From welfare state to welfare system
A welfare state is not enough. We need a system that involves many players – health professionals, employers and voluntary organisations.
It’s a pleasure to speak to you today at Reform’s conference on welfare, especially as Reform has produced so much innovative thinking on welfare over the years. I have now been doing this job for 4 months, so I thought it was timely to set out my thinking and sense of direction.
It is of course compulsory to quote William Beveridge in any review of welfare policy. He said that “The object of government in peace and war is not the glory of rulers or of races, but the happiness of the common man.”
How to achieve that happiness is indeed always the nub of the problem. But the welfare state we know today has been over a century in the making. It is the work of every political party that has held office in that period, both on the right and the left. Welfare does not belong to any political party.
Lloyd George and the Liberals introduced the old age pension. Attlee and Labour brought in comprehensive National Insurance. Margaret Thatcher’s government introduced Family Credit.
So it would be wrong to see there being a single moment in history, under a single party, when the current welfare system sparked into being – and of course there will never be a point in the future when the job is done and no further reform is needed.
One man, one name, has come to symbolise that. As I say, analysis has to start with Beveridge.
It was an important, nation-defining moment when following the Beveridge Report, the Attlee government brought in, for the first time in the 1940s, a comprehensive national insurance system.
But we can’t be sentimental. Today’s approach to welfare has to be significantly different from the response of the Attlee government to the Beveridge report.
That’s precisely because his report was a product of its time.
It was a report that reflected a society where generally men worked and married women didn’t, where lone parents were largely only widows. Where you could expect to work for one company, in one place, full-time for many decades. None of that applies today. The common man, and woman, these days demand more.
So I want to set out the principles on which we should now operate, as we build a welfare system that works for everyone.
The first principle is that a welfare state is not enough – we need a welfare system, involving many players – health professionals, employers large and small, a whole range of voluntary organisations.
The second is that for most people the purpose of the welfare system is to help them get into work, stay in work, and progress in work. We should offer work for those who can, and help for those who could.
The third is that we should offer care for the minority who can’t work. Whether through sickness, disability or personal circumstances, there will always be some who simply need help to get through their daily lives.
What do these principles mean for practical policies? First the welfare system I want to develop.
We can admire, even revere the welfare state. But a welfare state, is not enough for today’s world. What we need is an entire system of welfare.
The government is a necessary, but not sufficient provider of welfare. It can, and does, act as the guarantor of fairness within the welfare system to set the rules. It can also provide the backbone of the assistance system through more than 700 Jobcentre Plus offices.
What it must not try to do is assume that it can provide all the help necessary. To achieve a successful welfare system in the 21st century you need to give more decision-making power to individuals, and give more trust to the voluntary sector and private organisations to deliver services.
In the same way that Beveridge was responding to the world around him, assessing the support people needed in the 1940s, the government must make sure that the welfare system is wired for the way the world works today.
Take the compulsory retirement age. These days we are healthier for longer. We have therefore removed the default requirement to retire at any arbitrary age. People decide for themselves when they want to stop working, it gives them freedom and recognises that people are younger for longer.
This approach shows that we are now in a post-paternalist welfare world. We are in a world that is no longer determined and prescribed by those who think they know best.
The gentleman in Whitehall is less arrogant than he was when Douglas Jay expressed his omniscience in the 1930s.
What lies behind my second principle is the idea that work is the best route out of poverty, and is a much more stable and long-lasting route out of poverty than simply providing benefits.
This is true for those with a disability or a long-term health condition as well as those who have good health. So if we want a welfare system that works for the whole country we need to be creative about the needs of disabled people.
Yes, we must recognise that some people will never be able to work, but everyone deserves the chance to get a good job and the support to do so.
Disabled people, care leavers, ex-offenders, older people. Too many people are being held back.
Take disabled people and those with health conditions. Over four and a half million people with long-term health conditions are out of work. Eighty per cent of working age people with no health issues have a job. That’s a great success. But less than 50% of those with a disability have a job. That’s not good enough. That is such a waste of potential. And it needn’t be that way.
