Making welfare work: UK activation policies ... - Wiley Online Library

Making welfare work: UK activation policies under New Labour Robert Walker and Michael Wiseman School of Social Policy and Sociology, University of Nottingham, United Kingdom; Institute of Public Policy, George Washington University, Washington, DC

This paper describes and briefly evaluates the major “New Deal” activation policies introduced by the UK New Labour government since 1997. It outlines the ambitious project to modernize the UK economy and welfare state and, within this overall strategy, to end child poverty and to tackle social exclusion by encouraging movement from welfare benefits into work, and by making work pay. Three sets of New Deal programmes are discussed: those targeted on unemployed claimants, lone parents and people with disabilities. The paper concludes that real change has been achieved with measurable beneficial effects but that there are threats to the further elaboration and extension of the New Deal model.

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s is well known, the United Kingdom has, under a New Labour government, embarked on major reform of social assistance and social security benefits for working-age people. The reforms emphasize the role of employment as an alternative to so-called welfare dependency and as an antidote to poverty. What is less widely appreciated is that Labour’s “welfareto-work” policies — “activation” in continental European parlance — are

This paper’s flag title is shared with a book by Frank Field (1995), UK Minister of State for Welfare Reform between 1997 and 1998. The original version of the paper was presented at a seminar on Activating the Welfare State organized by the Senator for Labour, Women, Youth and Social Affairs, Bremen, and the University of Bremen on 6 September 2001. The paper calls heavily on work funded by the Rockefeller Foundation, New York. Thanks are also due to Clare Collins for preparing the tables and to anonymous referees for their helpful comments. Robert Walker is Professor of Social Policy in the Department of Sociology and Social Policy at the University of Nottingham and Research Fellow at the Institute for Fiscal Studies, London. Michael Wiseman is Research Professor of Public Policy and Economics at George Washington University and an Affiliated Scholar with the Institute for Research on Poverty at the University of Wisconsin, United States.

© International Social Security Association, 2003

International Social Security Review, Vol. 56, 1/2003

Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 01248, USA

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Making welfare work: UK activation policies under New Labour

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but one element in an increasingly coherent strategy to modernize the United Kingdom: the economy, the labour market, welfare (widely defined), and government. These reforms may be seen as a response to global trends including increased mobility of capital, a reduced ability of national governments to sustain protectionist welfare policies and a response to labour markets that are increasingly polarized between a core of secure, high-skilled, highwage jobs and a periphery of casualized, low-paid employment (Dean and Shah, 2002; Walker et al., 2000). Much influenced by US rhetoric and thinking and by developments in Sweden and the Netherlands (Cebulla, 2002), the policies are underpinned by a web of ideas that are often termed “the third way” (Giddens, 2000). Viewed by sceptics as a repositioning of leftof-centre parties to ensure electoral survival (Klein and Rafferty, 1999), and by advocates as a way of reconciling ideas wrongly thought to be antagonistic (Blair, 1998), certain of the ideas are particularly pertinent. They include belief that welfare systems are sources of problems as well as solutions, stress on active welfare linked to labour market reform, and coupling of social rights with personal responsibility (Deacon, 2003). However, the defining characteristic of the UK case is that welfare reform is recognized to be less important in itself than as one component in a coordinated policy response to social and economic change that is designed to equip individuals and society better to succeed in an increasingly open and global economy (Walker and Wiseman, 2003). In official documents this policy response is often termed “modernization” (HM Treasury, 1997, 2000). The architects of these reforms are apt to see them as a model for the development of activation and welfare policies within the member States of the European Union (Blair, 2001a, 2001b; Brown, 2000a, 2001). This aspiration gains in importance in the context of the application within the European Union of the open method of coordination (OMC) to both employment and social protection policies (Hughes, 2000/1; Vandenbroucke, 2001). This system, which entails international agreement on policy goals and measures, setting of national targets and collective monitoring of performance, sets countries in friendly rivalry. The United Kingdom, as one of the major economies, will inevitably emerge as an important reference case. The intention in this article is first to piece together the key elements in this overall strategy so as to be better able to assess its cohesion, then to review the effectiveness of Labour’s activation policies to date and, finally, to consider possible threats to future viability of the strategy. It helps to be aware of certain key facts about the UK economy and benInternational Social Security Review, Vol. 56, 1/2003



