Opposing Workfare and Privatisation

Issue date

19 Nov 2008

Opposing Workfare and Privatisation: the TUC response to the welfare reform Green Paper

Introduction

In July the DWP published No One Written Off: reforming welfare to reward responsibility, a controversial Green Paper proposing further reforms of benefits for unemployed and disabled people and an extension of individual budgets for disabled people. This document presents the TUC's response, which is being submitted to the Department for Work and Pensions.

Unions represent members from all walks of life, including individuals with a direct interest in the measures proposed by the Green Paper. Many of our members work part time, many are in supported employment, many are parents or carers and many have family members who are unemployed or otherwise disadvantaged.

The Green Paper was remarkable for the dismay it provoked amongst unions; no welfare reform proposal in the past eleven years has aroused such hostility. For the first time in recent history the TUC's annual Congress debated an emergency motion on social security, which was passed without opposition. TUC policy is therefore to organise opposition to workfare, the abolition of Income Support, benefit cuts for lone parents and disabled people, tougher conditionality for other claimants and the contracting-out and privatisation of services. This document expands on these positions and explains why trade unions think that these proposals are seriously mistaken.

To summarise, this document opposes proposals to:

Abolish Income Support,
Introduce obligations to work for benefits,
Extend compulsory training,
Introduce a right to bid for welfare services,
Cut benefits for lone parents and those with long-term illness,
Require all parents of young children to seek work,
Privatise the employment service.

Principles for reform

The TUC has taken an active part in a decade's debates and discussions about welfare reform. From the outset the TUC's General Council decided that our position should be based on three key principles: work, inclusiveness and equality.[1] The TUC urges the Government to hold firm to these principles and not to pursue a different strategy based on the myth of a work-shy Britain.

The TUC strongly supports welfare reforms designed to help and encourage people to get and keep secure and worthwhile jobs. In the changed economic climate, to have welfare policy based on the right to work will require a strategy of intervention to protect employment levels. This would be very different to the work for benefits proposals made in the Green Paper. Recognising this now would make it possible for the TUC to work with Government to build the intermediate labour markets that will be needed. An up-front commitment to employment rights including the national minimum wage would make this possible.

Because of our principle of inclusiveness, we do not accept that any group should be treated as unemployable. In particular we believe that a barrier free, non-discriminatory society would offer equal employment opportunities to all those at a disadvantage in the labour market. There are a range of practical measures the Government could use including the extension of the statutory equality duty as well as working with employers to challenge discriminatory attitudes.

There is a long history of research showing that the vast majority of unemployed people desperately want jobs and they are not fraudulent or lazy. Unemployed people are the victims of unemployment: the vast majority are not responsible for the fact that they are unemployed. If any blame is appropriate it should lie with those making decisions about redundancies and the management of the economy.

The Green Paper assumes that any job is better than no job but evidence has shown that it is wrong to believe that if people work, they and their children will be free from poverty.

The TUC is opposed to the proposal to require parents of very young children to be available for work and training. The changes, currently being introduced, to remove Income Support from lone parents when the youngest child reaches age seven, will test this approach in practice. This should be carefully evaluated. There is already a risk that the rules for JSA will become even more complicated to administer and understand as a consequence. The TUC wants to see more progress made on the availability of affordable childcare. We believe that the improvements recently announced by the Prime Minister should be fully rolled out before further changes are considered for lone parents.

Income Support - the system's safety net

When Income Support was introduced in 1948 (as National Assistance) it was a cornerstone of the Beveridge Plan. Beveridge argued that it would always be necessary in a civilised society to provide support at a basic subsistence level to those without any means of support. The TUC is committed to the existence of a welfare safety net, the cornerstone of system that guarantees support for disadvantaged people.

The Secretary of State's proposals for eliminating Income Support leaving those currently eligible with no alternative but to claim either ESA or JSA will not only abolish the safety net, they will also have the effect of transforming social security into a compulsory work system. The TUC notes that this proposal was not contained in the manifesto on which the Government fought the 2005 election; such far-reaching changes should, we believe, have a clear electoral mandate.

The proposal would make JSA in particular a much more complex benefit both to understand and to administer. As its title suggests, Jobseeker's Allowance is a benefit for people who are required to look for jobs and be available for employment as a condition of eligibility; but everyone agrees that it would be harsh and unfair to require some Income Support claimants - such as lone parents with very young children - to apply for jobs and accept job offers.

Bringing people who cannot be fairly required to be available for employment under the JSA umbrella will require special rules treating them as looking for work for benefit eligibility purposes. This will detract from JSA's focus on employment, undermine the message that JSA claimants are expected to look for jobs and substantially increase the pagination of the JSA rule book.

Income Support and carers

With the introduction of ESA, disabled people are being moved off Income Support, and a similar process is affecting lone parents with older children. Informal carers will be the largest single group remaining on Income Support, and will therefore be the largest group affected by this change. It is important to point out that carers are a heterogeneous group of people with very different needs; the 2001 census found that carers come from different backgrounds and that many different kinds of people are likely to have to take on this role at different times in their lives. While some carers may be better off financially on Jobseeker's Allowance than Carer's Allowance, it is likely that many more will be upset at the removal of the only benefit that specifically provides (inadequate) recognition of the contribution they make to society - estimated by carers UK to be worth £87 billion a year.[2] They will also be angry at the implied imputation that they are not already working very hard.

