New Model Welfare in the UK

1. New Model Welfare in the UK Paul Gregg Centre for Market and Public Organisation, University of Bristol

2. Models of Welfare • Academic debate in the UK and elsewhere often contrasts the US and European models of welfare • There isn’t in truth a single European model but perhaps a Franco-German hybrid offers a benchmark • Left-wing critics of UK government suggest UK is moving toward the US model; rightwing ones say this movement is too slow • But I will argue a new model is emerging in the UK with many similarities with Australia, NZ and Canada

3. Limited UI (5 months) without means test No generalised social assistance Time limited money payments to lone parents with activity requirements General support for ill health and disability In kind benefits integral – food stamps and Medicaid Long duration, earnings related UI system without means test Generalised social assistance programme No time limits, support services or activity requirements Little distinction made between unemployment, lone parenthood and ill health Cash payments dominate US vs EuropeUS Europe

4. History of Welfare in the UK By late 1960s the post-war model had evolved into a system close to the European model described above • Conservative government 1979-1997 abolished earnings link for social insurance and reduced insurance based exemption from means test • From 1986 created job search conditions for the unemployed with benefit sanctions if breached • Link with prices only meant relative value of support fell

5. UK Welfare System circa 1997 • In 1997 the UK welfare system was a walking disaster area • Spending had almost doubled to 13.5% of GDP from 1979 to 1994 • Working age adults receiving support nearly tripled – 2.2 to 6 million • Poverty and deep poverty had increased dramatically

6. The Emerging Model • The model contained four distinct themes • Flat rate, means tested social assistance with generous support for families with children • In-work support ‘Making Work Pay’– tax credits and other elements • A personalised package of welfare-to-work support (case management and limited conditionality) • Targeted savings plans for low earners

7. Personalised Welfare-to-work Support This approach now consists of: • A requirement to attend regular Work Focused Interviews for LPs (and S+D in pilot areas) • An Action Plan is designed delivering a package of support services tailored to the individuals needs brokered by a Case Worker • The Action Plan is mandatory for the long-term unemployed (existing benefits cut by up to 40%), for others the plan is voluntary • Under pilot are participation payments for extra activities – Work Related Activity Payments

8. Evaluation for Lone Parents • Does the personalised support for welfare-to-work work? • Does just talking to claimants in the Work Focused Interview really change behaviours? • Has the overall strategy made a difference to lone parent employment?

9. The Caseload

10. Action Plans • Action Plans are an agreement between the claimant and a case worker on a return to work strategy and time scale. • These contain a range of support services which are tailored to individual circumstances (short skills courses, confidence building, work trials, condition management, help getting child care, etc.) • They are badged under the New Deal brand • ND for Lone Parents raises participants moves into work by 22 ppts (Dolton et al. 2005 )

11. Work Focused Interviews • WFIs are a required activity whereby Lone Parents have to meet their case worker on a regular basis to discuss the potential for return to work. • They will include better off calculations for specimen jobs, discussions around childcare and the Action Plan based support • Attendance will be 6 monthly but more intensive when child turns 14 • Evaluation suggests that the WFI regime raised participation in New Deal for Lone Parents by 25% (Knight et al. 2004)

12. Policy and Lone Parent Employment I • The numbers of Lone Parents on Welfare has fallen from 1,025 to 777 thousand (1995 to 2006) • Employment rate among lone parents has risen from 46.4% in 1998 to 56.5% in 2006 (overall employment rose from 71.8 to 74.5) • Estimates of the impact of welfare reform policy (tax credits, Action Plans, WFIs etc.) suggests that around 4 to 5ppts of the rise

13. Problem of Low Participation • The Action Plan programme has a good record for moving claimants into work • WFIs raised participation - 1 in 10 start each quarter

14. Financial Sanctions • Given the desire to raise employment and engagement with Action plans why has the UK not followed the US and used financial sanctions to time limits • The key priority is poverty reduction and sanctions will reduce incomes • However, government is piloting an +ve payment of £20 ($30) pw, called a Work Related Activity Payment, for those who agree to an Action Plan and a time limited Return-to-Work Credit to raise work incentives • This is part of the New Deal + for Lone Parents programme under pilot testing

15. Sick and Disabled • More exciting prospect for US audience • Over the last 25 years in most developed countries reliance on benefits for ill health or disability have been rising • In the UK we have piloted the Pathways programme which broadly applies the same model as for lone parents to S+D. • Pilot results are encouraging

16. Pathways • Pathways offers 9 monthly WFIs to discuss return to work opportunities • The case worker can offer the range of support as for other groups under New Deal for Disabled Persons but also work related rehabilitation and employer support with employing a disabled person • A person returning to work receives tax credits and a time limited Return-to-Work Credit • Currently only evidence from pilot areas operating Pathways for new claimants

17. Offlows from Incapacity Benefit by Pathways area

18. Pathways Results • Around 200,000 people have started Pathways in the pilot areas • Just over 20% of those attending WFIs start an activity, Rehabilitation or New Deal for Disabled • Around 25,000 have moved into work • Pathways areas have around 8% fewer claimants on benefits after 6 months than non-pathways areas • Will go National by 2008

19. New Disability Benefit • Welfare Reform Bill suggests new test for incapacity benefits claimants. • Those deemed eligible will be required to engage in the action plan process or lose part of their benefit (perhaps £30). • This creates two alternative visions for the direction for future reform

20. Alternative Visions 1 • Creeping end to voluntary participation with greater use of sanctions and possible time limits (lower age of youngest child before LPs are treated as JSA claimants). • Sanctioning drives claimants below basic IS levels (and possibly off of benefits altogether • Primary emphasis on caseload reduction not poverty reduction or child well-being • Possibly buttressed by in-work support for retention and advancement

21. Alternative Visions 2 • Single Working age benefit with extra payments for extra activity under Action Plan system. IS rate plus New Deal payments or WRAP and new disability benefit. • JC+ engages in functions of eligibility, sanctioning and contracting out support functions • Personalised support package designed and implemented – no rules about package given by benefit status • No dependent spouses, all adults who are part of claim get support • Parallel system for those in work (along lines of ERA) aiming to support advancement, skills etc.

22. Conclusions • Most developed nations – America being one of the exceptions – wish to maintain a social safety net for the unemployed, the sick and disabled and those with children • The traditional European model of Social insurance with earnings related benefits, limited activity requirements and limited support services has been in decline in many countries • The UK, Australia, NZ and Canada have moved to systems with a lot of similarities, - flat rate benefits based on family size - in-work tax credits to maintain or enhance work incentives - activity requirements for unemployed and to varying degrees for others - packages of personalised support services tailored to individual needs to get people back to work • The UK is no poised either to enhance and entrench this new model of welfare or decisively move toward the harsh US model