efit system. At the time of writing (2002) the United Kingdom has a population of 58.8 million and a workforce of 29.4 million. Seventy-nine per cent of people of working age (16 to 60 and 65 for women and men respectively) are economically active. The economy, following three major recessions (1978, 1986 and 1993) has enjoyed eight years of continuous growth, and unemployment, at 5 per cent, is at a 26-year low. Even so, per capita GDP — £944 billion in 2000 — remains considerably below the EU average and, for example, only 94.2 per cent of that of Germany (£1 = US$ 1.56 = € 1.58). During the recent economic expansion, increased employment in the service sector largely offset the job loss in manufacturing that was the product both of previous recession and general deindustrialization. Deindustrialization also contributed to an increasing polarization between “work rich” families with more than one earner and “work poor” families with no one in paid employment, and in wages — those of men in the top decile rose at twice the rate of those in the bottom in the two decades leading to 1998 (HM Treasury, 1999). The social security system of Great Britain is highly centralized and uniform.1 Virtually all social insurance and social assistance benefits are administered by the executive agencies of a single national policy department — the newly reconstituted Department of Work and Pensions. About one in six households receives means-tested benefits, though the largest group comprises retirement pensioners. Nine hundred and forty thousand lone parents are in receipt of means-tested Income Support and about 3 million people of working age do not work because of disability, a figure that has increased by 1.3 million in the past decade. Benefit expenditure equates to 13 per cent of GDP and is predominantly funded through direct taxation. National Insurance contributions sustain the fiction that the system is funded rather than “pay as you go”. The strategic objectives of the Labour government are rehearsed in the next section. Each of the main activation policies is then discussed in relation to these objectives before reflecting on some of the emerging issues.

The broad and evolving strategy In Labour’s first term (1997 to 2001), an unusually proactive HM Treasury headed by Gordon Brown, who remains Chancellor of the Exchequer, drove economic and social policy. Strategic goals were formulated rapidly, namely to: •l“Provide a framework for macroeconomic stability and growth”; 1. Social security is administered separately in Northern Ireland.




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•l“Promote a flexible and adaptable labour market, backed up by a framework of minimum standards, and ensure that firms and their employees respond effectively to structural change”; •l“Encourage investment in education and skills so that people . . . can learn through life and remain employable as the market changes”; •l“Help move people from welfare-to-work . . . and developing a framework of rights and responsibilities”; •l“Make work pay through a national minimum wage and a tax and benefit system that promotes work incentives” (HM Treasury, 1997, p. 41). The first goal was addressed symbolically within days of the election when the Chancellor confirmed that he would adopt the expenditure limits set by the outgoing Conservative government and make the Bank of England independent of government, charged with the control of inflation. He established a committee to work towards the introduction of a National Minimum Wage and another to consider implementing an Earned Income Tax Credit. In his first interim budget in July 1997 he announced the intention to introduce a 10 per cent starting rate of income tax and to reform National Insurance contributions to assist the low paid. In the same budget he conjured up £5.2 billion to fund a welfare-to-work programme from a oneoff windfall tax on “excessive profits” earned by the former public utilities that had been privatized during the Thatcher-Major years (1979-97). Despite the broad front across which policy was made at speed in 1997, Labour did not have a comprehensive set of welfare policies that were well worked out on assuming power — there were at most a handful specified in various degrees of detail (Rawnsley, 2001). Instead, the strategic directions were more or less clear: to reduce expenditure on welfare so as to divert resources to electorally more popular areas of education and health; to make a “modern” welfare state compatible with a flexible labour market; to provide personalized assistance into work as the best way to tackle poverty; and to promote the goal of lifelong learning so as to equip people to retain employment in a changing labour market.