The amount of time carers spent on providing unpaid care tends to vary. The census found that while the majority (around 67%) were providing between one and 19 hours of care, 21 % were providing very intensive levels of care, 50 hours or more per week and we know that carers who provide heavy levels of care and carers who are trying to balance work and care often experience poor health and high levels of stress.

We do not expect the Government to introduce availability for employment requirements for carers caring over 50 hours a week, but even those with more moderate caring workloads can find that if they try to combine caring and employment their options are extremely constrained - workers providing more than 20 hours of unpaid care a week tend to be clustered in low-level, low paid jobs. Research for Carers UK found that many carers who were in work - a third of those who were surveyed - had considered giving up work because of their caring role.[3]

It is therefore very important that pressure should not be put on those for whom combining work and care is not a viable option; for those carers who want to combine paid work with caring it will be more useful to concentrate on guaranteeing appropriate support, including formal services in the community and within the workplace.

Benefit rates

The Green Paper was published on 21 July - before the HBOS/Lloyds TSB takeover (17 Sept), the Bradford and Bingley nationalisation (29 Sept), Iceland's financial crisis (early Oct), the UK rescue package and the co-ordinated central bank interest rate cuts (8 Oct), the RBS/Lloyds TSB/HBOS nationalisation (13 Oct) and the biggest rise in unemployment figures for 17 years (15 Oct).

The world is now very different. Unemployment is rising rapidly, there is a dramatic need for a fiscal stimulus, and the notion that there will be plenty of jobs for disadvantaged jobseekers to be prodded towards now looks very shaky. Next year harsh measures directed at unemployed people and ESA claimants may not look like the vote winners they seem to be now.

The TUC believes that the Government should reverse the proposals for tougher benefit rules and sanctions (we look at this below) and instead introduce immediate above-inflation increases in benefit rates.

In a time of collapsing demand the economy needs measures that will quickly promote extra spending. Infrastructure programmes and tax cuts will have a positive effect, but it will take time to work its way through the economy. The fastest way to stimulate the economy is by putting money in the hands of those with the greatest marginal propensity to spend: the poor.

Currently Jobseeker's Allowance for a single person aged over 25 is £60.50 a week. A Minimum Income Standard (the income needed 'in order to have the opportunities and choices necessary to participate in society') for a single working age adult, as calculated recently by a team of leading academics is £153 a week, excluding rent, childcare and alcohol. There are similar shortfalls for other family types.[4]

The Government appears to believe that higher benefits would undermine incentives to enter or remain in paid work, by reducing the returns to employment. In fact the UK has, by international standards, very low benefits - relative to wages - for all family types.

The table below shows replacement ratios - the proportion of former earnings a single worker with no children who lost their job could expect to receive from the benefit system. The median country and the UK are highlighted, and we can see that the UK is well below the median; for reasons of space we have only shown one family type here, but the overall picture for other family types is the same.[5]

Net replacement rates for single person with no children, OECD member states, 2005

Rank	Country	Replacement rate (%)
1	Luxembourg	86
2	Portugal	82
3	Switzerland	70
4	France	67
5	Netherlands	65
6	Norway	64
7	Slovak Republic	64
8	Canada	63
9	Denmark	63
10	Italy	63
11	Spain	62
12	Sweden	62
13	United States	62
14	Germany	60
15	Belgium	58
16	Austria	55
17	Finland	54
18	Japan	54
19	Iceland	51
20	Poland	51
21	Czech Republic	50
22	Korea	48
23	United Kingdom	41
24	Hungary	40
25	New Zealand	38
26	Turkey	38
27	Greece	36
28	Australia	33
29	Ireland	31

Plainly the UK could have more generous benefits without a threat of higher unemployment.

The current policy of increasing benefits in line with inflation, not wages, introduced by Mrs Thatcher in 1980, has resulted in benefits that leave people who have to rely on them falling further and further behind the standards that the rest of society expects.

If Jobseeker's Allowance had been increased in line with earnings over the last 30 years it would now stand for a single person over 25, not at £60.50, but at over £100 a week. If it had been increased in line with earnings just since 1997 it would now be worth £75 a week - £15 more. An increase in benefits to these levels would drastically reduce poverty and provide the fiscal stimulus the economy desperately needs.

Benefit conditionality

The Green Paper proposes a new system that applies progressively tougher labour market conditions to working age claimants, and the toughest sanctions regime this country has ever known. For Jobseeker's Allowance claimants the system will look like this:

Weeks 1 - 13: self-managed job search. Claimants will have fortnightly jobsearch reviews, and, about half way through, a 'Back to Work session', with a one-week sanction for failure to attend.
Weeks 14 - 26: directed job search. Claimants will have to look for and accept lower quality jobs and this stage will begin with 6 weekly jobsearch reviews.
Weeks 26 - 52: supported job search. Claimants will have to undertake activities beyond those they have already agreed to in their Jobseeker's Agreements, those with basic skills problems may be directed to take part in a Skills Health Check, with compulsory actions to follow-up.
Weeks 53 - 104: flexible New Deal. This will be run by private and voluntary sector contractors, and will replace the existing New Deal programmes. Claimants will be required to take part in four weeks of either employment or work-related activity. Claimants who fail to take part in activities will face sanctions of up to 26 weeks.
Weeks 105+: workfare. The Government will test different models of mandatory full-time work or work-related activity for people who have not found paid jobs by the end of the flexible New Deal.