So our Green Paper on work and health is an important part of ensuring that any disabled person who could work, is able to work. It needs changes in the way the NHS operates, changes in the way my department operates, especially with the Work Capability Assessment, and changes in the way employers regard hiring and retaining workers with a disability.
We will shortly update our Fuller Working Lives strategy, so that we can ensure that workers over the age of 50 don’t just drift out of the world of work in the way too many have in recent decades. A higher proportion of men worked into their 60s in the 1970s than they do now. This is something we need to change.
Today, what we call conditionality is focussed on the actions and behaviour the state expects an individual to take. It fundamentally underpins the relationship between the individual and the welfare state.
We set the expectations we place on an individual in terms of the support they should access and the steps they need to take towards work.
It’s a principle we know works – and is a good example of the try, learn and adapt approach to welfare.
Take our experience with lone parents.
Forty years ago, it was not expected that a lone parent would be working.
They were often overlooked by employers, but in too many cases, lone parents had low expectations for themselves which in many cases, passed down to their children.
Over the years, conditionality has played a crucial part in incentivising lone parents into work, alongside introducing extra support through childcare.
Today, the employment rate for lone parents is at a record high with thousands more households now enjoying the security and dignity of work.
It takes time because this is about changing behaviours and expectations, but it shows what is possible.
It shows that the principle of conditionality, alongside the right targeted support, is the right one.
It’s also right – and the public expects – there to be a backstop for the tiny minority of people who play the system for financial gain.
Look at sanctions. We need sanctions, and I don’t agree with those who would abolish them. But I am always keen to improve the system and in particular I do not want sanctions to discourage those with mental health problems from engaging fully with the welfare system. So we will ensure that they work for people with mental health problems.
I will also extend the definition of vulnerable groups who can claim immediate hardship payments if they receive a sanction under their Jobseeker’s Allowance (JSA) payment to include those with mental health conditions and those who are homeless.
We have been piloting a yellow card early warning system in Scotland to ensure people are not sanctioned without good reason.
This is important in itself, and is a signal of how determined I am that the fairness of the system remains one of its most important characteristics.
As expressed in my third principle, there will always be those who just need help, and the system must be effective in identifying them.
There will be those who can’t work, either permanently or temporarily, and we must do our best to identify them and help them appropriately.
For example, I have already announced that we will stop Employment and Support Allowance (ESA) re-assessments for those with the most severe health conditions.
My ambition is for a welfare system that works for the whole country. For those who need it and for those who fund it – the taxpayers.
A welfare system with work at its heart, encouraging those who can work into the right job, helping those who are working every hour they can, but who are still only just managing to get by, while always looking after those who can’t work.
It means a welfare system that responds to the way people work now and provides the right support to them in a changing labour market.
So, we need to continue on our journey of reform to make the welfare system more all-embracing.
We have made good progress.
We are already half way through a decade-long journey of reform transforming a system where there were few incentives to move from welfare to work.
It was a system where too many people were forgotten about and left to live life on benefits.
Since then, we have brought back financial control – the proportion of welfare spending in the national accounts is falling – and taken advantage of the success of the British economy in creating new jobs,
This has seen the number of people in work increase by half a million in the last year alone and by nearly 3 million since 2010, with the rate of employment also at its highest ever level.
That is a record that speaks for itself – and I’m optimistic that the progress we have made will continue, despite any turbulence there may be along the way.
Behind that record sits our welfare reforms. At the heart of those reforms is Universal Credit.
It is restoring the value of work, making sure it always pays to work rather than to live only on benefits, and crucially, that it pays to work more.
Universal Credit has removed the perverse incentives which encouraged people to restrict their hours.
Unlike the old system, Universal Credit supports you as you move in and out of work. It recognises and rewards hours of work that fluctuate week by week, month by month.
