Powerful Ideas
A speech given by the Rt Hon Chris Grayling MP, Minister for Employment, DWP.
Introduction
Good evening and thank you for inviting me to open this series of debates on the challenges we face as a society.
It is always a little daunting to be the first to take on a new initiative, but hopefully I will be able to do justice to the Powerful Ideas concept and make a positive start for the lectures to come.
The journey
Tonight I want to walk you through a revolution.
One that lies tucked away amongst a range of measures designed to change the culture of Government and its relationship with the private sector.
It’s one part - but a key part - of a strategy of getting Government to do less, and trusting those who can to do things better.
Whitehall is famous for its one-size-fits-all, the Man from the Ministry knows best approach.
Today, however, this Statist approach to Government seems increasingly outmoded and ineffective.
This is partly the result of a slow slide toward a world where people are afraid to take responsibility and make a decision for fear of not following the prescribed process to the letter, or worse, getting sued if they don’t.
Too many people in all walks of life are now hidebound by reams of rules and regulations that are both hard to understand and yet impossible to ignore.
This fear factor stifles creativity and starves the country of the innovation that made Britain the country we used to be famous for.
Today, that is changing.
The Coalition is committed to a new form of Government that treats people as adults.
It is a Government that is determined to leave policy-making by Whitehall diktat behind and instead let the people of this country do what they’re good at - getting out there and getting on with it.
Unleashing the creativity and energy of local groups.
And allowing local communities who really understand the challenges they face to determine how they manage their own affairs in their own way.
Responsibility agenda
This, then, was the starting point for some new thinking.
Not just thinking about how we might tear down the barriers to work and rebuild the benefits system.
But more fundamentally - about how we could reinforce the importance of work as a bulwark that supports more meaningful lives, stronger families and more cohesive communities.
The Responsibility Agenda forged the basis of the welfare reforms we are now implementing.
And what is most remarkable about these changes is just how much consensus they command across the political spectrum.
Consensus reforms
Arguably, this is hardly a surprise.
David Freud - or Lord Freud, the Minister for Welfare Reform under this Government - worked with the Labour Party in articulating many of the challenges in the welfare arena and outlining many of the solutions we are implementing today.
He was far from being alone in recognising there was a deep-seated problem.
Indeed, it is this realisation that has helped build strong support for many of the measures this Government has introduced since.
For example, we have gained strong cross-bench support for the work we are doing to help people off long-term incapacity benefits and start to make the journey back to work.
Most people recognise that it cannot be right to have a system that defines people as incapacitated and then simply consigns them to a life on long-term benefits without any follow-up support.
So with the help of the new Work Capability Assessment, we are doing something about it.
From this spring we will begin a nationwide programme to reassess 1.6 million incapacity benefit claimants to see who we can help to do something more with their lives.
It will be a challenging process, but one that is made stronger by the support we are getting across the political spectrum.
This same non-partisan support has also been extended to Iain Duncan Smith’s innovative plan to merge working age benefits into one, single Universal Credit.
Here again, there is a broad consensus that welfare dependency is a very real problem for some of the poorest in our society, who are stuck in the benefits trap and struggling to get out.
So it makes sense to take a bold step and get rid of the complexity and cliff edges that make it so risky for people to take work or extra overtime if the opportunity comes along.
The new Work Programme
But the Powerful Idea that I really want to talk to you about today is our flagship Work Programme - a huge employment support programme that will launch this summer to provide intensive help to the long term unemployed.
It will be the biggest support programme of its kind seen in this country for decades - if not ever.
Providing really high quality support to the unemployed is, of course, a vital part of getting people off benefits back into work.
It is also the key to breaking the back of our deeply-ingrained benefits culture.
More than that though, the new Work Programme also happens to be one of the best advertisements for this Government’s determination to decentralise power.
Our approach is nothing less than a revolution in how Government thinks about solving social problems - in this case, unemployment.
Gone are the one-size-fits-all programmes.
Gone are the short-term, quick and dirty political sticking plasters that use non-jobs to keep the unemployment figures down.
And gone are the top-down process constraints that prevented Jobcentre Plus staff from taking a flexible approach to helping their customers.
This is all part of our agenda of pushing power, discretion and responsibility to the front line.