The Government is also considering tightening conditionality in other ways:

The Government has asked for views on changing the benefit rules to require claimants to declare whether they are addicted to heroin or crack cocaine. They are also considering, for those who are addicted and are not in a treatment programme, to require them to agree and take part in a rehabilitation programme.
Requiring people aged 60 - 65 to take part in work-focused interviews.
Requiring ESA claimants and lone parents on JSA, like other JSA claimants, to take a skills health check and attend training.

Trade unions agree with the principle that 'Nobody should be written off'. However, we are not convinced that compulsion is the correct way to help people either back into or keep people in work. The 'work first' approach - which emphasises moving people into employment and pays comparatively little attention to the quality of the job - does little to help people out of poverty, and usually substitutes working poverty for out-of-work poverty. A paper for the Cabinet Office Strategy Unit found that, whilst in principle, low skill, low status jobs could be a first step towards better jobs, 'in practice, they provide little in practice, they provide little or no basis for substantial advancement through the labour market. The evidence suggests that short-term mobility in the wage distribution is limited and that individuals who do progress do not generally progress very far.'[6]

Unions would happily support a comprehensive attempt to address poverty through employment, which tackled working poverty as well as worklessness. Tremendous financial and social investment would be required to implement a policy to transform support mechanisms and open up new opportunities for disadvantaged people:

'wrap around' childcare for lone parents to reflect the reality of 24/7 childcare
ergonomic workplace adjustments
mentored support while in employment for people with disabilities
education for employers and co-workers on the benefits workers with disabilities can bring to the workplace
recognition of the problems encountered by people from disadvantaged communities

Benefit sanctions

The TUC is opposed to the reduction of benefit by as much as 40% for lone parents on JSA and believes that the proposal to increase the length of benefit sanctions is particularly damaging. These proposals impose a financial penalty on children in poverty. We note that a small DWP study concluded that sanctions for lone parents 'had little effect on labour market behaviour.' The most that could be claimed was that 'a very small number of customers said that the risk of, or the implementation of, a sanction 'may' have made a difference.' There was clear evidence, however, that sanctions increased poverty: sanctioned parents and their children had higher levels of ill health and a greater prevalence of debt.[7]

The TUC opposes linking treatment plans for addicts with benefit sanctions. This would undermine the successful joint work of Jobcentre Plus and addiction counsellors. We are not aware of any evidence that withdrawing benefit from addicts will bring them closer to the labour market.

The Government asserts there are a million disabled people who say they want a job. But there are 2 million working age disabled people who do not want jobs (calculated from DWP research). By 2013 all current claimants of incapacity benefits will be reassessed using a tougher test and claimants will be re-tested more frequently. We are opposed to forcing disabled people to be available for employment when it is not appropriate. People whose condition causes them pain or fatigue should not have to look for (or stay in) employment.

The TUC is similarly sceptical of proposals for making training compulsory. Our experience is that learning is most successful when people are supported and encouraged, as getting back into learning is often about needing to build confidence. Therefore an approach that is about empowering learners is most likely to be successful.

Workfare

It is clear that although the term 'workfare' is not mentioned in the consultation document, the goal is to introduce Workfare. Claimants who are unemployed for more than two years will be required to work full-time in return for their benefits - almost a dictionary definition of the word.

This is a radically new departure for British benefit and labour market policy. In 1997, having looked at US style work for benefits schemes the Government rightly rejected that approach and opted to increase support for jobseekers and ensure people were better off in work through the National Minimum Wage, Tax Credits, and targeted programme payments. The proposals therefore represent a controversial reversal of policy which we cannot support.

One of the strongest reasons for opposing this proposal is that workfare is an ineffective employment policy. A comparative review of workfare programmes in the U.S. Canada, and Australia, published this year by DWP, concluded that subsidised transitional job schemes paying a wage were more effective and that:

There is little evidence that workfare increases the likelihood of finding work
The requirement to work for benefit can limit job search activity
Is least effective for those with multiple barriers to work
Workfare is particularly ineffective where unemployment is high.

The report concluded that 'there is little evidence that workfare increases the likelihood of finding work. It can even reduce employment chances by limiting the time available for job search and by failing to provide the skills and experience valued by employers.'[8]

Furthermore, there is no good evidence that most unemployed people are avoiding work. All the evidence we have is that unemployed people desperately want jobs - when a programme seems to have a good chance of getting people into decent jobs it is immediately swamped by unemployed people desperate to get a place.