The technical design of Universal Credit has been good for the way people now work, it has helped us cope with the emergence of a new, dynamic labour market.
Just a few years ago the idea of a proper job meant a job that brings in a fixed monthly salary, with fixed hours, paid holidays, sick pay, a pension scheme and other contractual benefits.
But the gig economy has changed all that. We’ve seen the rise of the everyday entrepreneur.
People now own their time and control who receives their services and when.
They can pick and mix their employers, their hours, their offices, their holiday patterns.
This is one of the most significant developments in the labour market. The potential is huge and the change is exciting.
But we need to make sure that employment rights keep up with employment practices, and the welfare system is increasingly flexible itself to cope with a more flexible world of work.
That’s why we have announced the Taylor Review, to look at how the government keeps up with this new world of work.
It’s also why we’ve secured important changes to the times of day work coaches are available – to include evenings and Saturdays – so they can best respond to this new world of work.
But we don’t need only to modernise jobcentres. We need to modernise society’s attitude to disabled people at work.
We’re stripping out damaging, outdated attitudes towards disability, the way previous generations overturned ideas about women at work.
These attitudes are present in government as they are amongst employers and across wider society – and it’s not acceptable anymore.
I’m committed to making sure the welfare system works for disabled people. It’s about ensuring that – from sick pay to fit notes, to practical support and assessments – we do all we can to support people in the right way, when they need us most.
I don’t want people’s fate determined by difficult circumstances and a lack of proper support. I want people’s fate determined by their own ambitions and talents.
Providing the support that’s required cannot be a job for government alone.
It’s for voluntary organisations to come with us as we test and learn what works.
In this country, we have a proud tradition of a compassionate, expert, diverse and dedicated voluntary sector.
Jobcentres are not there to replicate the excellent, expert work they do in communities every day, whether on social exclusion, support for mental health issues, or around rehabilitation.
What we do need to do is link in at a local level the support that already exists and in many cases bring that to the claimant – and if it doesn’t already exist, to commission it through our Flexible Support Fund to provide the local support that our claimants may need to return to work.
But our efforts should not just be focused on supporting those who could move into work. We also need to focus on those who are already in work, but who are only just managing.
That means helping people build an asset base to give them security for the future, for example, through automatic enrolment to help them save for a pension.
It also means helping people through rises to the national living wage.
Already, the latest Office for National Statistics data show our approach is working.
The lowest paid workers saw their pay go up by the most, by over 6% last year.
That is narrowing pay inequality, but we need to do even more to support those who are just managing.
They deserve the support to progress in work and to earn more money as they do so.
In the spirit of the experimentation I have called for across the system, we have a test and learn strategy to deliver the evidence of what works.
We are trialling support delivered by Jobcentres to test different approaches to in-work support in a ‘live’ labour market.
The trials will see work coaches helping claimants identify barriers to progression, such as confidence and motivation or skills.
Alongside that, we will be teaming up with employers to open up opportunities for progression for low-paid workers.
By early next year we will have more than 15,000 participants involved in the trials, with further trials underway to develop and test strategies specifically in retail and hospitality jobs, sectors where progression is seen as a particular problem.
But only by being bold, innovative and experimental, by tackling both the barriers to work and the barriers to progress in work will we have a labour market that works for everyone.
As I hope I have set out, I believe a modern welfare system, fit for the world of work in the 21st century, is one that is relentlessly focussed on helping people into work, equally relentlessly focussed on fairness, and above all more than just a set of actions for government.
We need medical professionals, charities and business leaders to join government in providing the helping hand that exemplifies the British attitude to welfare. The attitude that if you play fair by the system then you deserve fair treatment yourself is a mark of the civilised approach to life we all value so much about Britain.
The need to preserve that civilised, fair approach to welfare is something that stretches back not just to Beveridge but to Lloyd George and the start of this journey. The circumstances today are of course radically different but we must preserve those essential values. I certainly hope and intend to do so.