Welfare Reform Green Paper

With permission, Mr. Speaker, I wish to make a statement on the Government’s Green Paper, ““A new deal for welfare: Empowering people to work””. After eight years of a Labour Government, there are now 2.3 million more people in work. There are 1 million fewer people on benefits. Some 2 million children and almost 2 million pensioners no longer live in poverty. Since 1997, we have worked to build a modern, active welfare state. Through the minimum wage and tax credits, we have made work pay. Through record investment in the new deal and Jobcentre Plus, we are creating an enabling welfare state that responds to the needs of individuals. All that contrasts with the record of the Conservative party. Eighteen years of economic mismanagement and welfare failure resulted in 3 million more people of working age on benefit. Unemployment went up 50 per cent. The numbers claiming incapacity benefit trebled as it was used to hide mass long-term unemployment, and 3 million more children were left to live in poverty. It is time now finally to bring that shameful legacy of Thatcherism to an end. That is why ensuring that people have the right to work must be a fundamental responsibility of any modern Government. Work is good for people. Work can be the bedrock of personal responsibility, dignity and well-being. The challenge that we face today is how to build a modern welfare state that allows people to exercise the right to work when our national economy is changing more rapidly than at any time since the industrial revolution. It is not only our economy that is changing. We are confronted by a rapidly ageing society and a falling birth rate. Soon, and for the first time in our history, there will be more people over the age of 80 than under the age of five, so our welfare state must continue to adapt to meet those challenges. We have set ourselves the ambitious goal of an 80 per cent. employment rate. Its achievement will be critical for our nation: for individuals, for families and communities, for the process of wealth creation, for economic competitiveness and for social justice. I do not underestimate the scale of meeting that challenge. It will mean a million fewer people claiming incapacity benefit, a million more older people in work and 300,000 lone parents off benefit. The proposals that we are putting before the House today will make a significant contribution to realising those ambitions. Today’s Green Paper builds on reforms that we have already introduced to remove the remaining barriers that hold people back from work. Our approach is based on a belief in an active welfare state that balances rights with responsibilities, and that provides work for those who can and support for those who cannot. Our proposals will be fair to claimants and fair to taxpayers. We will reform incapacity benefit. Nine out of 10 people who come on to incapacity benefit expect to get back into work, but if people have been on incapacity benefit for more than two years, they are more likely to retire or to die than ever to get another job. That cannot be right. The circumstances of claimants are changing, too. No longer is incapacity benefit associated with only Britain’s industrial heartlands. There are more people on incapacity benefits in the south-east than in the north-east, and there are at least 150,000 people on incapacity benefit in every region in the UK. A third of new claimants now cite mental health problems as the main reason for coming on to the benefit, compared with a fifth in 1997. The issue affects all the country, not just parts of it. We have already made a start. The combination of increased support through the new deal for disabled people and the extension of rights through the Disability Discrimination Acts has started to improve the opportunities available to disabled people. Building on those reforms, our strategy is threefold. We will act to reduce the number of new claimants. We will provide greater help for those on the benefit to return to work. For the most severely sick and disabled, we will provide even more support. The Green Paper sets out proposals to improve workplace health. General practitioners have an important role to play in helping to ensure that their patients are able to work, so we will test the impact of putting employment advisers in GP surgeries. The first of those will be in place within a month. We will work with GPs and primary care professionals to support individuals to remain in work or return to work, and we will reform statutory sick pay to simplify it and ensure that it helps people to stay in work. We will reform the medical test, which acts as the gateway to incapacity benefit. We must ensure that the assessment process is focused on people’s potential capability and capacity to engage in the labour market, rather than just their incapacity. Central to that will be the reform of the exempt category in the existing benefit structure. We must ensure that it no longer writes people off simply because they have a particular condition. For example, if people are blind, the current benefit structure assumes that they will always be incapable of work. That is wrong and unfair. We will correct it by reforming the criteria for exemptions. In future, all claimants will be assessed to determine not just their eligibility for benefit, but also their capability to work. I recognise the sensitivity and, of course, importance of getting this crucial aspect of the reforms right, and we will consult on that and other issues to ensure that we take a fair and equitable approach. We will also review the mental health component of the test. In addition to reforming the gateway, we will also reform the benefit itself. From 2008, new claimants will receive a new employment and