Workfare is not only inefficient; it is unfair too, because:

It exploits the unemployed people forced to take part. If a job is worth doing it is worth being paid the rate for that job. Unemployed people on workfare schemes would be paid less than half the national minimum wage and the evidence does not show that workfare improves their chances of getting real jobs. It is important to remember that unemployed people are the victims in this story, not the villains.
It is unfair to workers who would otherwise be employed at the rate for the job to do the work done by workfare conscripts. It therefore acts to hold down the wages and reduce the employment opportunities of all workers, and has its worst effect at the bottom end of the labour market, which is where free workers are most likely to find themselves in competition with workfare workers. As the Nobel prize winning economist Robert Solow pointed out in a famous lecture, 'the burden of adjusting to any genuine replacement of welfare by work will fall primarily on low-wage workers, especially those virtuous ones who have been employed all along. The burden will take the form of lower earnings and higher unemployment, in proportions that are impossible to guess in advance.'[9]
When workfare workers are offered to for-profit businesses other firms that do not use unpaid subsidised labour are at an unfair disadvantage - workfare is a threat to good employers, as well as to workers with jobs and unemployed workers.

The Green Paper indicates that around 2% of those on JSA become long term claimants (over 24 Months). It is reasonable to expect that this proportion may rise in the different labour market conditions now forecast. With higher numbers in the JSA claimant count, this proposal implies a work for benefit scheme involving over thirty thousand people.

It is very likely that a high proportion of those forced on to workfare will be disabled and other disadvantaged people, who will be more likely than non-disabled people to reach the end of the flexible New Deal without having obtained a job; workfare, in addition to all its other drawbacks, thus has the potential to be discriminatory in its impact.

It is an extreme form of exploitation to require someone to work without pay and the TUC is fundamentally opposed to compulsory unpaid work experience for extended periods in jobs that would otherwise be taken by workers paid the rate for the job. This would exploit claimants, unfairly provide free labour to certain companies and undercut the pay and conditions of existing workers.

Disabled people and the Green Paper

In October, Employment and Support Allowance will replace Incapacity Benefit. Except for those with the most severe impairments, ESA claimants will be required to engage in work-related activities. The Green Paper announces a consultation on whether to go further than this and also to require them to be available for employment and apply for jobs, like unemployed people claiming JSA. Ministers have made it plain that, although they are only consulting on this proposal, it is their intention to go ahead. Disabled claimants who break these rules will face benefit cuts.

The Government sometimes describes policies as offering people on benefits support in moving into employment when actually they are introducing or strengthening work-related obligations. Sometimes this is presented as a radical proposal: if disabled people now have equal rights, it is asked, should they not also have equal responsibilities?

For the TUC, our guiding principle of equality leads us to conclude, however, that it is not fair to extend the same duty in the same way to all benefit claimants. The key question is whether the members of other groups have, in fact, a reasonable prospect of getting jobs.

The TUC has long campaigned for disabled people's right to work, but obligations to work in the absence of effective guarantees against discrimination and exclusion are unfair. Similarly, while we agree that 'work is good for you' - or rather, that decent work is good for you - we insist that badly-paid, insecure work, with poor terms and conditions is not. In particular, we believe that the experience of repeatedly applying for jobs one fails to get is not good for anyone. We also believe that no-one should be forced into a job that would make a chronic condition worse, or which would cause them unacceptable levels of pain, distress or fatigue.

It is noticeable that the most recent edition of the OECD's Employment Outlook concluded, after a detailed review of the most recent evidence, that, yes 'getting a job is more beneficial than staying out of work' for people with mental health problems, but that 'non-standard' jobs may do little good or even some harm. The study quotes evidence showing that, in the UK, 'obtaining a seasonal or temporary job leads to a significant deterioration in psychological distress.'[10]

We believe that the Government underestimates the difficulties of securing adequate employment in the private sector in the 21st century. There is a great deal of evidence that labour market discrimination against disabled people still takes place and that there are many barriers to employment faced by disabled people. A government-sponsored survey of people who moved from Incapacity Benefit to Jobseeker's Allowance - a group one would expect to be much closer to the labour market than IB claimants generally - found that they had a very hard time:

On average, 28% of all disabled and non-disabled people claiming JSA were still on the benefit a year later.
But, for people who moved there from IB, the figure was 45%.
This was despite the fact that they were very committed to employment, and more likely than other people on JSA to say that they would accept any job they could get (39%, compared with 32%).^[11]

A DWP survey of What Works in employment programmes noted that researchers had pointed out substantial discrimination by employers:

' ... employers were often cautious about employing NDDP customers. ... Moreover, vacancies to which disabled people are recruited tend to be restricted to positions requiring low level skills.'^[12]

'Work with employers is an important element in a portfolio of policies to enhance employment rates of people from ethnic minorities, since discrimination is an additional problem some ethnic minority customers face in addition to barriers shared in common with other customers.'^[13]

In 2005 the Chartered Institute for Personnel and Development found that 33.1% of CIPD members excluded people with a history of long-term sickness or incapacity, even though such a policy would almost certainly leave employers very exposed should a disappointed applicant use the Disability Discrimination Act against them.[14]

These realities are why unions fear the consequences of increased obligations for ESA claimants, despite the genuinely welcome enhancements of anti-discrimination legislation we have seen in the past ten years and the equally welcome plans in the Green Paper for a doubling of the budget for Access to Work.

