is another important issue, on which we made one of the recommendations that got no response whatever.

As I said, the second main issue is housing costs in London. We found that for many different types of claimant, the point of change issue decides whether somebody moves into work. What is the situation at the point of change? The average local authority rent in London is £120 a week; it is about £250 a week in the private sector. A lone parent may have a very modest income on benefits, but at least it is secure; they know that it will turn up every week. If they rent, their council tax will be paid and the roof over their head will be protected. However, we ask such lone parents to move into an uncertain world in which, although their weekly income as such—with the minimum wage and the working tax credit—will increase significantly, their housing benefit claim will end and they will have to make a fresh claim as someone who is not on income support but working.

In London in particular, housing benefit administration is appalling; the length of time that it takes to process a new claim can be anything up to six months. A single parent moving into work would have to pay their own rent for up to six months while their housing benefit organisation sorted things out, on top of having to pay the child care costs—it is no wonder that they say, “No thank you. I shall stay on my modest income; at least I know that it is there every week.” There is a real issue there.

The Committee raised another issue. At the moment, a person can get housing benefit and council tax benefit paid for the first four weeks following a move into work. We raised the question whether personal advisers could have further flexibility in rolling out other benefits. The answer was a flat no, and the Government have no intention of considering that.

In this day and age the vast majority of jobs are paid monthly, so, for example, a single parent of two children is asked to give up her benefit and spend four weeks with no income. The children of someone on income support get free school meals, but if the parent receives anything else they will not and the parent will have to find £15 to £20 a week to pay for those two children. Previously, such children might have been protected from school travel costs or child care costs. We need a more radical answer to the expense picture, in London in particular, so that people can cross the rubicon created by the security that benefits offer, even though the income is low, into the world of work. Once they are established in work, it might well all work out, but while they are waiting for all the other organisations, some of which are administratively useless, to do their bit, who would take that chance? Who would put their children at risk? Who would risk being evicted? It is not good enough.

We saw in New Zealand that the personal advisers have absolute flexibility. I found it a bit dangerous, in fact, because it seemed that they could spend any amount of money as long as someone accepted a job. We cannot go that far, but we need more flexibility for personal advisers, so they can help people to bridge the gap and get over the massive barrier to work. If I were a lone parent, I would think five, six or seven times before I crossed that barrier. More help needs to be given.

Freud’s analysis is that if we do not make such interventions, we will continue to pay benefit for many years hence. For a lone parent, that will typically be about eight years. If they have two children, we are looking at £5,000 to £6,000 a year in benefit, which means £40,000 to £50,000 will have to be paid out unless those interventions are made. If it costs £5,000 to get someone into work, surely that is worth while.

Andrew Selous (South-West Bedfordshire) (Con)
I am particularly interested in the hon. Gentleman’s story about the flexibility that personal advisers have in New Zealand. Did that extend over a budget that they could spend on behalf of the jobseeker with whom they were dealing?

Mr. Rooney
We need to say two things about New Zealand. First, they have what is called a “work first” approach. If someone loses their job and approaches the New Zealand equivalent of the Employment Service, the system is geared towards getting them another job. In the United Kingdom, the system is geared towards establishing benefits. An awful lot of effort, technology and staff time is spent on getting the benefit established, and then people start to look for work opportunities. We need to consider how things are structured.

Secondly, I am not sure what the hon. Gentleman meant about “over a budget”. Each adviser does not have a personal budget. It is uncapped. I suppose there will be a limit at which they would have to refer the matter upwards—we were not told that—but essentially, they have the freedom to spend whatever is necessary to remove the barrier that stops an individual moving into work. That might involve paying the mortgage or the rent for two months, or buying them a new suit. They even told us of cases where they had bought people cars, because the job was 70 or 80 miles away and there was no transport. They were not buying Bentley convertibles—they were TR7s—but the point is that we need that flexibility to remove the barrier that stops an individual from getting into work.

There would be a price cap. Obviously, we could not allow advisers to spend £25,000, because they would send people on holiday to make them feel better about themselves. However, we need that flexibility somewhere and the accounting process needs to be, “If we don’t do this, we will spend this amount on benefits this year, the year after and the year after.” The generational deprivation would otherwise be continued, and, although I hate to mention the Government’s child poverty target, we will not reach it if we do not get more people into work.

The employment programmes at the moment are largely geared towards people who come on to benefits. For a new claimant, things move pretty well, but a “stock”—it is an awful phrase—of some 4.5 million are on inactive benefits. There is nothing substantial available to them to help them to get into work. Pathways to work and the employment and support allowance, which picks up on the pathways to work pilots and offers training, medical treatment and so on, help new claimants to get into work. That is fantastic, and it is right and proper, but there is nothing for the 4.5 million long-term claimants. To go back to Freud, he said that no impact will be made on those individuals unless we change the way in which government is organised and financed.

It is hard to give an average, but we could say that it costs about £3,500 to get someone into work. For those 4.5 million people, the cost would be in the region of £15 billion. The Government do not have that. If anyone stands up today and says, “Our party will do it,” they will be misleading the House. It will not happen. Freud suggested transferring the risk to the private and voluntary sector—mainly the private sector—over a set period of three years. That period is too long, however, and it should be two years. If the provider gets those people into work within that period, it should retain the benefit savings less the cost of putting the person into work. That might not be the perfect solution, but it is the way forward, and it reflects entirely our recommendation on recycling benefits savings while retaining some of that in the Department.

I want to close with two issues that relate to single parents. First, last October an incentive to lone parents to engage in work-related activity was announced. It was the work-related activity premium, which had already been piloted in some areas and would be extended from 1 April. On 29 March, it was announced that the premium would be abolished, which sent out a dreadful message. Lots of organisations up and down the country advised their clients that the premium was coming and geared them up to potential work-related training and activity, and that was snatched away at the last moment.

My second point is to do with the increasing use of work-focused interviews. I do not have a problem with the principle that people engage in work-focused interviews to assess where they are on the return-to-work scale, where they need help and everything else. However, it is worrying—frightening, in fact—that there have been 40,000 sanctions against lone parents. Something is not working if that many lone parents do not engage with the system in the full knowledge that their benefits could be sanctioned.

The Minister helpfully replied to a question of mine the other day and set out the process, and it is almost impossible to get sanctioned because of the number of attempts that are made to get the person to take part in the interview. Notwithstanding that, there were 40,000 sanctions last year. Someone needs to consider that, because the system is obviously not working and nobody is benefiting. The individuals are losing benefit, and the Department is not getting people into work. Something is going wrong somewhere, perhaps in the training programme or the personal adviser programme. We need a close analysis of why 40,000 people have chosen to take a benefit hit rather than attend an interview. An interview is all that it is. It is not an instruction to go to work, it is theoretically a helping part of the process of moving people back into the work arena. That is a serious cause for concern.

14:59:00

Mrs. Joan Humble (Blackpool, North and Fleetwood) (Lab)
I wholeheartedly endorse everything that the Chairman of the Select Committee, my hon. Friend the Member for Bradford, North (Mr. Rooney), said. We engaged in the report because the subject is at the centre of the Government’s welfare to work programme and because getting employment strategies right is vital for so many people.

We started off by acknowledging that the Government have got a lot right—I reassure my hon. Friend the Minister that we know that. The 2.5 million extra people in work and the amount of job creation in the past 10 years are signs of a successful economy and that the Government’s employment strategies have been working. Over the years, the introduction of various new deal programmes has been successful in targeting particular groups.

To achieve the 80 per cent. target that the Government are now talking about, we need to consider what has been working best, what is no longer appropriate in the labour market and how we can particularly help the groups that are the most disadvantaged in going back to work. That is why we examined certain groups in particular in our inquiry, and my hon. Friend the Member for Bradford, North outlined those groups. I wish to cover two or three of the issues that we raised.

I mention again to the Minister the issue of definitions and what we mean by the 80 per cent. target. Our report starts with an analysis of the extreme ends of the spectrum—the 16 to 18-year-olds and the 65-plus-year-olds. The Government are actually more sympathetic to us when we talk about the 65-plus-year-olds, because there are an increasing number of them in the labour market. To exclude them from the 16 to 65-year-old group that forms the target for the statistics will become increasingly bizarre, particularly as the Government are actively encouraging people to continue working beyond 65 through changes to pension legislation. We need to examine the basis of the statistics.

At the other end of the spectrum, the 16 to 18-year-olds, we currently have an analysis through the Department for Education and Skills of the NEET—not in education, employment or training—group. However, we are also getting messages from the DFES that the Government are considering encouraging the overwhelming majority of young people to be in education or training until they are 18. It therefore seems illogical to count the ones who are in education and training as unemployed for the purpose of the statistics.

I accept the Government’s response to our report. In it we say that they should leave the situation as it is but monitor it. If they come up with definitive proposals to require young people to remain in education until they are 18, it will be a nonsense to include them in unemployment statistics. Equally, if the Government are encouraging over-65s to remain in employment, it is bizarre not to include them.

For the time being I accept the Government’s response that they will monitor the situation, but it is important that they examine what will happen in the future. Their response that the suggestions would make international comparisons difficult will not be sustainable in the long term. Other countries are doing exactly what we are doing—encouraging older people to remain in work and younger people to remain in education.

John Penrose
Will the hon. Lady give way?

Mrs. Humble
I give way to my Select Committee colleague.

John Penrose
I thank my Select Committee colleague. On a point arising from what she said, in the existing statistics the Government are trying to have their cake and eat it. They are including people over 65 who are in work in one part of the calculation but excluding them from the other. They are including them in the numerator of the fraction and excluding them from the denominator, thereby pushing up the percentage. It is clearly relatively meaningless if one does not compare like with like. The Government need to make clear why they think that is okay.

On international comparisons, fine, we may need some statistics, but that should not be driving what is right for British policy making. Let us have a target, definition and statistic that are correct. Then, if necessary, we can publish the subsidiary figures that allow international comparisons on a like-for-like basis.

Mrs. Humble
That intervention has highlighted to the Minister the sort of detail that the Select Committee went into. We not only questioned witnesses on numerators and denominators—I had to think back for a minute to my schoolgirl maths to try to remember what they were—but compared ratio with rate. I will not question the Minister on that.