Welfare-to-work From the start, policy on welfare benefits was portrayed as an integral part of the overall economic strategy. It was intended to foster labour market flexibility, increase skills and reduce the financial and social burdens of unemployment. Labour’s 1997 election manifesto included the pledge — one of five given to the electorate — to move “250,000 young unemployed off benefit and into work” (Labour Party, 1997, p. 19). While the global goals of macrostability and growth were, among other things, to ensure buoyant laInternational Social Security Review, Vol. 56, 1/2003



bour demand, welfare reform was to be the key instrument to tackle problems of labour supply. Equally, though, the welfare-to-work policies that were introduced from 1997 onwards, branded “New Deal”, constituted part of a moral agenda. All included activation elements that were to varying degrees compulsory. These policies epitomize the contrast between old welfare that, in Prime Minister Tony Blair’s (1997a) words, “encouraged dependency, lowered self-esteem and denied opportunity and responsibility in almost equal measure” and modern welfare premised on the notion of promoting opportunity and personal responsibility. Such policies were expected simultaneously to enhance the skillbase of the economy, counter dependency and the growth of an underclass, and foster public support for benefits by emphasizing conditionality and showing welfare to be working (Blair, 1996).

Making work pay New Deal policies were rapidly complemented by the measures “to make work pay”: the National Minimum Wage, introduced in April 1999; the tax and national insurance reforms noted above that halved the income tax rate for 1.5 million low-paid workers and exempted a million people from National Insurance contributions while protecting their entitlement to benefit (HM Treasury, 2000); and, most notably, refundable tax credits for working families. The first tax credit introduced was Working Families’ Tax Credit (WFTC). The WFTC is payable to adults in one- and two-parent families working 16 or more hours each week. The amount is dependent on income and the number of children. Despite its high political profile, WFTC carried forward many features of the Family Credit system that it replaced. Although administration was transferred to Inland Revenue (the tax collecting agency), WFTC was, unlike income tax, calculated on the basis of household, not individual, income and paid fortnightly with no end-ofyear reconciliation that would transform what was, in effect, a benefit paid by the tax authorities into a true tax credit. Working Families’ Tax Credit was significantly more generous than Family Credit, raising both the level of benefits for families with earnings and the maximum level of earnings consistent with continued receipt of benefit. As a result, the caseload increased by 230,000 to 1.1 million in September 2000; simulations suggest that perhaps as many as 300,000 additional families were eligible but had yet to take up the benefit. There is a symbolic connection between the National Minimum Wage and the WFTC. © International Social Security Association, 2003



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The WFTC in combination with welfare-to-work policy was expected to increase labour supply by both “making work pay” and making work necessary.

Ending child poverty

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By 1999, attention to development of tax credit policies had been distracted by a new child poverty agenda. Child poverty in the United Kingdom has until very recently been rising disproportionately quickly and remains higher than in most comparable countries (HM Treasury, 1999; Hills, 2001). The principal cause appears to be the growth in adult worklessness, and ministers were much influenced by research documenting the long-term social and economic scarring of children that can lead to deprivation passing from one generation to the next (Hills, 1999). In March 1999, Tony Blair committed the government to eradicating poverty within a generation — 20 years (Blair, 1999). Brazen though the strategy was — there is still no official definition of poverty in the United Kingdom — it was prevented from being vacuous by the commitment to publish an annual poverty audit against which progress towards the goal could be assessed.2 Various measures have been introduced to increase direct support for families with children, including raising dependency additions for meanstested benefit and increasing the level of Child Benefit — a universal cash benefit payable on behalf of all dependent children. However, more important was the replacement of Working Families’ Tax Credit from 2003 with Child Tax Credit, which will effectively provide a basic income guarantee for dependent children, and Working Tax Credit, which extends wage subsidies to all low-waged workers including those without children (Brewer and Gregg, 2003). These developments illustrate that the Labour government’s agenda is dynamic and can be influenced by persuasive social analysis as well as other pressures. The government also recognizes that social problems, such as child poverty, do not map well onto the structures of government in which departmental boundaries rapidly become barriers. Accordingly, new agencies have been created at the heart of government, located in the Treasury, the Cabinet Office and the Prime Minister’s Office, with a remit to coordinate policy development across the traditional divisions of government (UK Government, 1999). It is evident, therefore, that Labour’s economic and social policies are, to 2. HM Treasury has now established intermediate targets to reduce poverty by 25 per cent by 2004 and 50 per cent by 2009.




a large extent, one and the same. Whether the positive effects anticipated from the reforms of the macroeconomy in fact occur, whether the management of the economy will continue to be effective in the light of a potential global recession and whether the fiscal, employment and social measures are on a scale large enough to generate cumulative and long-term change must still be open to doubt. What is clear is that the United Kingdom’s welfare-to-work or activation policies must be seen, analysed and appreciated as elements of a much larger, evolving strategy of modernization.