The example of the closure of the Crosfield disabled workshop in Croydon illustrates the realities that disabled people face. A GMB survey of redundant disabled workers undertaken in July 2007 (fifteen months after the closure) revealed that just 23% had found alternative work, despite assistance from Jobcentre Plus and the private sector.

Unions fear that theoretical new rights will go hand-in-hand with concrete new responsibilities and that many disabled people will face years of being bullied into applying for jobs they know they have little chance of getting, and with stress, loss of self-esteem and deteriorating health conditions as a consequence.

Remploy and other disability issues

Disabled people want and need quality employment. They also deserve the right to training and career development and this can frequently best be provided in a more structured work environment such as Remploy which has played a major role in providing services and support for disabled workers.

Remploy has a role to play in delivering support to those working in the wider community of work and providing employment provision in their workshops for those disabled people that find it difficult to work in outside industry.

The TUC believes there should be wider opportunities for Remploy to give more disabled people the strength, support and dignity from working and learning new skills, supported by a properly funded programme of support with trained Disability Employment Advisers.

The TUC is disappointed that the opportunity is not being taken to conduct a wider reform of the Industrial Injuries Disablement Benefit (IIDB) system to increase its scope and make it more relevant to the range of occupational illnesses that are most prevalent in the 21st century such as musculo-skeletal disorders and mild-to-moderate mental health conditions.

The Green Paper asks whether IIDB and Bereavement Benefit could be reformed to eliminate employment disincentives by, for instance, transforming them into lump-sum payments. The TUC believes that the introduction of lump sum payments for certain conditions would be welcomed by some claimants, would lead to reduced administrative costs and may encourage some claimants with permanent disabilities to return to work. However we believe there should be the opportunity to return with a further claim if the condition deteriorates and there should be no decrease in the actuarial value of the overall benefit.

The Green Paper includes a whole chapter on 'delivering choice and control for disabled people' which is rather difficult to comment on, as it lacks any concrete proposals; we understand that detailed discussions between Government Departments about making a reality of the principles in this chapter. The TUC agrees that independent budgets, as long as they are opted for as a genuine free choice, can offer disabled people greater control over their own lives and thus be empowering. Until there are more details about just what is planned, however, it is difficult for us to say more than our belief in the importance of full consultation with all stakeholders before the Department proceeds with any reforms.

Fit for work?

The phrase 'work is good for you' recurs throughout the Green Paper. However not ALL work is good for ALL workers as the injury and fatality statistics bear out - around 175 million working days lost to illness in 2006, with 600,000 moving on to the incapacity benefit system. A better slogan, if one must be used, would be 'GOOD work can be good for you'!

Occupational health services are very much a 'Cinderella' service. There are too few specialists with the relevant practical understanding and this shortage is compounded by a lack of appropriate timely diagnosis and intervention which should be used to stop or at least slow down the chances of chronic conditions developing.

Musculo-skeletal Disorders (MSDs) are among the major causes of sickness absence (over 30%) and within this injuries attributed to Repetitive Strain Injuries (RSI) constitute a large, and increasing, number. Current, misguided, information on dealing with MSDs in enabling workers to return to work within 4 weeks plainly cannot apply to RSI sufferers as these are long term conditions which need careful analysis, evaluation and understanding. This specialist expertise does not exist in sufficient numbers to be able to deal with this. Similar concerns arise when dealing with other specialist areas such as mental health or respiratory sensitized victims.

Any 'Fit For Work' scheme would have to address the serious issue of resources involving specialist training and adequate time, both for the training to tackle any backlog in deficiencies, and in dealing with complex individual issues.

The TUC believes that greater workplace enforcement of the Health and Safety regulations could yield even greater benefits, in particular examining the practical use of the Management of H&S at Work regulations and Risk assessment, and the H&S Display Screen regulations. This enforcement is not restricted to HSE but also applies to enforcement by local authority Environmental Health Officers. There have been no prosecutions under the DSE regulations during the fifteen years of their existence; unsurprisingly, the RSI statistics continue to rise.

Requiring employers, of any size, to invest in either an internal occupational health scheme, or for SMEs to enter into a collective scheme to enable them to pool their resources could be a productive governmental approach to reforming the benefit and rehabilitation system.

There needs to be a change in the following areas:

Investment in medical research with relevance to long term chronic conditions,
the development of fully funded occupational health services for all employers,
ensuring that occupational health services meet minimum criteria,
improving rehabilitation provision investment,
educating employers on the benefits of supported employment,
making sure that enforcement policy is effective in the prevention of ill health and industrial injury.

The informal economy and the Green Paper

The Green Paper has little to say about the informal economy. The TUC has close relations with Community Links, who have described how inadequate benefit levels can inveigle claimants into the informal economy. They then find that, while informal paid work may help them to escape from extreme poverty it then traps them in relative poverty. The TUC agrees with Community Links' recommendation that the Department should introduce incentives to encourage people to declare their work and make it easier for them to move into formal secure work.

There are lessons to be learnt from the TUC's Vulnerable Workers Project (a pilot funded by BERR) which test new ways to help make sure that vulnerable workers are treated fairly and not abused. The Vulnerable Workers Project runs a regular group of vulnerable workers which has discussed work in the informal economy. The disadvantages given outweighed the advantages and included being paid less, not being guaranteed to be paid at all, having no employment rights, job that do not last and the fact that employers take advantage of workers being in a weak position.