We all know that statistics can be misleading. As the hon. Member for Weston-super-Mare (John Penrose) said, they should be tools to help to develop policy, so I want to start from the basis of an analysis of whether the parameters in which the statistics are determined are correct. More importantly I wish to reinforce what I think is the key message of our report, to which my hon. Friend the Member for Bradford, North referred, which is what we mean by employment. We let the statisticians and the Government off too easily by saying that because somebody has been in employment for 13 weeks the job is done. It is not. A lot of people start work and leave it a lot more quickly than that, and a lot leave just after the 13 weeks. Surely the success of an employment strategy is whether people are still in work after six months or a year. We have recommended 26 weeks.

Greg Mulholland (Leeds, North-West) (LD)
rose—

Mrs. Humble
I give way to the hon. Gentleman, another colleague.

Greg Mulholland
I agree absolutely with the hon. Lady, my Select Committee colleague, on the fundamentally important points that she is making. Does she agree that we would like to hear from the Minister the Government’s thinking on our recommendation that the sustainable employment measure should be 26 weeks, which I know they are currently considering? I also ask the hon. Lady, and thereby the Minister, whether we can examine not only ways to measure people going into employment in the first place but a more meaningful measure including such matters as the level of pay at which they start a job, their job sustainability, the length of time they are in it and their job prospects. That would meaningfully get people into the culture of work as well as into work itself.

Mrs. Humble
The hon. Gentleman anticipates a point that I shall come to. As part of an employment strategy, in determining what we mean by sustainable we must also consider what makes a job sustainable. We need to examine what barriers there are that cause people to leave work. For many people going into the labour market, certainly for lone parents, sustainability depends on such issues as appropriate, easily accessible and affordable child care. My hon. Friend the Member for Bradford, North pointed out that there are real difficulties here in London with the affordability and availability of child care. There are problems for parents of disabled children wherever in the country they live. The employment level of parents with disabled children is 16 per cent., which is abysmally low. That is not to say that all those parents want to stay at home with their children; they often want to go out to work, whether in a part-time or a full-time job.

We need to examine all the issues that make a job sustainable, which could include child care or the prompt payment of in-work benefits. My hon. Friend the Minister is not entirely accountable for that, because in-work benefits are paid through the tax credits system. There must be close working relationships with Her Majesty’s Revenue and Customs to ensure that the transition from out-of-work benefits to in-work support is handled properly and that there are prompt assessments. As we heard earlier, there are issues about housing benefit. Some people do not realise that they might still be entitled to it when they are in work, depending on the level of their wages. Those people need to be made aware of that.

The issue of sustainability leads me on to the test that can be carried out to establish what people’s income will be in employment as opposed to on benefit. As the Chairman outlined, many people on benefit are fearful that they will lose the security of their, albeit very low, income when they go into the world of work. They are not entirely sure whether all the entitlements that they receive in work will match those that they receive out of work. For the overwhelming majority of people, being in work pays, but it does not pay for certain groups, and some lone parents with high child care and travel costs might well be no better off or only slightly better off in work. If we are to ensure that work is sustainable, we need a strategy to address all those barriers.

Natascha Engel
Does my hon. Friend recall our visit to Jobcentre Plus in Newham, where we met three or four women claimants, most of whom were single parents? When we asked about the better-off calculation, which assesses whether people would be better off in work or out of work, the advisers told us that it was not automatically done for lone parents on benefit unless they specifically asked for it, which seemed absolutely ridiculous to every Member on the visit.

Mrs. Humble
My hon. Friend makes an excellent point. If the Government are really serious about adopting a “work first” approach, it must apply from the initial interview—from someone’s initial contact with the Department for Work and Pensions. We heard examples such as that of a mother who had been widowed and who had young children at home, and it could of course be hurtful to talk to such people about better-off calculations when they have recently been bereaved. There will of course be exceptions, but individuals should be offered the calculations as soon as possible, because many people do not know their entitlement to in-work support or employment law support. Many people—particularly young women—are unaware of the excellent legislative changes that the Government have introduced on the work-life balance to give them all sorts of entitlements, such as time off when their children are ill, statutory holidays and new arrangements for maternity pay.

The Government have a responsibility to advise people about such issues to ensure that they go into work, that that work is sustainable and, to pick up an earlier point, that there is the possibility of advancement. One problem that has been raised with me as a constituency MP is that when people are in fairly low-paid jobs and have little hope of advancement, the jobcentre does not give them advice, because they are already in employment and are expected to look in the newspapers and find things out for themselves. However, many people in the lowest-paid jobs lack skills, might not have educational attainments and, quite honestly, often do not know where to look for opportunities to re-skill so that they can get into jobs that offer them a lot more. Long-term sustainability means having promotion prospects and being able to move from basic, entry-level jobs to more interesting, better-paid jobs. I therefore urge the Minister to look again at our recommendations on the issue.

As part of that, I want to repeat a recommendation that was made in earlier reports about the pilots to build on the new deal. In a report some time ago, our predecessor Committee pointed out that the original new deals worked well and put something new in place to support lone parents, people with disabilities, over-50s and the like, but many people might be over 50, a lone parent and disabled. The Committee recommended then, and recommends now, that personal advisers should not categorise individuals as belonging to one little group. People should be seen not just as lone parents, for example, and advisers should consider whether there are age, gender or disability issues.

We were pleased when the Government set up the building on new deal pilots, but they did not go anywhere. In the present report, we ask what has happened to BoND. Can we have a rebirth please, if not of BoND, then of something very similar—[Interruption.] The Minister now has a whole series of recommendations on the matter, but I will refrain from making any. I simply say that we must not label people when they walk in through the door, but see them as individuals who need support for their particular needs. That in turn means that we need appropriately trained staff with the range of knowledge and experience necessary to deal with individuals in the round and the flexibility to do so. However, the Government have not only not given personal advisers more financial flexibility, but have reduced the financial flexibility that they currently have. The limited amount of money that advisers had to buy people a new suit to help them get into work, for example, has been reduced. However, we are constantly told in our inquiries that that small amount of money can make the difference between somebody going back into work or not going back into work. Will my hon. Friend the Minister look into that? 

That leads me on to two final points, one of which leads into the other. There are too many pilots. We keep reading of pilots, and they usually work. They do a good job, and somebody in a particular area will benefit, but nobody in other areas does. I am sorry, but I really am going to have to get a dictionary out when I leave to look up what starting a pilot actually means. To me, it means that if things work, we then look at extending them throughout the country. One such pilot, which was mentioned earlier, was the new deal plus for lone parents. We have been told that it is working well where it is in place and offering lone parents just that little extra. Similarly, the Committee’s report calls for the work-related activity premium to be extended to parents of secondary school-age children, because it has worked well where it has been implemented.

There is a lot more that I could say about our report, but I will not, because colleagues want to get in. The Government have done so much good on this issue, but it is now time to build on that, to build on the pilots and to reconfigure services. In the Committee, my hon. Friend the Minister has a group of Members from all political parties who work hard and produce excellent reports with excellent suggestions. Will he please listen to us as much as he does to some of the external organisations and individuals that he commissions to produce very similar reports?

15:20:00

John Penrose (Weston-super-Mare) (Con)
I want to endorse and to follow up on many of the excellent points already made by my Select Committee colleagues: the Chairman, the hon. Member for Bradford, North (Mr. Rooney), and the hon. Member for Blackpool, North and Fleetwood (Mrs. Humble). In particular, it is important that we should not forget the points made about the Leitch report and its endorsement of the skills agenda, particularly for those over 25 and out of work. We have already heard how co-payment is not a viable opportunity or option for those people. I also endorse my colleagues’ comments about the Freud report and its suggestion about reinvesting benefit savings in bringing more people into work. Those look like excellent suggestions and I await with great interest the Minister’s response and in due course the Government’s more detailed response to Freud.

Before I go any further with my comments, I should apologise to the Minister and to my hon. Friend the Member for South-West Bedfordshire (Andrew Selous), because I must leave before they sum up. I hope that they will forgive me for that.

I want to expand a little on the point about flexibility for local advisers. We heard time after time, in many items of evidence, that that is vital. However it is, I think, contrary to many of the instincts of a large bureaucracy that goes for central control. It requires a degree of courage to allow the professionalism and excellent training of many of the advisers to be used to its fullest effect. Yes, some sort of control can be exercised by imposing a budget, so that flexibility does not run out of control, but it seems to be one of the most effective ways of allowing individual jobseekers to be treated as individuals, and their personal and specific circumstances to be taken properly into account.

Therefore, it is particularly disappointing that the Government’s response, at paragraph 65 on page 14, to our recommendation that personal advisers be given greater discretion over further benefit extensions, is:

“The duration of these payments is four weeks, to help the claimant until their first in-work payday. The Department considers that benefit extensions beyond this timescale have no policy justification.”

That is peculiar, to put it politely, because in paragraph 34 of the same response the Government say, in discussing whether it makes sense to extend the definition of sustainable employment to 26 weeks or beyond:

“The purpose of monitoring sustainment over a shorter period is twofold: statistics show that the risk of becoming workless decreases over time, outcomes in the short to medium term are a good indicator”.

Thus the Government are accepting that the longer someone is in work, if they can be got over that initial difficult period at the start of work, the better; there is a massively improved likelihood of staying in work. Surely that provides them with precisely the policy justification, which they said in their response in paragraph 65 did not exist, for giving advisers more flexibility to get people over the initial introductory hump, settle them in and ensure that they remain in work for the crucial first weeks and months, by whatever means their circumstances make necessary. I hope that the Minister will give a proper response to that.

I was disappointed with the Government’s response to the various points that were made about discrimination. Discrimination is extremely difficult to quantify. The assumption that tends to be made is that it is the remaining explanation for any differentials in employment rates for different groups, after all the other explanations have been used. However, it is difficult to understand precisely how much discrimination affects different groups. Nevertheless, the evidence that we received included a wealth of anecdotal certainty among many different groups that discrimination is real and affects many different jobseekers severely. Whether someone is elderly, from an ethnic minority, or in some other category, discrimination in one form or another is potentially a serious barrier to work for some people.

It is important to understand that discrimination is not exercised only by employers, although I am afraid to say that it does occur with some employers. It may have other sources. Members of a person’s family or community might frown upon their going into work, so that they must overcome a societal barrier. I am very concerned that the Government’s response on this, whenever we have asked Ministers about it in evidence sessions—and, indeed, in the response to the Committee’s report—seems to be to postpone it, and to say that a report is coming up. Real hard suggestions are absent and that is deeply worrying at this stage. I hope for some concrete suggestions, because it is a difficult area to understand but it is vital to do so if we are to take on this task properly.