Just as importantly, this is the mechanism that will allow us to put an end the situation where diktats from officials in Whitehall shape the services offered to our citizens - often with little reference to the practicalities of life on the ground.
But that still doesn’t define the full extent of the Powerful Idea.
What makes the Work Programme really revolutionary is that it marks the Government’s first real foray into the world of Payment by Results.
It is redefining the relationship between Government and its contractors.
Now, some of you may argue that Payment by Results is something that the Government has tried before. To a limited extent it has. But let me explain why what we are doing is both radical and cutting-edge.
Clearly, Government has tried to pass risk to the private sector for years with varying degrees of success.
The lesson of the 1970s and 1980s was that Government did not run things well, and that external contractors could bring a much more focused set of skills to the public sector.
The original principle of PPP schemes was to enable the public sector to take advantage of private sector financial and management expertise.
But sometimes attempts to harness the skills of the private sector drowned in contractual complexity.
However, the fact is that the fundamental principles behind PPP remain valid today.
If Government can capture the discipline of private sector management… if it can genuinely pass on risk to the private sector… and crucially, if it can capture the creativity and innovation that drives successful corporations… then this is an idea that is worth pursuing.
That’s what makes the Work Programme different.
It ends the principle of Whitehall-based programme design.
Instead, we are going to hand a blank sheet of paper to the private and voluntary sector and say to them - “you decide what works.”
Most importantly though, we will only pay the bill when providers succeed.
If they don’t, they miss out. It’s that simple.
We have fundamentally changed the terms of engagement.
You say you’re good at getting people into work - we say, go out and prove it.
If you succeed, you make your money.
The Work Programme is redefining the relationship between the Department for Work and Pensions and most of its major contractors.
We’re providing them with the opportunity to succeed, but it will be down to their efforts to determine whether or not they do so.
Britain today has some five million people on out of work benefits.
Spread across Jobseeker’s Allowance, Income Support and Incapacity Benefit and its successor, Employment and Support Allowance.
That total isn’t just a factor of recession. It’s been like that for a decade and more - with very little change even when employment has been rising fast.
The goal of the Work Programme is to break down that culture of dependency.
Of course not all of those people can work. Many will need unconditional support for the rest of their lives. But every official and independent assessment of the problem in recent years has expressed the view that most have the potential to return to work.
The problem is that although billions of pounds, quite literally, were spent on Whitehall designed employment programmes to make this happen, the overall total barely budged.
The Work Programme is designed to change that for good.
From June this year, around six hundred thousand people a year will be referred to specialist providers.
The providers have been chosen for their potential to get people back into work; for their ability to gather together a mix of expertise to support the hardest to help; and for the financial strength to carry the risk of a payment by results scheme.
We want to see providers tailoring support to individual needs, supporting the unemployed back into work, and then providing them with ongoing mentoring to help them stay there.
We’ve designed a contracting structure that will ensure that this is what happens.
The Work Programme will support people over the age of 25 who have been unemployed for more than a year.
It will support young unemployed people after nine months of job-search.
And it will provide much quicker access to specialist support for people moving off Incapacity Benefit or Employment and Support Allowance, as well as for those who come from the most challenging backgrounds.
Depending on the scale of the problems in a claimant’s life, we will pay anything between four and fourteen thousand pounds to the employment specialists - IF they can get them into sustainable employment.
And that means getting them into work and then supporting them in work for up to a further two years.
It’s a challenge.
It’s certainly a lot more difficult to do than to operate the previous programmes, where the money was pretty much guaranteed to flow in.
We will make a small upfront payment each time someone is referred to the Work Programme.
However, this only applies for the first three years of the contract - and then that will stop.
Once we’re fully up and running, all of the rest of the payment will depend on success in the labour market.
Around a quarter of the fee will be paid after three or six months of employment.
The rest is paid month by month in instalments for between one and two years, by which time the claimant should be well bedded down into employment.
We are also setting minimum performance standards that will ensure that the providers cannot make good money by taking an ultra-cautious approach and only focusing on a small number of people.
And we’ve built price ratchets into the plan so that the providers have to constantly seek to improve performance in order to continue to maintain profitability.
At the heart of all of this lies an accounting revolution for the public sector.
We will be using savings generated by moving people off benefits to pay for the cost of the programmes that get them there.