support allowance, replacing the current system of incapacity benefits. The perverse incentives in the current system will be removed. Unlike today, no one will be eligible for the benefit until they have completed the proper medical assessments. Claimants will no longer receive more the longer they claim. For those who are exempt, the new benefit will be paid at a rate higher than the long-term rate today. As now, they will be able to take up support if they want to, but it will not be a condition of their benefit. However, for the vast majority—those who will not be exempt—the new benefit will have a clear framework of rights and, yes, responsibilities. People will be required to attend regular interviews, complete action plans and engage in work-related activity. The level of benefit they receive will be above the current long-term rate of incapacity benefit, but those refusing to engage in the help and support offered could see their benefit reduced progressively in stages, to the level of jobseeker’s allowance. Existing claimants will remain on their existing benefit, which will be protected. Over the next few years, we will ask existing claimants to attend a work-focused interview and agree an action plan to take steps to return to work. Those who do not engage will, as now, potentially see their benefit reduced. That process of re-engagement has already started, but we can only ask more of people if the help and support that they need is in place. Our pathways to work pilots—combining employment and health support—have already shown significant success in getting people off benefit and back into employment. I can confirm that over the next two years we will be investing a further £360 million, from within my existing resources—from my own budget—to extend pathways to work to every part of Britain by 2008. For the first time, as a result of that investment, we will bring new hope and opportunity to some of the most disadvantaged communities. I am confident that the reforms outlined today will move us significantly closer to our goal of an 80 per cent. employment rate and the realisation of that vision. I believe that if we take the measures that I have outlined, and work together with health professionals, local authorities and employers, we can get 1 million people off incapacity benefit within a decade. In doing so, we could ultimately save up to £7 billion a year for taxpayers. That should be the scale of our ambition. We also need to do more to help lone parents to get back into work. Today, 56 per cent. of lone parents are back in work compared with only 45 per cent. eight years ago. We know that many lone parents want to work but face barriers to returning to the workplace. That is why we have extended support through the new deals and our 10-year child care strategy. Building on those reforms, we will increase the number of interviews lone parents are expected to attend. We will require those whose youngest child is at least 11 to attend interviews every three months, alongside piloting a new premium so that lone parents are better off if they take serious steps towards preparing for work. Those with younger children will have to attend twice a year, compared with once a year now. We will pilot more intensive support for lone parents during the first year of their claim and we will also simplify the rules so that lone parents are not penalised for joining work experience programmes. A key part of our strategy is to ensure that many more older people are able to remain in work for longer. I have spoken about the challenges of an ageing society. The Green Paper sets out proposals to extend all aspects of the new deal 25-plus to the over 50s. We will improve the back-to-work support for JSA claimants and their partners who are over 50, and will work with employers to extend flexible working opportunities to older workers. The Green Paper also sets out our plans to simplify the existing housing benefit system to improve work incentives and encourage personal responsibility for housing choices. The Green Paper sets out a challenging goal—one that central Government acting on their own cannot meet. Instead, we will need to engage those in the public, private and voluntary sectors in a new mission to improve employment opportunities in our disadvantaged areas. Moreover, there is a crucial role for local community leaders. Tackling worklessness can be achieved only if we work with partners in the local community—including the private and voluntary sectors—and harness their energy and commitment to deliver real progress. Some of our biggest cities in particular have a disproportionate number of benefit claimants. I am committed to opening a new chapter in the evolution of our modern welfare state. Local leaders will be asked to bring together local employment, training and health providers to help tackle concentrations of worklessness. They will be able to ask for greater flexibilities over the use of existing funding. In return, I will ensure that local communities share in the rewards of reducing the number of benefit claimants. For successful bids, I will provide seedcorn funding, and provide outcome payments when they meet their goals. The publication of our proposals today will start a three-month consultation process. We will engage with and listen carefully to all who respond—to everyone who shares our commitment to improving the employment prospects of those currently living on benefit. The proposals will help build a modern welfare state that responds to individual need, balances rights with responsibilities, tackles poverty and disadvantage, and invests for the long term. The Government stand ready to make that investment in our people and our country. That is why I commend the Green Paper to the House.