I am conscious that other hon. Members want to contribute, so I shall limit myself to one more point. To return to what the hon. Member for Blackpool, North and Fleetwood said about the Government’s targets and whether 80 per cent. is right, she will, I am sure, be pleased to hear that I do not plan to go into any more detail about numerators and denominators, but it is important, from a conceptual point of view, to understand who we expect will get into work, and who we expect will not. The Government have said that they want 80 per cent. of some fictional number—the number of people in work divided by the number of people below retirement age, which is a strange figure anyway—to be in work. That implies that they have a view that the other 20 per cent. are not supposed to be in work. We need, as a country, to be clear about who is in that 20 per cent., and why that is the figure. What is the justification? Where is the evidence to support it?

The Government’s response on that point looks pretty woolly. Paragraph 8 of their response to our recommendation states:

“The Department’s view is that producing a list of groups not expected to work would be likely to limit the aspirations of those who could potentially re-enter the labour market with the right support.”

I completely accept that if the message were wrongly conveyed, that interpretation might be taken, and that is not the Committee’s intention or, I am sure, the Government’s. However, it must be possible, particularly given the Government’s vast resources of spin doctors and so on, to get the message across in a way that does not have that impact.

I remind the Government of their own comment in paragraph 10:

“There will be many disabled people and carers, for example, for whom employment is not a viable option.”

They say that they do not want to identify such people, because it might limit their aspirations; then, two paragraphs down the very same page, they have done it. It is clearly possible, provided that it is approached sensitively and with a degree of understanding, to explain that people may not be expected to re-enter the labour market, because it is difficult for them and it may be unreasonable to put them under that pressure, but that the Government want to give them the opportunity. The Government did that extremely carefully in their recent proposals to reform the incapacity benefit system. The support group has exactly such a definition behind it; its members are not expected to be in work, and will not be put under pressure to enter work, but if they want to get into work and volunteer for the process, they will be welcomed, supported and encouraged. Not only that group of people, but others should be given clarity about whether they are expected to be in work.

What will be the approach to people who are retired? We know that people over 65 will probably be encouraged into work in future, but are they expected to be in work? If not, let that be made clear: let us say that they are part of the 20 per cent. of society who are not expected to be in work, and that if the Government want an excuse for not attaining more than 80 per cent., with respect to their target figure, that is a reasonable one. We should not beat up Ministers for failing to get retired people into work when they do not want to be in work. I am trying to help the Government out by suggesting that as a potential answer to future criticism. Equally, as has been mentioned, we should consider people in full-time education. It may be unreasonable to expect them to be in full-time work.

I encourage the Government to be bold and clear about this issue. Who do we expect to be in work, and who do we not expect, but encourage, to be in work? Once those groups are defined, it will not be difficult to quantify them with at least reasonable accuracy, so that we know whether 80 per cent. is the right figure to aim for. If we have quantified groups of people who are not expected to be in work and they turn out to be 30 per cent. of the population, rather than 20 per cent., an 80 per cent target is ridiculous and we should reduce it to 70 per cent. Similarly, if those people are actually only 10 per cent. of the population we should raise the target, because 80 per cent. is too easy. It is important that the Government are not precisely wrong on the figure in saying that it is difficult to measure. It is important, however, that they are willing to be approximately right and say that they can define the groups and, within reason, distil from various statistics how many people there are in those classes, so that we know whether they are aiming at the right target.

That is an important point. If we do not have accurate statistics and targets, the Government will, by definition, be pointing their policy towards achieving an invalid or incorrectly grounded policy objective. It is therefore fundamental to the way in which the Government approach things that their targets are worth while—they are fond of targets—and provide a sensible direction for policy. This one in particular needs substantially more work.

15:30:00

Natascha Engel (North-East Derbyshire) (Lab)
I am absolutely delighted that the Select Committee has secured this debate. This is one of the many reports we have done to which the whole Committee was very committed.

On the one hand, the Government have been most successful in identifying an incredibly ambitious aspiration of 80 per cent. of people in employment. They also identified work as the best route out of poverty—I believe that everyone on the Committee agreed with that—and therefore also as the single best way of ensuring that their other ambitious targets to end child poverty are also met. The Committee applauded what the Government are doing in respect of the 80 per cent. target, and therefore was excited about examining the detail behind the strategy. We focused on the strategy, and that is where we were most critical. I should like to focus on it a little now.

The strategy falls into many different parts. Further to the point made by my hon. Friend the Member for Blackpool, North and Fleetwood (Mrs. Humble) about pilots, there have been some immensely successful pilots, and immensely successful examples of getting people back into work. One of the pilot areas for pathways to work in my area of Derbyshire, which we visited quite a while ago, informed much of the Committee’s debate and much of what went into the report.

We saw that the more individualised and tailored the support, the more people had success in making the leap from out of work into work. The more tailored the support—and, by the same token, the more expensive the support—the more successful the strategy was, not just in placing people in work but in keeping them in work for any length of time.

That goes to the heart of the problem that we as a Committee had with the strategy. It has been mentioned already, but is worth mentioning again, that the system and the Department for Work and Pensions at present look at the whole system—the whole strategy—of getting people back into work in terms of the benefits that they claim. They do not consider the individual or the barriers that they face in going into work. That has a huge implication for anybody who claims anything other than one simple benefit. For anybody who has multiple disadvantages—many different types of disadvantage—there is an issue about which benefit is the basis for getting them into work. We need not only a system change but a culture change, but that will not happen just by tweaking the present system. Other Members have spoken about the changes that they would like, but I go back to the point that the more tailored and individualised the support, the more successful it will be.

The report deals with one of the big problems with strategies to get people back into work, which is that at present everything is delivered through Jobcentre Plus. Jobcentre Plus does an excellent job at many things in many parts of the country, but the focus is almost exclusively on job entry. Although there are bits about keeping people in work for a certain time—and we can discuss until the cows come home what that period should be—what Jobcentre Plus really focuses on is job entry. The proportion of people who come back to claim benefits, and who go back through the doors of Jobcentre Plus, is 70 per cent. That is a staggering figure. It tells us that there is something seriously wrong with the kind of work that Jobcentre Plus is doing. There is a revolving door, a churn—whatever one wants to call it. People go to Jobcentre Plus and are placed in work, but they fall out of the labour market far too quickly and come back through the doors of Jobcentre Plus again.

There are plenty of statistics about keeping that 70 per cent. out of Jobcentre Plus, keeping them in the workplace and meeting our 80 per cent. target. All sorts of different statistics are bandied about, but they indicate that the system is not really succeeding at keeping people in work.

The report also points to what the Committee identified as a sort of a tick-box mentality in either the DWP or Jobcentre Plus. Once somebody has gone for 13 weeks, or however long it is, the box is ticked and their case notes go into the files. The person does not really matter until they come back through the door, when their case notes become live again. Not only is that enormously inefficient and expensive, but it is not very good for the individual who bobs in and out of the labour market and is just running to keep up. The Committee focused on that.

That brings me to the point about work first, work first plus and Lisa Harker’s report. Freud and Leitch were enormously interesting to read and enormously informative, but Lisa Harker’s report on child poverty targets is one of the best reports that I have ever read. She proposes the idea of work first plus. Under the New Zealand model, when somebody comes through the doors of Jobcentre Plus, the focus would be on work—not benefits—but not only on work. The focus would be on good work. Not only are people being churned through the doors of Jobcentre Plus, but we also have many people who are in poverty at work, and that is very alarming. I go back to the points made about lone parents and lone parent benefit, and how we must create a system whereby it is worthwhile for somebody to go back to work. Work is about a lot more than just earning money to survive. It is about creating social networks, and progression and personal development.

That brings me to retention and progression. An alarming aspect of Leitch was the description of our economy as having many low-skilled or unskilled jobs and many high-skilled, high-technology jobs but really nothing in the middle. It is difficult, given the state of our economy, to progress from a low-skilled, low-paid, often menial job through the labour market into a higher-skilled, higher-paid job. We must look at that situation in a sophisticated manner and develop policies to deal with it. Much is said about in-work skills and “Train to Gain”, but we must also consider how our economy is structured. That would go a long way towards ensuring that we keep in touch with people once they are in the labour market, rather than just letting them bob in and out without gaining any skills or any really useful experience other than how to sign on again.

The Government’s response to our excellent report on their employment strategy referred frequently to the Freud report. I am aware that the Government have not yet responded to it. I would like to make a bid in respect of the response. The Treasury will produce a response to Leitch, and the DWP will respond to Freud. Would it be possible to produce a hybrid response to both reports that addresses skills and welfare at the same time? That is essential if we are to deal with the skills development agenda but also keep people in work and reach the 80 per cent. employment target.

The Freud report talks a lot about the radical proposal of regional prime contractor-led monopolies and consortiums bringing in local private and voluntary sector organisations to deliver welfare in each of the regions. The Committee produced its report when the Freud report was happening in the background. All members of the Committee welcomed some of Freud’s proposals and thought that they were new and interesting. We will certainly look at them in far greater detail, but we had slight concerns about the effect that such a large regional consortium would have on the local provision that is currently good. Some local provision is not good, but some is absolutely excellent. There were also concerns about the ultimate effect that proposals would have on Jobcentre Plus, which has a good district-based network of not just personal advisers but jobcentre managers, who are part of networks and liaise with local authorities and private employers. There is a danger that making consortiums far too big would undermine the good work that is happening and if it is done in the wrong way, the Government’s 80 per cent. employment target could also be undermined.

The proposal for city strategies was in the Welfare Reform Act 2007 and was discussed in our report and the Government response. The Committee visited Glasgow and I have recently found out about the Manchester city strategy. City strategies work best where there are close personal working relationships, not just with Jobcentre Plus, but with local authorities and different local providers. The key to the success of city strategies has been the pooling of resources and budgets. It is fundamental to the success of city strategies that those operating them are in control of the resources and budget. City strategies that have not yet been so successful have not been running for long and we should give them more time because it is a no-brainer to say that city strategies must work. Pooling resources and bringing together people with an interest in the strategies has to be a good thing.

As my hon. Friend the Member for Blackpool, North and Fleetwood mentioned, Jobcentre Plus and city strategy partners are losing flexibility because the Government have recently centralised the procurement budget. That undermines the help and support that can be brought in at a district and city strategy level in order to better and more easily reflect local labour market needs and the needs of local claimants. Nationally pooled and spent budgets means that the local labour market angle is totally lost, which we warn against in the report.