A striking point was that enforcement mechanisms had only a limited impact, and that positive policies, as recommended by Community Links, would be more likely actually to help people move out of the informal economy.

Contracting-out - a threat to DWP workers and claimants alike

The TUC is reluctant to see the private and voluntary sectors take over the delivery of specialist disability employment services. Jobcentre Plus already works well with specialist organisations where an extra degree of expertise is genuinely necessary, and we would welcome the expansion of independent information and advice services that would help disabled people to make the most of any new opportunities.

But we do not accept that private/voluntary sector involvement needs to be expanded and we object to the plans for longer-term supported employment, which involve the contracts for this provision being awarded on the basis of competitive tendering.

The TUC believes that the public sector has strengths that are often not recognised. For instance, the efficiency record of this country's public sector is actually rather good, compared to other countries'. When measured in terms of output per hour (the best efficiency measure of productivity) productivity in 1999 in UK non-market services was 19% higher than in the USA and 15% higher than in Germany. By contrast, in market services the UK was 30% behind the US and 17% behind Germany. This non-market sector performance was remarkable, given that investment was higher in these countries: capital per hour worked was 80% - 90% higher in Germany and the USA.[15]

In 2006 the Government introduced Capability Reviews, 'to give honest and robust assessments of capability to central government departments and to identify the specific measures needed to ensure that the Civil Service is equipped to meet its future challenges.'^[16]

The DWP has now had two reviews, rating the Department in ten key areas. In five areas the 2008 rating was higher than that for 2006, and in none was it lower. In seven areas the 2008 review ranked DWP as 'well placed' or 'strong', the top two categories. In his foreword to this year's review, Sir Gus O'Donnell congratulated DWP:

'for making good progress over the last two years. In particular, the Department has grasped the importance of taking responsibility for leading delivery and change, and has made a significant improvement to its capability. Responsive leadership from the Permanent Secretary, an Executive Team focused on the delivery of services and efficiencies and recognition amongst leaders about the need for change have raised this from being a 'development area' to a 'strong' aspect of their capability.

'DWP exceeded its efficiency target set by the Gershon Review of 2004, creating over £1.4bn of Efficiency Savings. Jobcentre Plus completed the £2bn rollout of its new nationwide network of offices £314m under budget. Furthermore, the Department has delivered new policies which have fundamentally changed the child support system, created a new benefit for disabled people and people with health conditions and reformed pension provision.'^[17]

The Green Paper announces that employment services for disabled people and long-term unemployed people will be contracted-out to 'public, private and voluntary organisations.' This was widely expected, but the Green Paper introduces a new element, 'a new 'Right to Bid' for public, voluntary and private providers that believe they could deliver any part of our services more effectively.'[18] The impact of a 'right to bid' on the security, morale and commitment of JCP staff could be disastrous - no employee will know whether their job could be contracted-out at a moment's notice. The TUC seriously doubts whether this measure will produce sufficient advantages to compensate for the widespread disruption we foresee.

The TUC is especially concerned about the possible impact on claimants as providers engage in a 'race to the bottom.' In a period (such as now) when funding for employment programmes is restricted, the lowest price submitted by any organisation tendering for a contract could easily become the highest price other agencies would feel it was safe to bid and providers would avoid spending more than was needed to meet the minimum quality criteria specified in the contract. In such a system the incentive to move people off benefits quickly could lead to claimants being treated unfairly or harshly, or being provided with lower quality services.

Outcome-related funding that emphasised speedy movement into jobs could lead to reliance on low paid insecure jobs with poor terms and conditions. It is true that contract specifications could be designed to protect claimants against this approach, but in a period of tight budgets there would always be pressure to cut such protections; when this happened, the very single-mindedness and focus on results of commercial organisations would mean that the situation of claimants would be far worse than it would be if they were dependant on organisations infused by the public sector ethos.

We know that it is a false economy to move people into any job, regardless of whether or not it meets their aspirations. This approach leaves people much less likely to want to hang on to their jobs, and without that motivation they are far more likely to fall back into non-employment; no civilised modern society can lower social protection to the point where this stops happening. The end result of a contracted-out system with outcome-related funding in a period of tight budgets could thus be a growing number of people trapped in the 'low pay - no pay' cycle.

Another possible strategy would be for providers to identify the most job-ready clients, concentrate on them, whilst ignoring those with more problems - 'creaming' and 'parking' as this is known. If this happened there would be a risk that those groups subject to discrimination - such as black or disabled people - would be especially likely to be 'parked', while groups already at an advantage would be more likely to be 'creamed'.

