WORK IS THE BEST FORM OF WELFARE (SAVINGS): THE PROCESS IS THE POLICY. BILL WELLS

WORK IS THE BEST FORM OF WELFARE (SAVINGS): THE PROCESS IS THE POLICY. BILL WELLS

BEVERIDGEAN WELFARE STATE PRINCIPLES: in SOCIAL INSURANCE AND ALLIED SERVICES. [1944] The first principle is that any proposals for the future, while they should use to the full the experience gathered in the past, should not be restricted by consideration of sectional interests established in the obtaining of that experience. Now, when the war is abolishing landmarks of every kind, is the opportunity for using experience in a clear field. A revolutionary moment in the world's history is a time for revolutions, not for patching. The second principle is that organisation of social insurance should be treated as one part only of a comprehensive policy of social progress. Social insurance fully developed may provide income security; it is an attack upon Want. But Want is one only of five giants on the road of reconstruction and in some ways the easiest to attack. The others are Disease, Ignorance, Squalor and Idleness. The third principle is that social security must be achieved by co-operation between the State and the individual. The State should offer security for service and contribution. The State in organising security should not stifle incentive, opportunity, responsibility; in establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family.

% of POPULATION AGED 16 TO 59/64 AT LAST THE 1948 (TO 1966) SHOW: In terms of UK employment We ve done a lot. 88 TOTAL WORKFORCE JOBS & LFS EMPLOYMENT (PEOPLE): AS % OF WORKING AGE POPULATION; [HERE 16-59/64] 86 84 82 8 78 76 74 72 7 68 66 Workforce Jobs LFS Employment 16+ LFS EMPLOYMENT 16-59/64

but to hit 2 million jobs this parliament there is still more to do. THOUSANDS The ageing population is already here. Over 5s who work less up by 2 million. With half over 65 Under 5s who work more down by ½ million. 1,75 POPULATION CHANGE 215-22: BY AGE/SEX: ONS: 212 PROJECTIONS: 1,5 1,25 685 1, 75 542 5 25-25 -91-129 -98-133 62 216-135 -155 297 255 17 163 574 855-5 MALES FEMALES

THOUSANDS So, it is difficult to see employment growth of more than ¾ to 1 million over the next 5 years without substantial policy reform. Reforms would need to deliver 1-1¼ million more people in employment 1, 9 8 7 6 5 4 3 2 1-1 -2-121 -121 PROJECTED EMPLOYMENT CHANGE 215-22 WITHOUT REFORM: CONSTANT EMPLOYMENT RATES & EXCESS UNEMPLOYMENT (BACK TO PRE-RECESSIONARY LEVELS) Constant Employment Rates -89-52 -6 Excess Unemployment (+ve Only) 41 46 69 79 189 221 313 235 569

REFORM: BACK TO THE FUTURE? Complete the process of Beveridgean welfare to work that was RESTART-ed in 1986? SOCIAL SECURITY MUST BE ACHIEVED BY CO-OPERATION BETWEEN THE STATE & THE INDIVIDUAL The State should offer security State sorts out individual s benefits quickly & accurately & provides certainty. for service & contribution. Every individual is expected to behave in a way that improves their situation despite receiving benefits and so minimise the time spent on benefits. The State in organising security should not stifle incentive, opportunity, responsibility; Individual agrees contract of behaviour with state. Based on jobsearch Regularly and frequently check and review the individual s behaviour. State provides more help to individual the longer they are on benefits.

PER CENT The rise in UK average living standards as measured by GDP per head has been amongst the fastest in the OECD over the past 3 years or so. 44 4 36 32 28 24 2 16 12 8 4-4 -8 This is despite a fall of 2% between 27 and 214 427 18 134 127 87 28-2 -19 GDP PER HEAD: %AGE CHANGE 1983-214: OECD: $PPP 1983-214 27-214 78 77 75 74 72 71 69 67 66 66 66 66 65 6 58 5 49 48 42 39 34 8-2 4-5 -11-5 -5 2 2 8-2 5 4-2 3 6-14 -15-1 -18 27-42 RANKED OVER WHOLE PERIOD 1983-214