Finally, the Government response states that there will be

“a small number of consultation events in May 2007”

on the Freud report. I am not aware of any consultation events although I have been looking out for them. I would like to know where they will be, when they will be and who can take part in them. The issues raised by Freud are dramatic—such as moving welfare delivery from Jobcentre Plus to the private sector for people who are out of work. That is a dramatic shift and I understand that the DWP will be piloting Freud’s recommendation before it is introduced. As it is such a dramatic shift from the way that welfare is currently delivered, consultations should not take place not just in May, but for a much longer time. We need the opportunity to scrutinise that proposal much more carefully to ensure that the good things are not wiped out.

I do not wish to be too negative and will end on a positive note. The whole Committee agrees that the 80 per cent. target is wonderful; it was just the way to reach it that we had slight concerns about.

15:44:00

Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD)
It is a pleasure to be here. I feel a bit like an intruder because so far all the speakers have been members of the Committee—it is only the Front-Bench spokespeople who are not. Having listened to the quality of the contributions from all parties and all members of the Committee, it is clear that the Committee is well on top of its brief and knows what it is talking about. That comes through in its excellent report, which offers a strong critique of the Government’s employment strategy, albeit phrased in the careful, constructive, none the less critical language that we have heard from all members of the Committee. In particular, the Chairman, the hon. Member for Bradford, North (Mr. Rooney)—who I am sorry has left the Chamber so will not hear me say this—gave an excellent introduction to the debate and clearly set out the wide range of issues that need to be considered in relation to the Government’s employment strategy.

The last sentence of the contribution of the hon. Member for North-East Derbyshire (Natascha Engel) summed the matter up: it is not the 80 per cent. target about which we are worried, it is how we will achieve it. That is the question. All parties think that it is right to have the objective of getting more people into employment, particularly from the disadvantaged groups that are mentioned in the report. That is the right objective and a considerable amount of good work is taking place.

The Committee said in the report, and I believe strongly, that the overall employment strategy and target for significantly raising the employment levels of people with disabilities and on incapacity benefits must be a big part of successfully delivering on that objective. That is not a matter considered extensively in the report because it was the subject of a previous report by the Committee. None the less, it is important to place on record that if the numbers of people in employment in this country are to be significantly increased, it is important to get people off incapacity benefit or its successor—the employment and support allowance. The Minister and I spent many a happy hour in the Committee that considered the Welfare Reform Bill considering that matter in detail and I was delighted that many of the amendments introduced by the Liberal Democrats in Committee were accepted by the Government when the legislation reached the other place. That is a welcome sign of the Government’s willingness to listen.

However, as the Chairman said in his excellent introduction, the Government response is thoroughly inadequate, and does not address many of the points that were made. It is uncharacteristic for the Minister to be inadequate; normally when we discuss these matters—not least at the recent international gathering on welfare reform—he is robust and clear in his opinions. That does not come through effectively in the Government’s response.

15:48:00

Sitting suspended for a Division in the House.

16:03:00

On resuming—

Danny Alexander
I think that I had finished the point that I was making, but I am sure that, if I repeat myself, hon. Members will bear with me. The Select Committee’s excellent report dwelt in detail on a number of the important issues that need to be dealt with for the Government to meet their targets relating to raising the employment rate. I am referring in particular to issues relating to older people—the over-50s—ethnic minorities, the cities strategy, to which I want to return in detail, and multiple disadvantage, which is, if I may say so, the fundamental burden of the report. That has come out in a number of the speeches that have been made. I do not intend to go into detail on all those matters, because many of the points that I intended to make have been made by members of the Committee. I think that I have made the point, but it is worth repeating that, in looking in total at the way in which the Government—

16:04:00

Sitting suspended for a Division in the House.

16:13:00

On resuming—

Danny Alexander
A critical part of the Government’s strategy to meet the target to increase the number of people in employment must be to tackle the low rates of employment among people who are disabled or who have long-term sicknesses, as well as focusing on the groups that are rightly dwelt upon in the Select Committee’s report. I know, from our discussions in other debates and Committees, that the Minister is well aware of that.

In his opening speech, the Chairman of the Select Committee voiced his concerns about the poor quality of the Government’s response to the report and their inadequacy in addressing many of its important points. It seems that Ministers are in the mood for apologising at the moment—the Chancellor has certainly been in the habit of apologising for other Departments’ mistakes recently. I know that the Minister has great aspirations: perhaps he could take a leaf out of the Chancellor’s book and apologise to the Committee for the Government’s poor response, but that might not be his style. I do not know; we shall see.

Natascha Engel
I do not think that the Committee really wanted an apology from the Minister or the Department. We simply wanted the Department to address some of the important points that we made in order to ensure that we better reach the 80 per cent. employment target.

Danny Alexander
I am grateful for that intervention. Perhaps the Minister will, instead, acknowledge the inadequacy of the Government’s initial response to the report. That would be a good way in which to address some of the points that the hon. Lady rightly made, which I shall now address.

We must consider the report in the context of overall performance on employment. I am sure that the Minister will dwell upon the rises in the number of people in employment under the Labour Government, but despite that increase, the UK employment rate is no higher than it was at the peak of the last economic cycle. Indeed, according to figures that were released yesterday, it is slightly lower. That throws into stark relief the scale of the challenge.

The composition of the employed population has changed slightly. There has been a fall in the male employment rate, which has been balanced by a significant rise in the female employment rate. That goes to some of the social exclusion issues that have been raised. A significant part of the population is workless and there are workless households. Some of those issues were addressed by the Committee in the context of multiple disadvantages. Raising those people’s employment aspirations and employment rates will be an important part of meeting the target.

While the employment rate of groups such as the disabled and lone parents has risen steadily in the past 10 years, albeit from a low base, the employment rate of people with the lowest qualifications has fallen from 58 to 49.4 per cent. since 1992. Those figures highlight the points that have been made about the synergy between the Freud report and the Leitch review and the importance of the skills agenda in pushing the employment strategy through. According to yesterday’s figures, the employment rate in the UK is 74.4 per cent., so we are still some way from meeting the 80 per cent. target.

Other points have been raised that are worth reflecting on. Both the Chairman and the hon. Member for Blackpool, North and Fleetwood (Mrs. Humble) talked about the importance of engaging with employers. That point has been made throughout our debates on welfare reform. I have said several times that the Government’s policy on employment seems to be largely supply-oriented, the view being that if they put in place policies to get people ready for work, employers out there will simply absorb those people into long-term, sustainable employment.

For people in some of the groups that we are discussing, particularly the multiple-disadvantaged for whom disability is part of that, there is still a significant amount of work to do to change attitudes. We need to work with employers and to have a long-term relationship with them to ensure that they are willing, ready and able to employ people after work has been done to prepare those people to enter the labour market. The Government have not really applied themselves to doing that. The Secretary of State’s recent announcement about the partnership programme with large employers such as Tesco is a welcome step in the right direction, but it is practically the first thing that the Government have said about engaging with employers that has any substance. I welcome that step, but we need to see much more progress in that area.

The report rightly dwells on labour market disadvantage and identifies several different elements of disadvantage in the labour market. That concept is much more useful than the approach that the Government sometimes take, particularly in relation to disability. During our debates on the Bill that became the Welfare Reform Act 2007, I suggested that we should identify labour market disadvantages rather than identify barriers using medical terminology. That is a better way of thinking about the position that many people in society are in—suffering from multiple labour market disadvantages—and recognises the social context rather than placing the barriers firmly with the individual, which has too often been the Government’s approach.

The Committee’s report was published before Freud’s, but the news of his publication was already in the public domain. In a sense, the Committee’s comments on the Freud report are limited, but there are clear synergies between what David Freud said in his report and the points that the Committee has made. 

The Government have talked about piloting. The hon. Member for Blackpool, North and Fleetwood made the sensible point that we have a lot of pilots, but not many aeroplanes. Pilots come and go, but the idea of programmes taking off across the country sometimes falls by the wayside, in some cases despite considerable success having being identified in pilots. Her point is an important one: when pilots are successful, the learning, knowledge and ideas from them need to be applied.

The need to have full consultation has been mentioned. We do not know anything about the events in May. The Minister indicated that this might be one of them, but our only clue about that is that it is May. Full consultation and discussion about the ideas in David Freud’s report need to take place, and we look forward to the Government’s response.

The hon. Member for North-East Derbyshire asked why the Department for Work and Pensions and the Treasury do not get together, in an astonishing feat of joined-up government, to publish a single, combined response to the Freud report and the Leitch review. That is a good suggestion, but I suspect that her faith in joined-up government may be considerably greater than mine. If the two Departments could find a way to get together on that, it would signal that the skills agenda and the Freud review’s agenda of bringing labour market services to those who need them in a more targeted and personalised way over the long-term had been taken forward.

There are concerns in relation to the Freud review, although they are not about the review itself. I welcome its content and believe that, in some areas, which I shall come on to, the Government could go further in the direction that he signalled, rather than hold back. The Minister is not one to hold back, and I hope that he will not do so in this area.

We should examine the role of the voluntary and private sectors in delivering welfare to work services. The long-term funding model suggested in the Freud review takes account of the fact that the money that will be paid in benefits to people should they remain on benefits for a long period is, in a sense, a payment for failure. If that money can be used to help to stimulate greater, targeted activity in the private and voluntary sectors to help people back into work, that must be a good thing; it would be a good funding model. It would better reflect the idea that we should spend to save in this area and seek long-term investment that delivers long-term benefits. The Treasury has perhaps not historically been comfortable with such a funding model, but I hope that the Minister will push it forward.

I wonder whether the Minister, when examining the Freud review, will be inclined to rethink some of the proposals that have been put forward in the cities strategy. A discussion of the strategy was an important part of the Committee’s report. In some areas, the Freud review contradicts, or is, at least, in a slightly different current of opinion to, the ideas contained in that strategy. The Freud review seems very much to be about bigger contracts and contracting out—concerns have been expressed about the way in which contracting is being centralised—whereas the cities strategy is about devolving to city level.

I have another concern. Although the emphasis in the Freud review is rightly about engaging with and utilising the innovation, skills, experience and benefits of the voluntary and private sectors, in the implementation of the cities strategy, engagement with—this is certainly the view that I have heard from providers—private and voluntary sector contractors seems very much to be an afterthought by the cities strategy consortiums that have so far been set up.