Activation policies The New Deal programmes introduced piecemeal from 1997 onwards are built on the premise that paid work is the best route off benefits and out of poverty. Many of the programmes feature case management, with claimants being assigned a personal adviser to guide them off benefits. The programmes differ in their focuses — unemployed claimants and their partners, people with disabilities, and lone parents — and, therefore, whether they target social insurance or social assistance recipients. Some are predominantly “work first” strategies largely devoid of training, while others offer substantial human development input. They vary, too, in the extent that private and not-for-profit agencies participate in the delivery of services. While all seek to enhance opportunity and are based on the belief that claimants should take up the opportunities on offer, the programmes vary in the extent to which participation is mandatory, although the degree of compulsion has generally tended to increase. In terms of their high profile and comprehensiveness, the New Deal programmes mark a substantial break with the past. However, the building blocks of these reforms were put in place between 1992 and 1997 by the Conservative government led by John Major. Undoubtedly the most important of these earlier reforms was the 1996 introduction of Jobseeker’s Allowance, which explicitly emphasized the conditionality of benefit receipt within a more coercive regime (Trickey and Walker, 2001). Jobseeker’s Allowance merged social insurance and social assistance payments for unemployment into a single scheme, reduced the receipt of insurance benefits from 12 to six months, and placed benefit administration and job placement services within the same local office. Receipt of benefit was made conditional on signing an individualized Jobseeker’s Agreement that spelled out the job search activities required of claimants under threat of benefit sanction. Jobseeker’s Allowance remains in place as the principal public income maintenance programme for unemployed people. If Jobseeker’s Allowance symbolizes the shift to conditionality, Project © International Social Security Association, 2003



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Work and the Lone Parent Caseworker Project (later to become Parent Plus) were the immediate precursors to New Deal. Project Work, piloted in 1996, comprised 13 weeks of intensive job search followed by 13 weeks of mandatory work experience for people who had been unemployed for at least two years. The programme seemed to produce a significant decline in the claimant count, but it is less clear how effective the scheme was in helping participants back into work (Price, 2000). The Lone Parent Caseworker Project was a small-scale voluntary scheme that offered lone parents access to a named caseworker to provide advice and information about work opportunities (Vincent et al., 1997). Between 1994 and 1996, the Conservative government had plans to test a very similar Parent Plus scheme on a larger scale which were taken over by the incoming 1997 Labour government and metamorphosed into New Deal for Lone Parents. The ease with which the Blair government could build on Conservative initiatives illustrates the cross-party consensus that had evolved concerning the need for proactive policy and the legitimacy of enforcing conditionality. Drivers of the consensus were the financial cost associated with claimant numbers that had not fallen in line with employment growth, concern about dependency, crime and the risk of social unrest especially among young unemployed people, and success stories about US welfare reform that were actively promoted in London (Bennett and Walker, 1998). Labour strategists were also influenced by the architects of the so-called Dutch miracle (Visser and Hermerijck, 1997). Claimants themselves overwhelmingly accepted the legitimacy of conditionality (Jobseeker’s Allowance), although often those who were sanctioned reported that they either did not know why or felt that they had had no alternative but to act in the way that they had done (Vincent, 1998). Trade unions, benefit activists and some Labour backbench Members of Parliament were less persuaded of the merits of proactive policies, dismissing them as “US-style workfare”. Once in power, Labour rapidly came to believe that the machinery of government frustrated their goal of work-orientated reform and that there were limits to what could be accomplished by “joining up” the operation of the departments responsible for job placement and benefits policy at the ground level. Hence, the Department of Work and Pensions replaced the Department of Social Security and the employment component of the Department for Education and Employment, and their two executive agencies were merged into Jobcentre Plus. Under the new system, benefit and job placement services will be delivered together and working-age recipients of all income maintenance benefits will eventually be expected to attend regular work-focused interviews as a condition of receipt. International Social Security Review, Vol. 56, 1/2003