PER CENT and (much) more of this GDP per head is taken by workers in the UK than in other countries. 65 LABOUR INCOME SHARE: 213 (MOSTLY): ILO 6 55 5 45 62 6 59 58 4 56 56 56 55 55 53 51 5 48 47 35 42 38 3 33

PER CENT UK main rates of benefit are low by international standards. They are, however, more universal, flat-rate and indefinite 1 OECD NET REPLACEMENT RATES: 213 RATIO OF OUT-OF-WORK BENEFITS TO A SINGLE PERSON'S TAKE HOME PAY [FOR 67% OF MEDIAN EARNINGS: INITIAL PERIOD OF UNEMPLOYMENT: WITHOUT HOUSING BENEFIT] 9 8 7 6 5 4 3 2 1 2 31 35 39 39 48 49 5 53 55 55 55 55 56 59 59 61 62 63 64 64 65 68 68 69 7 72 74 75 76 76 77 78 83 84 85 86 89 9 93

this delivers a (far from generous but) relatively universal benefit floor of income support at around 4% of average income. Also it does help to reduce the unemployment trap & make work pay... 22% OECD POVERTY RATES: % OF POPULATION BELOW 4% & 5% OF MEDIAN INCOME 2% 18% 16% 14% 12% 1% 8% 6% 4% 2% % 4% [25] 5% [211 OR LATEST]

INDEX: UK TAKE HOME PAY =1 and once in work the average income of UK workers (wages net of tax/ni Contributions) is amongst the very highest in the world. This is despite poor growth in take-home pay since the recession. 15 14 13 12 11 1 9 8 7 6 5 4 3 2 1-1 142 19 19 15 15 14 1 28 25 19 AVERAGE TAKE HOME PAY 214: OECD ESTIMATES: INDEX UK =1 ANNUAL EARNINGS: $US USING PURCHASING POWER PARITY EXCHANGE RATES: [FOR A SINGLE PRIVATE SECTOR WORKER, NO CHILDREN: ON AVERAGE EARNINGS:] 33 23 9 3 97 95 92 9 9 19 11 9 28 25 19 19 86 85 83 82 82 81 3 22 26 2 79 78 77 77 71 71 63 56 51 37 14 25 22 24 15-1 19 27 47 46 46 45 45 41 39 38 61 28 39 26 39 51 29 13 213 %AGE CHANGE 27-14

PER CENT So, achieving full employment is central to dealing with UK poverty. Currently the UK has one of the highest employment rates in the world and amongst the highest in its history... 88 EMPLOYMENT RATES BY AGE: 214 AS %AGE OF WORKING AGE POPULATION (16-64): OECD 84 8 76 72 68 64 6 56 52 48 44 AGED 16-64 AGED 65 & Over

PER CENT Growth has generally been more job rich/productivity poor.. with, in line with most but not all, other countries, a big improvement in rates from the 8s mass unemployment period. Equivalent in the UK to around 3 million more people in employment. 28 CHANGE IN EMPLOYMENT RATES BY AGE: 1984 TO 214 AS %AGE OF WORKING AGE POPULATION (16-64): OECD 24 2 16 AGED 16-64 AGED 65 & Over 12 8 4-4 -8

and since the recession, growth continues to be job rich. What is more the biggest improvement has generally been amongst those that started off in the worst position PERCENTAGE POINT CHANGE [With young people as a major and important exception.] 7 CHANGE IN LFS EMPLOYMENT RATE BY SEX & AGE: MAR-MAY 28: TO FEB-APR 215: 6 5 4 3 6.3 2 1-1 -1.3 -.4.9 1.1 1.2 1.6 3. 3.1 4.4-2 -3-4 -7.1-6.9-5 -6-7 -8

PERCENTAGE POINT CHANGE rates have grown for UK nationals, most other EU nationalities & most ethnic groups. They have fallen for non-eu nationals (outside the Indian subcontinent), the new EU2 states and for the Chinese 12 1 8 6 4 2-2 -4-6 -8-1 1.2 1.1.5 CHANGE IN EMPLOYMENT RATE BY NATIONALITY (16-64) & ETHNIC MINORITIES (16 & OVER): LFS: (16-64): N.S.A.: JAN-MAR 28-14 -2.2-4.6 11.5 7. 6.4 2.3 1.4.8.5-3.6-8.7