The boards and the consortiums in the city strategies are perhaps naturally public sector led, but, in many cases, they exclusively involve the public sector, bringing together Departments, local authorities, quangos and other public bodies. They do not bring on board the expertise, ideas and innovation that the voluntary and private sectors can bring to the table, and which the Minister has, in other contexts, rightly celebrated.

I hoped that those sectors would be brought in at the beginning of the city strategies, rather than as an afterthought. I hope that the Minister will explain some of his thinking, because the feedback that I have received has suggested that that is not happening in some of the city strategies. Some of the more sceptical responses that I have heard have said that the city strategies are more about bringing services back in-house, perhaps within local authorities, than about utilising the sorts of services and ideas that the Freud report rightly highlights.

The Chairman of the Committee rightly said that there is no point replacing Jobcentre Plus with, as he put it in an aside, large private sector monopolies. On the centralised contracting process and the lead contractor model, the Committee’s report identifies the risk that the lead contractor model could lose the very local innovation that has taken place. I should particularly highlight the work of the Shirlie project in Inverness, which the Minister is yet to visit, despite a commitment to do so. I am sure that in many of the constituencies of the hon. Members present, and in mine, that degree of local innovation could well be lost in the lead or prime contractor model. I hope that the Minister is conscious of that when developing the contracting process.

The Committee rightly concentrated on the fact that many people who wish to get back into work face multiple barriers to work. The sort of help that is available under the current system depends on the benefit that one is on. The system means that many people do not get access to the help that most suits their needs. Many of the support services available under pathways to work are not available to people on jobseeker’s allowance, despite the fact that we may be talking about someone whose most significant barrier to employment is a low-level mental health problem. Getting help through the national health service is an integral part of the pathways model. Accessing such services as a matter of course is much harder for people on jobseeker’s allowance.

That sort of thinking in silos needs to be broken down, and service needs to be much more personalised. The Committee has rightly highlighted the experience gained from its visit to New Zealand. I recently had the pleasure of a brief visit to New Zealand and Australia. In Australia, the jobseeker classification instrument, which sounds like a weapon of torture but is a means of assessing the range of different disadvantages that someone faces, provides, at the start of the process, a much clearer method of analysing the variety of different barriers that an individual might face in getting back into work. No matter which benefit someone is on and no matter what their main barrier to labour market participation, the process of having the jobseeker classification instrument applied to them—that sounds terrible and I am sure that I could have phrased that better—means that they get directed to precisely the sorts of services that are needed to address the specific barriers that are most important to them.

In Australia, people are also then directed to the private and voluntary sectors through the job network that exists in Australia, not just for people who have been on benefit for more than a year, but for nearly all claimants after three months. That experience needs to be evaluated more closely to see whether the Freud review goes far enough in terms of the extent to which the experience and innovation of the private and voluntary sectors are used.

The Committee’s report also made the point that in New Zealand, the assistance and support that are available to get back into work are based much more on the needs of the individual, rather than on the individual benefit that they are receiving. The concerns about that are reflected in the fact that the building on the new deal programme seems to have disappeared off the face of the earth. Perhaps the Minister will explain what has happened to it, because I am sure that he knows what has happened to it.

The Committee made the point powerfully in its report that there should be much more focus on retention and ongoing support in employment—not just getting someone into a job, but ensuring that that job is sustained and that they move perhaps to a better job and then to a career. The ABC of labour market participation is a job, a better job, and then a career. Taking someone through that process should be a big part of the Government’s employment strategy. Work first may be right, but there must be an emphasis on sustained labour market participation and not on the sort of recycling that we have seen too often in the new deal programmes.

The hon. Member for North-East Derbyshire is no longer in her place, but she made the point that some 70 per cent. of Jobcentre Plus customers are recycled again and again. Dealing with that problem through sustained engagement with the individual and the employer can be a way of building those long-term relationships. I saw that when I visited the working neighbourhoods pilot—yet another pilot, to take the point that was made by the hon. Member for Blackpool, North and Fleetwood—which has been very successful and has engaged with people in a particular ward in Glasgow, not just to get them into work, but to continue that engagement, sometimes over a sustained period to enable them to move forward.

At the end of its report, the Committee addressed benefits simplification and in a few short paragraphs pointed out a particularly important area for ongoing consideration. I am delighted that the Committee says that it is planning to carry out another inquiry into benefits simplification, and I greatly look forward to its results.

The Committee concluded that the effects of complex benefits can be significant in terms of barriers to the labour market. It pointed out one or two areas where barriers exist—for example, income disregards. The point has been made in the debate about better-off-in-work calculations, particularly relating to lone parents. I would add to that the relationship between benefits and tax credits, and the fact that they are dealt with by different Departments. Different bureaucracies mean that the interaction between benefits and tax credits, which are now a big part of understanding whether someone is better off in work, is not well understood. Jobcentre Plus is not always easy to access for someone trying to gain an understanding of their position.

There is a wider issue where we could go further. The Committee went to New Zealand, so Committee Members will know that detailed consideration has been given there to moving towards a single benefit for people of working age. That important idea merits further discussion. Clearly, there are issues of detail that need to be worked through, but the idea is to remove many of the complexities and distinctions between benefit levels, depending on why someone is out of work, and instead, for example, in relation to disability, provide support much more through disability living allowance, which is payable whether or not someone is in work, as opposed to having different levels of benefit dependent only on whether someone is out of work. That would be a more coherent and straightforward way to approach the matter, and would remove much of the complexity that too often disadvantages those who are seeking to get back into work.

The Minister has suggested in previous debates that that may be worth exploring, and perhaps he will give us a wee hint as to how the Government intend to move forward. Moving towards a radical simplification of benefits, while not without pitfalls, could make a big difference to employment and to delivering the Government’s employment strategy.

16:33:00

Andrew Selous (South-West Bedfordshire) (Con)
It is a pleasure to serve under your chairmanship, Mrs. Anderson, and to be back here. I was a member of the Select Committee throughout the last Parliament, and I have happy memories of Thursday afternoons contributing to these debates.

It is excellent to see my old colleague and veteran of the Committee, the hon. Member for Blackpool, North and Fleetwood (Mrs. Humble), who must be in her second, if not third Parliament on the Select Committee. It is wonderful that such knowledge and expertise is retained, and I am sure that all its members are grateful for that experience—I see some hon. Members nodding. It is extremely useful to a Committee to have that collective knowledge going back.

I am thrilled that we are having this debate this afternoon, because the matter is tremendously important. We have heard many positive ideas this afternoon. In such a debate, there have inevitably been criticisms, but there have also been many constructive suggestions, and it is in that spirit and that vein that I make my remarks this afternoon.

The Government told us, rightly, at the beginning of their response that some 2.5 million more jobs have been created in this country since 1997, and many of those will have gone to migrant workers. Some 1.24 million 16 to 24-year-olds are not in education, employment or training—they are often referred to as NEETs—and we know that, overall within the economy, some 2 million economically inactive people want to work, but do not appear in the unemployment figure of 1.7 million, which came out yesterday. If that 2 million is added to the 1.7 million, around 3.7 million people of working age want a job but do not have one, which is why this debate is so important.

I want to start by looking at training and the skills agenda, because I think that is the key issue in the Government’s employment strategy, and I think that they recognise that. The Treasury commissioned the Leitch report towards the end of last year, and we shall see the Government response in due course.

Last month, my attention was drawn to an article in one of the magazines that come across our desks by Professor David Ashton of the Centre for Labour Market Studies at the university of Leicester. It was entitled “Learning and training are two skills not one”. I thought he made an extremely valid point: that when we talk about the issues, we often confuse the equity issues associated with remedial education with training issues that employers need and which are part of a demand-led system. We merge the two together when we talk about this tremendously important area. He said in his article that after

“three decades of training programmes”—

this goes back over previous Governments—

“we still have 15 per cent. of working age adults who are functionally illiterate and 20 per cent. lacking basic numeracy skills.”

That is the backdrop to many of the issues that we are discussing this afternoon.

What do we mean by functional illiteracy and functional innumeracy? I will give an example of both. If someone is asked to find an electrician and is given a copy of the Yellow Pages, they could not do so. That is the sort of definition we are talking about. If they went into a supermarket with £5 in their pocket and bought something, they would not know how much change they should receive. Those are two examples from the official literature that defines functional illiteracy and innumeracy.

Employers rightly ask why they should be expected to pay for the sort of remedial education that I have just spoken about. Those people have been in the education system and at school for 10 years or more, and employers might ask whether the cost of addressing that illiteracy and innumeracy should go back to the schools from which those people came. It is important to be aware of that issue when discussing training.

The Leitch review of skills had quite a lot to say about the work of the Department for Work and Pensions, even though the review was commissioned by the Treasury and dealt largely with the work of the Department for Education and Skills. My attention was drawn to page 124 of the report, where Lord Leitch said that there is no automatic basic skills assessment for new jobseekers when they make their claim. It is done only after six-months stage of being a JSA claimant. Even when Jobcentre Plus identifies basic skills needs, the report says:

“Only 11 per cent of people with identified basic skills needs…complete a basic skills qualification.”

Further on in the report, on page 127, Lord Leitch makes the point that the hon. Member for North-East Derbyshire (Natascha Engel) made so eloquently earlier in the debate. He says:

“Around two thirds of all JSA claims each year are repeat claims, some 1.6 million claims.”

On learning those figures, we should think about what is happening in human terms. The report really says, “People on JSA go into the labour market and get a job for two or three months before their employer realises that they cannot understand the health and safety instructions on the wall; and that, very sadly, they lose their job, go back to Jobcentre Plus, sign on until they get another job for a couple of months and then they end up out of work again.” It is subsistence employment—going in and out of the labour market. It is a churn, and we must address the issue more seriously than we have done in the past.

On 12 February, the Minister said that there should be a requirement on migrant workers who do not speak English to take steps to improve their English. As far as I understood his announcement, it was to be a requirement—I think that he is nodding at me from across the Chamber. Philosophically, is it such a big leap from, “We the state are going to do our bit, be on your side and pay you—not a very big amount, but the JSA—every week to help you get a job,” to, “Should you not, therefore, as a citizen whom we are trying to help to learn reading and basic maths, work with us, and perhaps be required to do so?” It is just a question that I pose as much as anything else, but philosophically, given that the Minister made an announcement on 12 February about migrant workers who do not speak good English, I wonder whether it is such a big leap. Perhaps we should consider that issue.