This is what’s been widely described as the AME-DEL model - moving funds from the benefit savings pot into the programme spending pot.
This might sound a little anodyne and technical - but in reality it is crucial.
It means that the Work Programme has no limits. The budget cannot run out if more and more people are helped into work.
And there is only one way in which the providers contracted to deliver the work programme can make very substantial profits.
That’s if they are massively successful at moving very large numbers of the most challenged people into our society into work.
And let’s face it - if they can do that, they are worth every penny they earn.
It’s been very obvious that some parts of Britain’s welfare to work industry took a sharp intake of breath when they realised what we are doing.
I know of one who told media organisations that it was having to rewrite its business model because of the robustness of our approach.
But more than a hundred organisations came forward to put in initial tenders, and almost all of our shortlist of potential suppliers are expected to submit final bids in ten days time when the process closes.
The truth is if we are to be good stewards of the public finances, we need to be putting our contractors under pressure.
And the reality is that this model is not nearly as radical in business terms as some in the industry have suggested.
Because at the heart of it lies a simple premise, one that is fundamental to any new business.
You raise initial funds to get things going.
You take the risk that you may or may not be able to build a successful business.
You reach breakeven and start to make a profit.
Eventually you make enough money to recoup your initial investment.
And then you are in surplus and making a genuine return.
This is a well-worn path that almost every business has walked.
However, it is the first time that Government has made it a condition of doing business with you.
And it should not be the last.
There are many other parts of Government - both national and local - that can use payment-by-results as the way to drive the best possible service for our citizens from the companies and organisations that want to work with us.
Indeed, the approach we have taken to contracting the Work Programme has created a toolbox that other parts of the public sector can use to adopt a similar approach.
We have built the Work Programme around a framework contract approach that allows other parts of the public sector to buy additional services from the companies on our list - as long as those services related to our core goals of employment and tackling social deprivation.
So a local authority, for example, could commit to a local payment by results scheme to deal with a local problem - like a large number of older workers unemployed for a long period in an old industrial area - and deliver in doing so enhanced support over and above what the Work Programme will do.
This has to be the future of public sector contracting.
The Ministry of Justice is already testing a payment-by-results approach in the area around two of its prisons to see what impact it can have on reoffending rates.
And at heart, this approach isn’t just about passing risk to the private sector. It’s also about capturing what works in our society and bringing it to Government.
It’s a philosophy that drives everything we are doing.
Handing back responsibility to heads and teachers in our schools.
To doctors and nurses in our hospitals.
Stripping away the paraphernalia of bureaucracy that has held back so many parts of our public sector and public services.
We’re pushing power and responsibility down to local authority level as well.
In 2012, for example, we are giving local communities direct control over their police forces through the election of individually elected police and crime commissioners to oversee the fight against crime in their areas.
Within the Department for Work and Pensions we are also removing the old target culture that dogged Jobcentre Plus, and giving advisers much greater discretion in how they deal with the challenges that newer claimants face.
The Work Programme is part of that narrative of change.
It needs a national framework to operate in, as you can’t set up dozens of individual payment-by-results relationships between local authorities and the Treasury. But it absolutely should not be delivered to a national template.
Indeed I want to see the providers assembling teams of people and organisations whose skills drive down to the lowest possible level - in the heart of the local neighbourhood, or with small groups of claimants with specialist needs.
Taken together, the Work Programme, the migration of people away from long term dependence on Incapacity Benefit, and the introduction of the Universal Credit mark a complete transformation of our welfare and back to work system.
Our goal is very simple - to change lives.
Conclusion
Even as the new Work Programme rolls out in the months ahead and we see more people on incapacity benefits escape welfare dependency, we know that we have a long way to go.
Changing minds and attitudes is much harder than simply changing processes and contracts.
Yet we know that if we do not change - and change radically - we will fail the very people who need our help most.
Many will pay the price of a life lived in poverty with the attendant poverty in life chances that brings for their children.
So I believe that this journey is one that we can - and must - take together.
Giving power back to those best placed to use it.
Removing the shackles on innovation imposed by Whitehall.
And unleashing the creativity we need at all levels to offer people the dignity of work and the power to take back personal responsibility for their own lives.
Thank you.