It is simply not the case that privatised employment programmes outperform those provided by Jobcentre Plus. Consider, for instance, Employment Zones, which are often described as out-performing the New Deal 25+. As the Freud report itself admitted, the two programmes achieve remarkably similar performances when measured in terms of cost per sustained job:[19]

Value for money, Employment Zones and New Deal 25+

Programme	Cost per sustained job
Employment Zone clients aged over 25	£5,110
New Deal 25+	£5,130

The National Employment Panel's Fair Cities programme, which the NEP described as having 'anticipated the DWP's new Commissioning Strategy by several years'^[20] underperformed on its targets:[21]

Fair Cities performance

Measure	Goals Dec 05 - end Mar 08	Actual to date
Job entries	4424 (06 -07 target: 2414) (07 - 08 target: 2010)	1028
Employer satisfaction	70% of all interviewees start work	62%
Customer profile	65% of job starts from specified target wards	45%
Ethnic minority outcomes	No specific target. Target ward used as proxy for ethnicity	73%
Retention	70% of job starters in work after 13 weeks	53% (39% were in employment after 26 weeks.)

Or, finally, consider the evaluation of Action Teams for Jobs:

'The 25 PSL [private sector-led) teams as a whole only met 78 per cent of their job entry targets in year one of Phase 3 of Action Teams, compared to the 40 Jobcentre Plus teams, as a whole, who achieved 140 per cent of their job entry targets. PSL teams, as a whole, achieved 69 per cent of their outcomes from non-JSA customers, compared to Jobcentre Plus teams, as a whole, who achieved 76 per cent (again, exceeding the target of 70 per cent). PSL teams, as a whole, moved into work proportionately more clients who had only been out of work for a short time than Jobcentre Plus teams. They were also proportionately more likely to work with clients with just one of the target disadvantages than Jobcentre Plus teams, as a whole, were.'[22]

Unions are also concerned that private sector organisations may treat personal information about clients simply as another business asset. Even if these organisations maintain high standards there will be serious problems achieving an adequate level of public trust, as many claimants will be much more uncomfortable about giving sensitive information to a representative of a private company than to a public servant.

The public interest in maintaining a public employment service also has a geographical dimension, with the loss of the public sector commitment to maintain a nationwide presence, regardless of how unprofitable it might be to operate in any given district. Further, there would be a real risk of the loss of transparency in public services, as more and more important information about the performance of government policies became inaccessible because it was 'commercial-in-confidence.' This is not a problem that is confined to private sector organisations; in 2006, a Charity Commission survey found that 40% of charities who were delivering public services in the UK reported a lack of complaints procedures.

All organisations delivering public services should have to comply with the Human Rights Act 1998 and the Freedom of Information Act 2000. At present neither applies to voluntary and private sector organisations in the realm of welfare provision.

Finally, there is a strategic issue, as the loss of a public sector presence in delivery can impair policy development, as feedback from the operational end of the benefit system is lost.

The implications of contracting-out for the voluntary sector

Greater reliance in contracts for delivering Government policies could endanger voluntary organisations' valid role as independent voices for marginalised and excluded groups and in experimenting with innovative policy ideas that are not constrained by the need to meet the Government's targets.

Firstly, voluntary organisations that delivered formerly public services would come under the same budget pressures the public sector previously faced, some would have to make cuts or cross-subsidise from other sources of income. According to Dame Suzi Leather, the Chair of the Charities Commission, 88 percent of charities are 'failing to achieve full cost recovery for service delivery - statutory services or not - can we really sustain the belief that this can be in the best interests of charities, beneficiaries, or the sector as a whole?'^[23]

Secondly, some voluntary sector organisations are rightly worried that bidding for contracted-out work would force them to become more 'business like', making them reluctant to criticise government policy and thus endangering their ethos. Organisations that used to develop new ideas and meet unmet needs could become so busy delivering these services that they would lose touch with their original raison d'être and the client group they meant to serve. As Paul Farmer, chief executive of Mind put it:

'We welcome the recognition that the voluntary sector has an important role to play in helping people into employment, but our clients must always come first. Trust is one of the voluntary sector's unique selling points. We can't betray people by getting involved in compelling them into work before they are ready, or without the support they need.'^[24]

There is also the obvious danger that organisations which currently have the ability to criticise Government decisions that harm their client group will feel less able to do so the more completely they become reliant on public funding. In private discussions NGO leaders have confirmed to the TUC that this conflict is real.

We already have an example of all this happening, in Australia. In 1998 the Commonwealth Employment Service was wound up, and replaced by the private and voluntary sector delivered Job Network. Australian experience since then indicates some of the dangers of privatisation for voluntary organisations. As the Australian Council of Social Service has noted, community organisations and charities participating in delivering formerly public services come under the same budget pressures the public sector previously faced, forcing them to become more 'business like', making them reluctant to criticise government policy and thus endangering their ethos. Organisations that used to develop new ideas and meet unmet needs are now so busy with 'core business' that their role as the spice in the national recipe has disappeared, a factor that is increasingly worrying voluntary organisations:

'The role of non-profit community organisations is reduced to providing a function or service defined by government for the best possible price (which may or may not be set by government). Some go so far as to argue that the theory itself prevents a greater role for "providers" in identifying needs and developing solutions to meet them, because such a role might be construed as a "conflict of interest" or "unfair advantage" when the time for distributing funds arrives.'^[25]

Contracting-out to religious organisations

Religious and faith organisations are becoming increasingly central in the provision of welfare. Last year employment and welfare reform minister Jim Murphy said that faith groups can play a 'pivotal role in delivering success in welfare reform over the next decade'.[26]

The transfer of work to private or voluntary organisations risks external priorities influencing how services are provided. This is a particular danger with faith-based groups:

Pecan (who are a previous Jobcentre Plus contractor) in their equal opportunities contract stated 'to maintain Pecan's Christian distinctiveness to serve the aims and objectives of the charity'.
The Salvation Army at the parliamentary joint committee on human rights argued 'whilst it is appropriate for the state to be religiously neutral, this is impossible for an organisation such as the Salvation Army, which delivers its services as a direct outworking of the Christian faith'

Public funds should not be used to boost the influence of religious organisations in the public sphere. There are risks of employment discrimination and discrimination against service users by some faith-based employers. Unions want people to have equality at work and in service delivery, which means that organisations delivering core public services should be impartial and unbiased.