On the skills pledge, I received a helpful brief from the British Chambers of Commerce that speaks favourably about the “Train to Gain” regime that the Government have introduced, and the new qualifications and credit framework, which has not been mentioned this afternoon. The BCC expressed its concern that the regime and the framework will not have bedded down or have been introduced for that long by 2010, when there is the implicit threat that employers will have to provide on a statutory basis the remedial training that I have discussed. I should like the Minister to respond later or to write to me about that issue. The BCC also commented on the sector skills councils, saying that there are rather too many of them and that they could be usefully rationalised. The brief is an important representation.

Harry Cohen (Leyton and Wanstead) (Lab)
The hon. Gentleman is right about Lord Leitch pressing for the skills pledge and the related bargain, but Lord Leitch said that if there is a low take-up, workers should have a statutory right to training that is relevant to their employment. Are the Conservatives philosophically opposed to that idea?

Andrew Selous
No, absolutely not. There are two issues. I do not know whether the hon. Gentleman was present when I talked about what Professor Ashton said earlier, but I said that I am not sure whether it is right for an employer to pick up the tab for what a school did not do—either under my Government or under this Government. That is what I am saying, quite bluntly. Frankly, the employee has a right—a duty from society—to be taught to read and count. It should have happened at school, but if it has not, we cannot ignore it and pretend that it has. There should be a right to it from the public purse. I am very wary of loading the cost on to employers, who could reasonably say, “Why have I been paying corporation tax all these years to the Treasury to fund schools, when I have employees turning up who cannot read or count?”

On the issue of training that is useful to that employer, however, I am with the hon. Gentleman, because if the employer is going to benefit and profit from his business, it is right that he should pick up some of the tab.

Danny Alexander
Earlier, the hon. Gentleman seemed to suggest that individuals who have the lowest levels of skills, literacy and numeracy have an obligation or responsibility to seek skills, which is what he said that the Minister said in relation to migrant workers. Is the hon. Gentleman suggesting therefore that it should be a matter to which conditionality is applied in a benefit system?

Andrew Selous
Philosophically, that is an interesting question. I should like the Minister to reflect on it, but, like the hon. Member for North-East Derbyshire, I am deeply concerned about the large number of people who go through the claimant process and in and out of work with very low skill levels. We must address that situation. To help the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), I am neither being prescriptive nor annunciating specific Conservative policy. This is a Thursday afternoon debate, and it may be one of the few opportunities that we have for one of the consultations that the Minister said he was going to organise. I am asking the question in the spirit of these debates—no more than that. Perhaps we could leave party politics out of it, because the issues are too serious. I hope that we are all concerned about getting the issues right, and I merely pose the question at this stage—no more than that.

The Committee’s excellent report mentioned lone parents, and I agree that personal advisers should have discretion over whether there is a mandatory increase in the frequency of work-focused interviews. Time and again, from almost every Member who has spoken, we have heard about the need to treat claimants as individuals: not to mould them to the system, but to mould the system to the needs of the individual. Later, I shall say more about the way in which we can travel a great deal further along that path. The issue is tremendously important.

On page 20 of the Government’s response, I was particularly pleased to see recommendation 52, which talks about lone parents. The Committee said:

“There may be a range of reasons why a lone parent does not wish to work. We recommend that the DWP concentrate its efforts on providing better support for the majority of lone parents who do want to work, as discussed in the chapter on lone parents above.”

That is humane and sound. The hon. Member for Blackpool, North and Fleetwood may remember my making similar concerns known to the Committee when I was a member during the previous Parliament.

The Child Poverty Action Group, in its excellent submission to this afternoon’s debate, went into more detail. It talked about the increase, from 12 to 16, in the age of children as far as conditionality is concerned:

“Between 12 and 16 children face enormous changes and challenges in life such as starting secondary education, facing exams and going through the physical and emotional changes associated with puberty and adolescence. It is also in these years that many will face challenges such as becoming sexually active, using alcohol and drugs, being bullied or developing a mental health condition. A lone parent should be able to put their child’s welfare and emotional needs before employment if required during these difficult years.”

Again, that was the Committee’s sentiment in recommendation 52.

On that general point, it is also worth saying—again, the hon. Lady may remember my making similar comments in the previous Parliament—that the Department for Education and Skills has a role, through its overall responsibility for family policy, in trying somehow to help couples stay together. We have talked about Australia this afternoon, and the hon. Member for Inverness, Nairn, Badenoch and Strathspey said that he was off there soon.

Danny Alexander
I’ve been.

Andrew Selous
Then I wonder whether he came across the excellent family relationship centres that exist throughout Australia. They not only do remedial work and help with child support, but help families to try to stay together in first place. Whatever our politics, I hope that we all agree that prevention is better than a cure. I am not someone who just accepts that such things happen. We can do a little bit, as a Government and in the voluntary sector, to help couples to stay together. Organisations such as community family trusts do excellent work in this country; indeed, the one in my constituency—south Bedfordshire community family trust—does precisely that.

In relation to the over-50s, I understand from the report that there has been no reduction in the past decade in economically inactive people aged between 50 and the state pensionable age. The over-50s make up 40 per cent. of the non-working population of working age, and so are a vast pool of talent and expertise that could be wasted if we do not get things right.

Getting the training right for that age group is tremendously important, particularly as we have just put through the House a Bill that will raise the state pension age to 68. I have huge concerns, which I expressed in the Committee stage of the Pensions Bill to the Minister for Pensions Reform, about the lack of sufficient training for older workers. Someone who has worked in a steel foundry or elsewhere in heavy industry cannot continue in that work when they reach their early 60s. They need to retrain and be reskilled in order to carry on working until they can claim their state pension at the age of 68, but we are not doing enough.

I pressed the Minister for Pensions Reform to provide information on the number of workers over 60 who are out of work in each local authority area, and on the training and retraining opportunities available to them in those areas, but he refused to provide it. I hope that what I am saying will strike a chord with all members of the Committee. I urge them, and particularly those Labour Members here, to put pressure on DWP Ministers to look at this tremendously important issue, on which we need to do more.

I was also interested in what the Committee said about the issue of forced retirement, involving workers over the age of 65 who do not have adequate protection. A lady in precisely that position came to see me in my surgery last week. She had worked for Luton borough council all her life and, at the age of 65, had applied to keep her job. The council went through the process of deciding whether she could, but she was told that she could not. She was a bright, intelligent and capable woman, who needed the income and enjoyed going to work. As a result of having left the employment of Luton borough council, she now cannot work for any other local authority in Bedfordshire. Future generations will look back with incredulity at our society, for telling people when they reach retirement, “That is it—you can be forcibly got rid of.” To me, that is the equivalent of saying that people who are 6 ft 5 in or who have brown eyes can be got rid of. That is how we will be viewed.

I am not blind to employers’ concerns that, effectively, they will have to keep a file on every one of their workers if they should want to dismiss them beyond the state retirement age. However, I cannot believe that it is impossible to reach a workable solution that will give workers better protection, but also ensure that employers can get rid of workers over retirement age who are not up to their jobs, as sadly they will need to do on occasion. I note that the issue is currently before the European Court of Justice, as referred by the High Court in December, following the Heyday case, brought by Saga.

The issue of ethnic minorities was another of the main points raised in the report. I agree wholeheartedly with what the Minister said recently: the disparities in employment among some ethnic minority groups—particularly the Bangladeshi and Pakistani communities, as the Chairman of the Committee also mentioned—are far too high. That is something on which we must make greater progress. The Minister said that he held a summit on the issue, and some suggestions were made by my hon. Friend the Member for Weston-super-Mare (John Penrose) earlier.

Benefit simplification gets a brief mention at the end of the report, although I was not hugely impressed by what the Government said about it. Benefit simplification is one of those issues on which parties can never make much progress in opposition, but there really is an opportunity to do something about it in government. We all know that the benefits manuals have grown larger and larger and that the debates on social security in the House are attended by fewer and fewer hon. Members. Why is that? Frankly, it is because even very few Members of Parliament fully understand the complexities of the benefits system. That is deeply worrying, because we cannot hold the Government to account or have sensible debates on the issue. Most importantly, the range of benefits that our constituents have to deal with causes sheer befuddlement. The National Audit Office has looked into the issue, as has the Public Accounts Committee, but much more needs to be done.

The Chairman said in his opening remarks that the new deal needed to be refreshed, and I agree with him. There is now quite a lot of statistical evidence that the results of the new deal are not as successful as they were in the past, that taxpayers are perhaps not getting the value for money that they should and that the sustainability of the scheme for ongoing employment is not there. We know that almost one third of new dealers have been on the scheme on two or more occasions and that nearly 50 per cent. of young jobseekers who leave the new deal for young people end up back on benefits within a year. We also know that 23 per cent. of those leaving new deal 25-plus in August 2006 found jobs without claiming benefits, compared with 38 per cent. in June 2001. The figures are clearly going the wrong way. I hope that the Minister and his colleagues are into evidence-based policy making, because those are quite worrying statistics.

Danny Alexander
While the hon. Gentleman is on that point, perhaps he is aware of comments made by one of the Minister’s predecessors, the former Minister for Welfare Reform, the right hon. Member for Birkenhead (Mr. Field). He recently described the performance of the new deal in relation to young people as “woeful” and drew attention to the fact that, as he claimed, there were significantly more people in the 18-to-24 age group who are out of work now than in 1998. Does the hon. Gentleman think that that reinforces his point?

Andrew Selous
That figure is correct, although it does not really matter who said it; we just need to look at the evidence, and I am afraid that the evidence is not good. Indeed, some of the indicators are going in the wrong direction.

The key issue is what we should do going forward. David Freud talked in his report about some payments being made by result as a possible replacement, as well as other schemes that could run alongside the new deal. That is where the focus of policy debate needs to be at the moment. There are obvious concerns about how such schemes are structured. We should ensure that they help those furthest from the labour market, who are the most difficult to help, and that they lead to sustained employment. I completely agree with the Committee Chairman and others that 13 weeks is a wholly inadequate measure for sustained employment. Who plans anything in their life for three or four months? None of us operates in such a way in our own lives. One cannot pay a mortgage on three months’ employment, and one cannot plan to pay for a holiday, plan to buy a new car or do any such thing on the basis of 13 weeks’ employment, which is not “sustained” employment under any definition that our constituents would recognise.