PERCENTAGE POINT CHANGE and all types of households have also benefited. Again the biggest improvements in those that started off in the worst position. Employment rate growth has also been concentrated amongst people with disabilities/work limitations 8 CHANGE IN EMPLOYMENT RATES (16-64): LFS FOR VARIOUS GROUPS OF HOUSEHOLDS/INDIVIDUALS [OCT-DEC 27-14: JAN-MAR 28-215] 7 6 5 4 3 7.9 6.8 2 4.1 1.5 1.6 1.1 2.2.5 -.6 1.4-1

THOUSANDS with active management of disability benefits contributing to this shift from welfare to work. They are now at 2 year lows and 25-3 thousand lower than its peak. But still over 1m higher than the mid 198s. Then, by mistake, a temporary sickness benefit for people without jobs became a permanent incapacity benefit 3,2 2,8 2,4 2, 1,6 1,2 8 4 DISABILITY BENEFITS (ESTIMATED): [Including & Excluding Effect of Equalising State Pension Age] EMPLOYMENT SUPPORT ALLOWANCE (ESA), INCAPACITY BENEFITS (IB) & SEVERE DISABILITY ALLOWANCE (SDA): All ESA/Incapacity Benefits ESA/Incapacity (Net of Females Aged 6-64)

PER CENT but, history suggests that active management is not enough. As the UK is one of the few countries with indefinite benefits the state needs to stay in constant contact, maintaining effective jobsearch behaviour & provide more help the longer the individual stays on benefit. 1 OECD NET REPLACEMENT RATES: AT 5 YEARS DURATION RATIO OF OUT-OF-WORK BENEFITS TO A SINGLE PERSON'S TAKE HOME PAY: 213 [FOR 67% OF MEDIAN EARNINGS: WITHOUT HOUSING BENEFIT] 9 8 7 6 5 4 3 2 1 2 7 2 23 31 32 33 35 47 51 51 58

Thousands Since Restart in 1986 the original Beveridge approach has been reintroduced successfully for unemployment benefits. Virtually all of the improvement has been amongst longer durations as the state has continuously promoted behaviour by the individual that minimises their time on benefit by getting a job. 3,6 GB: UNEMPLOYMENT BENEFITS BY DURATION: 12 MONTH AVERAGE 3,2 2,8 2,4 2, 1,6 1,2 8 4 Total Claimants -4 Weeks Claimants -26 Weeks Claimants -52 Weeks Claimants Total Registrants -4 Weeks Registrants -26 Weeks Registrants -52 Weeks Registrants UK Claimants (Inc. UC) UK Registrants

Thousands activation of lone parent benefits has been similarly successful. And again the biggest improvement has been amongst the longest durations. Down over ½ million since its peak and back to mid 198s levels 1,2 1,1 1, 9 8 7 6 5 4 3 2 1 Lone Parent Benefits Total -13 Weeks -26 Weeks -52 Weeks -14 Weeks

Thousands and, most recently, the activation of 6-64 year olds. The equalisation of state pension age - moving women (and men) from the state endorsed inactivity of early retirement back into working age. Down around 2 thousand largely amongst the long durations. 5 45 4 35 PENSION CREDIT: AGED 6-64 3 25 2 15 1 5 TOTAL MALES FEMALES TOTAL DURATION UNDER 6 MONTHS

PER CENT And, although labour intensive, the active management of benefit registers throughout the duration of the claim is cheap. The object of activation is to get the claimants to do all of the work to find a job that suits them. Much less expensive than training or work experience programmes. 4. SPENDING ON ACTIVE & PASSIVE LABOUR MARKET POLICIES: AS % OF GDP: 213 (MOSTLY): 3.5 3. 2.5 2. 1.5 1..5. PUBLIC EMPLOYMENT SERVICES TRAINING & OTHER LABOUR MARKET POLICIES PASSIVE MEASURES (PRIMARILY BENEFITS)