Unfortunately, many religious organisations believe that they are exempted from anti-discrimination legislation for almost any services they provide, and might therefore discriminate even if this proved eventually to be unlawful. There is a very real danger that religious organisations providing employment services may discriminate against staff or clients on the grounds of religion, lifestyle or sexuality.

As far as the TUC is aware, there are no plans to put clauses in contracts for employment services to protect clients and employees from discrimination, no plans to give transferred staff a right to work for a non-religious organisation and no plans to give clients a right to be referred to a non-religious organisation.

Conclusion

In this submission the TUC has argued:

Against the abolition of the Income Support safety net,
For higher benefit rates,
Against the Green Paper plans for tougher benefit conditionality and sanctions,
Against workfare,
Against requiring claimants of Employment and Support Allowance to be available for work or to apply for jobs,
In defence of Remploy.

The submission concludes with our arguments against contracting-out services currently provided by Jobcentre Plus. The DWP should also indicate its intention of following the Cabinet Office agreements with PCS which provide workers in the civil service with improved protection from compulsory redundancy and the national guidance on good practice for dealing with staff where their functions are being outsourced or privatised.

Notes

[1] General Council statement on Welfare Reform, TUC, 1999.

[2] Valuing Carers - calculating the value of unpaid care, Lisa Buckner and Sue Yeandle, Carers UK, 2007.

[3] 'Carers Employment and Services' Survey Report Series, Carers UK and Leeds University, 2007

[4] A Minimum Income Standard for Britain: what people think, Jonathan Bradshaw, Sue Middleton, Abigail Davis, Nina Oldfield, Noel Smith, Linda Cusworth and Julie Williams, JRF, 2008.

[5] OECD tax benefit calculator, accessed at www.oecd.org on 24 September 2008. Data cover OECD member states in 2005, assumes the first month of unemployment and that each individual previously earned the average wage in that country.

[6] Employer Perspectives on the Recruitment, Retention and Advancement of Low-pay, Low-status Employees, John Atkinson and Matthew Williams, IES for the Cabinet Office Prime Minister's Strategy Unit, 2003.

[7] The Effect of Benefit Sanctions on Lone Parents' Employment Decisions and Moves into Employment, Vicki Goodwin, DWP Research Report 511, July 2008, sections 4.5 and 5.2.

[8] A Comparative Review of Workfare Programmes in the United States, Canada and Australia, Richard Crisp and Del Roy Fletcher, DWP research report 533, 2008, p 1.

[9] 'Guess Who Pays for Workfare?', Robert Solow, New York Review of Books, 5 Nov 1998.

[10] Employment Outlook, OECD, 2008, chapter 4.

[11] Well Enough to Work?, Karl Ashworth and Yvette Hartfree, Centre for Research in Social Policy, and Augusta Stephenson, Policy Studies Institute for DWP, Research Report No 145, July 2001, p 50.

[12] What works for whom? a review of evidence and meta-analysis for the Department for Work and Pensions, Chris Hasluck and Anne E. Green, Institute for Employment Research for DWP, Research Report 407, 2007, para 8.4.

[13] Ibid, para 9.4.

[14] Labour Market Outlook, CIPD, Summer/Autumn 2005, CIPD, table 11.

[15] 'Britain's Relative Productivity performance', Mahoney and de Boer, Economic Review, NIESR, March 2002.

[16] Department for Work and Pensions: Progress and next steps, Cabinet Office, 2008, p 2.

[17] Ibid.

[18] Green Paper, para 34.

[19] Freud report, table 5.

[20] Fair Cities: lessons for practitioners and policy makers, NEP, 2008, p 2.

[21] Ibid, pp 14 & 17.

[22] Ibid, p 4.

[23] Speech to the NCVO Annual Conference, 21-2-2007, downloaded from http://www.charity-commission.gov.uk/recent_changes/speech.asp on 24/05/2007 19:25.

[24] 'Welfare reform requires more carrots than sticks', Mind, 2007, press release downloaded from http://www.mind.org.uk/News+policy+and+campaigns/Press/AW2007-03-04Freu… on 24/05/2007 19:30.

[25] 'Public and private sector roles in social services', speech by Michael Raper, President of the Australian Council of Social Service to the 2000 International Conference on Social Welfare, based on Common Cause? relationships and reforms in community services, ACOSS Paper 102, November 1999.

[26] Speech by Jim Murphy MP at seminar on 'What role for faith groups in today's welfare state?', City of Manchester Stadium, 19th February 2007.

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