It is tremendously important that the payment by results models are structured so that the hardest to help are not left out. They will need a higher fee—more money will need to go to those who have been out of the labour market longest. That is probably the best proxy for the hardest to help. I am convinced that it is possible to put together a package to help all those with some of the payment by results schemes.

To take one example, an independent provider, Tomorrow’s People, is achieving a 90 per cent. rate of people staying in work for at least 13 weeks, compared with a result of only 33 per cent. under the new deal for young people and new deal 25-plus measured during the same period. There are opportunities to get a lot more people back into work on a sustained basis. That is a tremendously exciting possibility that the Committee will consider seriously.

My final point is about an issue mentioned by almost every Member who spoke this afternoon—the importance of giving the personal advisers more flexibility, treating claimants as individuals and trying to get the system to fit their circumstances rather than the other way round. We have heard a lot of figures this afternoon—we have had numbers of people, percentages and all the rest of it. I want to end my remarks by referring to two individuals, both of whom I spoke to earlier this afternoon and both of whom have given me permission to mention their cases.

The first is a Mr. Michael Hughes of Ipswich. Happily, he has a job at the moment—I am sure that we all send him our congratulations and hope that he can keep it. He had been on jobseeker’s allowance for some time. Incidentally, he asked me to say that he rated his new deal adviser as extremely good—he was very impressed and wanted no criticism of any of the individuals who had helped him. He was concerned only about the system with which they were working.

Mr. Hughes had one specific problem. He had the Institute of Certified Bookkeepers qualification and was all set and ready to get a job. There was lots of work around Ipswich that he could have got. The one thing that he needed to start work was for his indemnity to be paid. He thought that it would cost £250, which was too high a figure as it turned out to cost only £182. When he told his employment adviser about the problem, he was sent on a 13-week course to do a CV. The course was poorly run, I am afraid. There was very little access to computers, and he had to redo his CV time and again. He said that the course lowered the morale of the people on it. Even when his local MP tried for him, he was not able to find out the cost of sending him on that course, but I bet the Minister that it was rather more than £182. We have heard about the flexibility in New Zealand; why could Mr. Hughes not have been paid £182? He could have been in work straight away, much earlier than he was.

The other story comes from a Mr. Ian Freke of Bristol, who wrote both to me and to his local paper. His letter is in the public domain. He had been unemployed for more than a year. For the first nine months, he had not claimed JSA, but lived off his savings. He had not wanted to claim, but started to do so on 6 December 2006. He was absolutely thrilled to have been offered a job on 28 March this year. He had to start at 7 o’clock in the morning. He did not have a car, so he looked at the bus timetables. The earliest bus would not have got him to work until 7.35 am. It would have taken him an hour and 10 minutes to cycle, which the Minister would probably think unreasonable—the Minister is not responding, but I hope that he would think so. What Mr. Freke wanted was to get the job and get off JSA, so he wanted a scooter, which—on the road, taxed and ready to go—would have cost about £500. He was being paid £228 in JSA every month, so within two and a half months, the Department would have got its money back. Sadly, the job has gone. He was not able to get from the Department the means to get the work. This afternoon, I spoke to Mr. Freke, who is still out of work and claiming JSA. It will not be long before the Department will have paid out more in JSA than it would have cost to give Mr. Freke the means to get to work.

We have to give personal advisers responsibility and discretion. If they get it wrong very occasionally, so be it. There are excellent people among them, and they will get it right more often than they get it wrong. They will get it right in eight or nine cases out of 10. Of course there must be overall responsibility, limits and accountability to managers, but please, New Zealand can do it! What is the point of a Select Committee that travels the world and finds out best practice from other countries if we do not learn from it? The travel budgets that the House pays will not be worth while if Ministers of any Government do not listen to those who can tell them about best practice and what works in other parts of the world. Please, can we give the personal advisers more discretion on how they spend their budgets, which have been reduced? I hope that my two examples will give the Minister pause for thought.

17:07:00

The Minister for Employment and Welfare Reform (Mr. Jim Murphy)
Mrs. Anderson, I thank you for chairing this debate, which has been well informed. That reflects the dedication that the members of the Work and Pensions Committee, on both sides of the political divide, show to the responsibility that they have.

I thank the Committee for its report on the Government’s employment strategy. Given today’s debate, it is clear that we largely share common aims and common concerns. The report was informed by visits to my home city of Glasgow—I am sure that that was of great benefit—and New Zealand. I understand that the Committee is also to visit California shortly. I can only quietly reflect that I am in the wrong job; unlike the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), I have not had the opportunity to go to New Zealand or Australia.

Generally, there has been warm acknowledgment of the success of the past 10 years; certainly all Labour Members who have spoken acknowledged that pretty freely. The hon. Member for Inverness, Nairn, Badenoch and Strathspey also did. To be fair to the hon. Member for South-West Bedfordshire (Andrew Selous), he also acknowledged the real progress in one half-sentence at the start of his contribution, although his comment was tinged with the dig that a proportion of the jobs will have gone to migrants. That was his half-sentence acknowledgment of the progress of the past 10 years.

I say relatively gently to the hon. Gentleman that it is sometimes instructive to reflect where we have come from in respect of the scale of the achievement. A decade ago, it would have been unthinkable for us to have had a sensible or legitimate conversation about an 80 per cent. employment rate. That was just not part of the political discussion or vocabulary, except perhaps among the frustrated fringes of part of the trade union movement in the Labour party. They may have asked why their ambition of full employment—the historic goal that the movement and the Labour party were founded to achieve—could not be achieved. However, here we are having a proper conversation about a proper Select Committee report and having a proper debate on how we can deliver on that historic demand for full employment. Ten years ago, more than 2 million were unemployed, the number on incapacity benefit had trebled over the previous 20 years and 6 million were dependent on out-of-work benefits. Of course, we still have a lot more to do.

The debate has shown that there are still clear dividing lines, but they no longer seem to be based on the accusation that the introduction of a national minimum wage would be ludicrous and would cost 1 million jobs or that mass unemployment is a price worth paying. The modern dividing line on the labour market that has come across in today’s discussion seems to be about rates versus ratios and numerators versus denominators. A consensus seems to have been created by the Government, employers, trade unions and society at large that an investment in full employment is a price worth paying.

My hon. Friend the Member for Blackpool, North and Fleetwood (Mrs. Humble), in particular, talked about the success of having 2.5 million more in work and an employment rate that is up in every region of the United Kingdom, as well as the fact that 900,000 fewer people are on out-of-work benefits today than a decade or so ago. A number of hon. Members from all parties, the hon. Member for Inverness, Nairn, Badenoch and Strathspey and my hon. Friends the Members for North-East Derbyshire (Natascha Engel) and for Blackpool, North and Fleetwood, Fleetwood being the most important, reflected on the pilots and how much effort, analysis and retrospective justification it will take before we can get them to fly nationally.

My hon. Friend the Member for Blackpool, North and Fleetwood asked specifically about the new deal plus for lone parents. I remind her, the Committee and the House that in the child poverty strategy that we published recently as part of the response to Lisa Harker’s report, we have said that we will extend the new deal plus for lone parents until March 2011 in the pilot areas. We will expand it to all lone parents in London, in part in acknowledgment of the specific challenges of the London labour market that were alluded to by my hon. Friend the Member for Bradford, North (Mr. Rooney). We will also extend key elements to couples on benefits in the pilot areas throughout London. We have learned from that example of best practice and extended it through our announcements on child poverty.

Phenomenal innovations are taking place across the country. This week, I have had the opportunity to combine one of my great passions, football, with my determination to go further with our welfare reform and employment agenda. I visited Middlesbrough football club and, earlier today, Millwall football club. They are two phenomenal examples of innovations whereby the voluntary, private or community sector has done things that would have been unimaginable for a Government to have achieved before, because of the power and pull of the brand of Middlesbrough football club, a community club, and, despite my preconceptions of Millwall based on its previous fan base, because of the remarkable things that Millwall is doing as part of its continued rehabilitation. Incidentally, when I lived in London before, I used to actively go and watch and support Millwall, until at a game against Portsmouth Millwall scored and, instead of celebrating, different factions of the Millwall supporters started to fight with one another. To me, that was symbolic of the problem that Millwall had, but it has worked remarkably hard to change its image. The work that I saw today that supports people from all backgrounds and ethnicities—migrants and others—in resolving the difficulties that they face in the labour market was pretty inspirational.

The hon. Member for South-West Bedfordshire asked about the new deal. I can sense in some Conservative spokespeople a continuing, decade-long retrospective justification for their opposition to the new deal in principle. The new deal has helped 730,000 young people into work and 85 per cent. of those job entries have been sustained. The new deal has helped us to have fewer than 10,000 long-term unemployed 18 to 24-year-olds in the United Kingdom. There is a strong case for a more flexible new deal, for additional discretionary powers for advisers and for all sorts of measures to refresh it, and we remain committed to the principles of BoND. We are actively discussing how to put proper shape to those principles so that we can refresh the success of the new deal.

Andrew Selous
Is it not the case that unemployment among 18 to 24-year-olds now stands at 518,000, a rise of 15,000 over the last quarter, and that 157,000 of those have been unemployed for more than six months? I hope that the Minister is not complacent about that fact.

Mr. Murphy
There is no complacency on the Labour Benches about what more needs to be done on welfare reform in the labour market. We brought forward the Welfare Reform Act 2007 to support the 2.7 million who are on benefit and others who flow on to it, so that they can be supported in getting off the benefit. The hon. Gentleman is wrong; the long-term youth unemployment claimant count is less than 10,000. That is a remarkable transformation from when his party was in power for those 18 years.

I agree with the hon. Gentleman that we need a family-friendly policy on employment and welfare. For me, that is not about the moralising of the right, nor a sense of tub-thumping and lecturing from some sort of bully pulpit, but an acknowledgment that two parents supporting a child, all other things being equal, have better outcomes. However, the vast majority of lone parents do an exceptional job—in what is probably the most difficult job imaginable—of bringing up children with phenomenal educations and with the love and support that enables them to get on in the labour market and, perhaps more importantly, to develop their character.

The family-friendly approach to the politics of welfare is why we extended maternity and paternity leave and why we introduced adoption leave. I rue the fact that that was opposed by the hon. Member for South-West Bedfordshire and his party, but such extensions in flexibility and the chance to work are part of a continuing family-friendly labour market.