The improvement in disability benefits has been smaller. It also takes a different form with little improvement amongst the long durations. Not surprising given that the active management concentrates on the start of the claim not continuous management throughout the claim - and on measuring claimant s health status - not promoting jobsearch Thousands 3,2 DISABILITY BENEFITS (ESTIMATED):TOTAL AND DURATION EMPLOYMENT SUPPORT ALLOWANCE (ESA), INCAPACITY BENEFITS (IB) & SEVERE DISABILITY ALLOWANCE (SDA): 2,8 2,4 2, 1,6 1,2 8 4-6 Months (Old Est) -12 Months (Old Est) TOTAL ESA/IB/SDA -6 Months -12 Months

Thousands and the numbers moving on to ESA are primarily means tested as contributory benefits are now time-limited. It also seems that the eligibility tests have tended to weed out those who signed on for NI Credits Only 3,2 DISABILITY BENEFITS (ESTIMATED): EMPLOYMENT SUPPORT ALLOWANCE (ESA), INCAPACITY BENEFITS (IB) & SEVERE DISABILITY ALLOWANCE (SDA): 2,8 2,4 2, 1,6 1,2 8 4 TOTAL ESA/IB/SDA IB/SDA CLAIMANTS IB/SDA CREDITS ONLY ESA MEANS TESTED ESA CONTRIBUTIONS ONLY ESA NI CREDITS ONLY

THOUSANDS and administration of ESA is poor. Over 6, are either still in the assessment phase or even unknown - a quarter for more than a year. And, as the focus is on health not Welfare to Work, most of the 1.67 million who have been assessed 7% - are in the Support Group. With nearly 1m already in that group for more than a year.. 1,2 EMPLOYMENT SUPPORT ALLOWANCE (ESA), NUMBERS IN EACH PHASE: 1, 8 6 4 2 ASSESSMENT PHASE WORK RELATED ACTIVITY GROUP SUPPORT GROUP UNKNOWN

In Northern Ireland since 28 the JSA position relative to GB has got much worse. This coincides with a shift away from the GB intervention regime involving a greater focus on the start of the claim and employability measures rather than activation/jobsearch. This shift reverses the trend towards a UK-wide welfare to work approach PER CENT 7 6 NORTHERN IRELAND AS % OF GB UNEMPLOYMENT: CLAIMANT COUNT: S.A. 5 4 3 2 1

PER CENT and for lone parent benefits as well as JSA the Northern Irish position has worsened during a period when the rest of the GB were introducing successful welfare to work reforms. Only for ESA which has been less successful in GB has the share remained roughly the same. 5.6 WORKING AGE BENEFITS: Northern Ireland as % of GB & Abroad 5.2 4.8 4.4 4. 3.6 3.2 JSA ESA & Incapacity Benefits Lone Parents

PER CENT Housing benefit is a much bigger part of the UK benefit system than elsewhere. There is also a different administrative system, it is not based on household characteristics and it is not flat rate. That makes it difficult to sort out benefits quickly and concentrate on Welfare to Work. Most importantly, it is likely to lead to lags in closing down cases 1 9 8 7 OECD NET REPLACEMENT RATES: HOUSING BENEFIT 'TOP UP' RATIO OF OUT-OF-WORK BENEFITS TO A SINGLE PERSON'S TAKE HOME PAY [FOR 67% OF MEDIAN EARNINGS: INITIAL PERIOD OF UNEMPLOYMENT: 213] 6 5 4 3 2 1 1 1 4 5 8 9 12 12 12 21 23 33

despite this, the numbers on Housing Benefit are now falling for all forms of private and public sector tenants. PUBLIC SECTOR HOUSING: (s) PRIVATE SECTOR HOUSING: (s) Some of this fall may be due to greater active management of the housing benefit register over the past few years 2,2 HOUSING BENEFIT: GB BY TYPE OF HOUSING AND HOUSING ALLOWANCE OR NOT: 1,6 2, 1,8 1,6 1,4 1,2 1, 8 1,4 1,2 1, 8 6 4 2 Social Landlord Tenants [LHS] Private: Housing Allowance [RHS] Local Authority Tenants [LHS] Private: Non-Housing Allowance [RHS]