The Select Committee is underpinned by the acknowledgment that if we are to achieve our ambition of supporting those who have multiple barriers to work and are furthest from the labour market, we need to extend the boundaries of welfare much further than we have before so that we can help those whom we have not been as successful in helping as the Labour party might traditionally have had the ambition to be. My hon. Friends talked about those who might suffer from an experience of drug addiction, disability and family pressures, such as those that might come from having a disabled child. As we continue to reform the welfare state, not only through the new deal but with other employment programmes, we need to design systems in the public sector and the private and voluntary sector that acknowledge that a person is an individual rather than someone on a specific benefit. My hon. Friend the Member for Bradford, North and I have spoken about the specifics of how to achieve that on numerous occasions.

My hon. Friend also talked about the employment gap among ethnic minorities, as did other hon. Members. My hon. Friend is more than informed enough publicly to acknowledge that the employment disadvantage is not uniform among all ethnic minorities. Part of it is to do with language. I would like to confirm that my announcement in February was not about migrants but about those who wish to have access to the system and are legally entitled to claim benefits, and about the fact that in future the jobseekers’ agreement would take account of language barriers. It was not about migrants because, as the hon. Member for South-West Bedfordshire knows—and as the Daily Mail knows, although we do not always read it—migrants do not have automatic access to benefits in the United Kingdom in the way that some of the tabloid press, and that newspaper in particular, like to suggest that they do.

On the subject of the disadvantage for ethnic minorities in the labour market, my hon. Friends know that the Business Commission report commissioned by the Treasury will report shortly about what more employers can do to break down barriers and drive out whatever racism exists in their practices, and about what changes can be made to recruitment practices. But it is absolutely the case that the disadvantage of ethnic minorities in the UK’s labour market is partly down to discrimination. There are other contributory factors, of course, but discrimination is a substantial part of it.

One way to look at it is that, as we all know, there are two bulges in ethnic minority performance in education. There is a disproportionate tendency for ethnic minorities to underperform in education and the academic world, but there is another bulge at the top. A disproportionate number of those from ethnic minorities are likely to outperform the UK average in academic performance. So there are two bulges—one at the top that we celebrate and one at the bottom that we bemoan.

In the labour market there is only one bulge of over-representation among ethnic minorities, and it is at the bottom. The above-average performance in the academic world is in no way translated to an equivalent bulge in the labour market. That has to be partly down to discrimination. The Business Commission will come forward with proposals about what more business can do.

Andrew Selous
I am grateful to the Minister for drawing the attention of the House to that point. He said that ethnic minorities are under-represented in employment, but some people from ethnic minorities have their own businesses. Do his figures take that into account? There is tremendous entrepreneurial flair in some of the ethnic minority groups that do well educationally, for which we are extremely grateful.

Mr. Murphy
I think that the analysis takes account of all the trends in the labour market. The fact is that it is not just down to employer discrimination, although that is there. There are cultural issues, family structure issues and the poverty of place—the concentration of poverty and a lack of aspiration. That is all a complicated interplay, but the Business Commission will make recommendations on it.

My hon. Friends the Members for Bradford, North, for Blackpool, North and Fleetwood and for North-East Derbyshire spoke about lone parents and what more we can do to support them. That question is clear in the report. I would point out that in London the lone parent employment rate has increased in the past decade, I think by 8.5 per cent. Although the rate of improvement has not been as fast as in the rest of the United Kingdom, there has nevertheless been improvement. We do need to recognise the specific challenges in London referred to by my hon. Friend the Member for Bradford, North, which is why, as part of the new strategy in response to Lisa Harker’s review, there is an in-work credit in London. It takes account for the first time of the additional pressures that lone parents face in London.

In response to the Committee’s comments we must do more work on how to structure the in-work credit to reward sustained employment. It is currently a regular payment, which is a great help, but we need to do more work on analysing where the drop-off points and pressure points are for lone parents—whether three months, six, nine or whenever is the point at which there is the greatest propensity for lone parents to fall back out of the labour market. We should restructure the in-work credit to incentivise retention at those points of friction.

My hon. Friend also asked about the processing of benefits. There have been improvements in recent years in the processing of housing benefit in particular. In the most recent years for which records are available, between 2002-03 and 2005-06, there was a 19-day improvement in the average clearance time for housing and council tax benefits. There is more that we can and should do, particularly to address continuing underperformance below the average. We are trying to drive that down. We anticipate that the introduction of the local housing allowance in the Welfare Reform Act 2007 should speed up the claims process by an average of a further seven days, which will be welcome.

My hon. Friend the Member for North-East Derbyshire raised the issue of skills, to which Lisa Harker’s report also referred. The question is what we do to assess the skills needs of people—particularly but not exclusively lone parents—at the point when they become unemployed and report the need of a benefit application, so that they can compete in the labour market. In response to Lisa’s report and as part of the evolving work on the new deal, we must be much smarter at the first point of contact so that we refer lone parents not to just any job but to one that fits around their life patterns, child care needs and the pressures of family life. We have committed to that as a consequence of the part of Lisa’s report about trying to mark jobs that are suitable for lone parents. Probably more important is that we do not just wish people luck as they enter the labour market but provide sustained support through their first few weeks of employment to reduce drop-off and the recycling of people coming on to benefit.

Points were made about sustained employment. The definition of sustained employment is currently 13 weeks. The Committee has suggested 26 weeks and David Freud three years. We have given David Freud’s report a warm initial response and we shall respond to it in more detail in the summer. I do not think that I am giving too much away by saying that we are not instinctively attracted to a definition of sustained employment as unbroken employment for three years. David has set us a phenomenal challenge and, based on the challenges that we now know of in the labour market, we can no longer defend the idea that 13 weeks is sustained employment. In considering the detail of the Select Committee’s report and David Freud’s report, we will move away from that. I shall not announce today what we shall move to. We joked at the seminar earlier in the week that no one considers 13 weeks to be sustained employment with the exception of current Ministers. No one would plan on the basis of 13 weeks’ employment, as the hon. Member for South-West Bedfordshire fairly said.

An additional point on sustained employment is that we have made important announcements about permitted work rules and introduced more sensitive linking rules on benefits. We need to go further in publicising some of the rules, not just to customers but to those with whom we work. If we were all to pop into our local citizens advice bureaux—mine, like many others, does a phenomenal job—we could ensure that the advocates there were aware of some of the changes that we have implemented.

I was asked what events we have planned as part of the continuing conversation on Freud. We had an event earlier this week organised by the Smith Institute, which was attended by my hon. Friends the Members for Bradford, North and for North-East Derbyshire, who spoke at the event. Lord Kirkwood of Kirkhope was there and spoke from the audience, and the hon. Member for Bury St. Edmunds (Mr. Ruffley) also spoke. We have an event tomorrow in Manchester, organised by ippr north, involving stakeholders and others, and one has been organised for 22 May by the Social Market Foundation as part of the discussion prior to the Government’s formal response to Freud. Once we have that response we will enter a formal Government process of listening and consulting. Even before that we are trying to give people an opportunity to feed into the process.

On benefit simplification, which is referred to in the Select Committee’s report and was mentioned by hon. Members this afternoon, when I arrived at the Department I thought, “Well, let’s just do that, then.” But if it were so easy to do—I am not being political about this—the previous Government and every Government would have done it. I have reflected on it, and although every new benefit rule is introduced for a correct and proper reason, they have cumulatively led to a benefits system that is bamboozling for our customers, some of our advisers and many of our advocates.

There is the issue of how simplification should be done, but there is also the question whether if there were a single benefit there should be a single benefit rate. That is a reflection on the comments in the Select Committee report and elsewhere, but it is easier said than done. It will rightly be acknowledged that there are additional pressures such as the financial pressures of disability.

We have to reflect on whether we bring low benefits up to the level of the disability benefit or whether we level the disability benefit down to the jobseeker’s allowance rate. That would probably be a lot less popular, and it is something that we would never do. If we want to simplify benefits and have a single working-age benefit, we will have to deal with all sorts of often complicated issues.

Andrew Selous
I am sure the Minister is aware that we have another 25 minutes. I would not want him to rush his remarks because of the two Divisions.

On benefit simplification, I note that the Select Committee’s report states on page 94 that

“New Zealand is planning to introduce a simplified benefits system.”

If New Zealand can do it, I hope that it will not be too great a challenge for the United Kingdom.

I may have missed what the Minister said, but I hope that he will respond on the point about flexibility of the personal adviser, which has been raised by many Members.

Mr. Murphy
I know that Members would thank me if we were to finish before five minutes to 6, Mrs. Anderson, but I shall not test their patience by inviting you to put it to a Division, as I know that that is not allowed.

The hon. Member for South-West Bedfordshire almost incites me to visit New Zealand. My understanding of what is happening there is that they have been planning to introduce this sort of reform for some time. Wishing is easy, planning is difficult, and doing is even more difficult. I believe that that has been the experience of New Zealand.

On the point about flexibility, I believe that I alluded to it quite early in my remarks. In terms of refreshing the new deal, there is, of course, a strong case for greater flexibility for our advisers but also for our customers, so that we acknowledge the nature of the barriers that individual customers face.

If Members will allow me, the last thing that I want to concentrate on is the city strategy. However, if they wish to ask additional questions, I would be happy to respond to them. [Interruption.]

Janet Anderson (in the Chair)
Order. I shall suspend the sitting for 15 minutes for a Division in the main Chamber.

Mr. Murphy
Mrs. Anderson, would it be possible for me to take one minute to conclude my remarks? That way, we would not have to come back.

Janet Anderson (in the Chair)
Does the Chairman of the Committee wish to speak after the Minister?

Mr. Rooney
I am happy to leave it on this occasion.

Janet Anderson (in the Chair)
Go ahead, Minister.

Mr. Murphy
I thank you, Mrs. Anderson, and my hon. Friend the Member for Bradford, North.

The city strategy is an important opportunity to drive out economic inactivity in our big cities. It was launched in April, and we are working through the detail of the targets this month. It will play an important part in our determination to achieve the 80 per cent. employment target across the UK, because our cities underperform on that target in a much more significant way.

With that, Mrs. Anderson, I wish to thank you, all the hon. Members who participated in the debate and, more importantly, the members of the Select Committee who every week work on this agenda in a way that is constructive but also challenging. In particular, I would like to thank my hon. Friend the Member for Bradford, North, who is acknowledged across the political divide as playing a phenomenal role in keeping unity by challenging unity within the dynamic of the Select Committee.

Question put and agreed to.

Adjourned accordingly at twenty-seven minutes to Six o’clock.