with the falls in stock due to falls in the numbers flowing on to HB. They are now greater than off-flows which have not improved as much. Thousands HB off-flows are likely to be lower because of an administrative delay in closing down HB claims after people move off the main benefit 1,6 1,55 1,5 1,45 HOUSING BENEFIT FLOWS: 12 MONTHS AVERAGE: GB [ESTIMATED BASED ON DWP AD HOC ANALYSES] 1,4 1,35 1,3 1,25 1,2 1,15 ON FLOWS OFF FLOWS

and the administrative delay in closing down claims is likely to have contributed to the continuous rise in HB for those who are in work. Thousands Thousands The numbers on Housing Benefits for those Not in Employment have fallen by over 3 thousand since the start of 213. 1,2 1,1 1, 9 HOUSING BENEFIT: GB BY WHETHER ATTACHED TO BENEFITS (PASSPORTED) OR NOT: 2,4 2,3 2,2 2,1 8 7 6 5 4 2, 1,9 1,8 1,7 1,6 In Work - Not Attached to Benefits [LHS] Out of Work - Not Attached to Benefits [LHS] HB - Pension Credit Benefits [LHS] HB - Working Age Out of Work Benefits [RHS]

For those in work the number leaving the benefit system entirely has been increasing rapidly. If administrative delays in closing down claims can be reduced it would rise further. Also, if as planned in UC, people leave out-of-work benefits & HB at the same time (so workers don t claim HB) HB would fall further. THOUSANDS 36 34 32 3 28 26 24 22 2 18 16 14 12 1 HOUSING BENEFIT FLOWS: FOR PEOPLE WHO ARE IN WORK: 12 MONTH AVERAGE: DWP NEW ON-FLOW OFF-FLOW- OFF ALL BENEFITS ON-FLOW - FROM OUT-OF-WORK BENEFITS OFF-FLOW - ON TO OUT-OF-WORK BENEFITS

History suggests that integrating administration of Housing Benefit with its main benefit might lead to a substantial fall in the numbers on Housing Benefit for those in work. Registrants: >2, more than Claimants: Oct 1982 Despite supposedly measuring the same thing. Adult Students: >1, in each Autumn1975-88. Roughly time when Benefit Offices & Jobcentres were separated c. 2, 1983-85 when did not have to sign on at Jobcentres in order to get benefit. Year after JSA introduced (from Autumn 1986): fell 3-35, more than previous year: JSA integrated Unemployment Benefit (Contributory) and Unemployment Benefit (Income Support)

THOUSANDS Outside the benefit system there is no longer any continuous active management system of individuals making the transition from education to work or further education. Yet, this is where the worklessness problem of young people lies. The numbers on benefits are at their lowest levels for decades 65 6 55 5 45 4 35 3 25 2 15 1 5 WORKLESS YOUNG PEOPLE UNDER 25: NOT IN FT EDUCATION: (Estimated Rough indications of Scale) 162 JSA 133 LONE PARENTS 19 ESA/DISAB 25 OTHER 'INACTIVE' BENEFITS 51 ALL ON BENEFITS 611 NOT ON BENEFITS

and this has led to young people leaving education and falling through the cracks taking longer to move into work or on to FE. By contrast, the number of young people who have made the move into the labour market who are workless is at historic lows. Chart 3.8: Workless under 25 year olds (excluding those in full-time education) who have never had a job and previously had a job: [BIS Analysis of Labour Force Survey: 4 Quarter Average. 215 NMW Government Evidence]

Also outside the benefit system there is no longer a national jobmatching or career service. For example, not only are students no longer allowed into Jobcentres but neither are workers looking for better jobs. PERCENTAGE POINTS This may have contributed to the fall in employment rate of students and also made it more difficult for workers to move on to better jobs. 1 EMPLOYMENT RATES BY AGE: UNDER 25: IN FULL TIME EDUCATION: %AGE POINT CHANGE SINCE APRIL 1992 5-5 -1-15 -2-25 16-17 YEARS 18-24 YEARS UNDER 25