New Deals for unemployed people The original two programmes for unemployed people, New Deal for the Long-Term Unemployed (the direct descendant of Project Work) and New Deal for Young People, were introduced in 1998. These have since grown to at least five including New Deal for Over-25s, New Deal for Over-50s, New Deal for Partners and New Deal for Musicians. The archetypal scheme is New Deal for Young People. This programme is by far the best funded: £2,620 million was initially earmarked for it, compared with just £450 million for New Deal for the Long-Term Unemployed, despite the fact that the initial target caseload for the latter group was only a third smaller than the former. Over time, the content of the other New Deals has tended to evolve in ways that emulate New Deal for Young People. New Labour’s principal focus on young people, which contrasts to that of the previous government on long-term unemployment, is reflected in the strategic policy goals discussed above: concern that crime, dependency and worklessness both encourage teenage pregnancies and offer role models for children. Two other factors were important. First, the increased emphasis given by employers to accreditation had made it more difficult for unqualified youths to first enter the labour market. Second, it was judged that young people still confronted fewer obstacles to employment than older people and therefore that activation programmes aimed at them should prove to be more cost effective. New Deal for Young People. The New Deal for Young People is delivered locally by a mix of partnerships comprising public-sector (Employment Service), for-profit, and not-for-profit agencies. The scheme consists of three staged elements (Table 1). The first element, “Gateway”, is a period of intensive job search to which young persons are automatically referred once they have been unemployed for six months and during which they develop an action plan with a personal adviser. Gateway is intended to last for a maximum of four months; initially it was expected that 40 per cent of participants would secure employment in this phase. Soon after the programme was initiated, however, it was found that too many Gateway clients were on courses preparing for the second stage, called “Options”, and too few engaged in active job search (Hasluck, 2000a). Changes were therefore implemented in late 1998 to redress the balance. While the number of clients finding work in Gateway has increased since 1998, it remains below the 40 per cent target. “Options” comprises a set of four alternatives typically lasting for up to six months: subsidized work (employers receive £60 a week plus a training © International Social Security Association, 2003



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Target group

Duration of worklessness

Compulsion

Content

Remuneration

Subsidy to employer

Implementation

Young people aged 18-24

Six months or more

Yes

Gateway period: – intensive help, advice and guidance (up to four months)

Rate for job or:

£60 a week for six months Training contribution of £750

Pathfinder areas: January 1998 Nationwide: April 1998

£75 a week for six months

June 1998

Options: – subsidized employment – self-employment – full-time education/training – voluntary work – environmental task force (all options to include at least one day a week education or training)

JSA and a training allowance (most options include a fund for such expenses as childcare, travel and equipment) Wage or £15.38 a week grant Wage or £15.38 a week grant Wage or £15.38 a week grant

Follow-through: – renewed intensive help © International Social Security Association, 2003

Long-term unemployed aged 25+

Yes Unemployed and claiming JSA continuously for 18 out of the previous 21 months

Gateway: as above Options: – subsidized employment – subsidized self-employment – full-time education/training – work placements Follow-through: as above

Rate for job If not in work, will receive a training allowance, including 10p income-based JSA plus £15.38. Allowance paid without the addition if you are on the Education and Training Opportunities May be entitled to a job grant if on a work placement



Table 1. New Deal programmes for unemployed people


Compulsion

Content

Remuneration

People aged 50 and over

Six months or more

No

Help with job search

Eligible for EC when start working (if job expected to last five weeks or more, gross annual income is £15,000 or less, partner not getting EC and you work more than 16 hours a week)

Subsidy to employer

Implementation

April 2000

16-30 hours EC = £40 30 hours or more = £60 Partners

Those whose partners have been unemployed for six months or more


Yes for childless couples aged 18-24; otherwise voluntary

Financial help with travel and childcare costs for those on an approved training course or participating in an employment programme

Similar to New Deals for young people and long-term unemployed above but involving joint application

JSA = Jobseeker’s Allowance; EC = Employment Credit.

April 1999 as a voluntary initiative, compulsory in early 2001




Target group

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allowance; the client is paid the rate for the job); self-employment; work in the voluntary sector or with an environmental task force (the participant receives benefit plus a small subsidy); or full-time education or training which includes at least four weeks’ work experience. All the options include an element of accredited training, an innovation in the history of UK activation policies. There are no precise criteria for allocating clients to particular options, although clients have a marked preference for subsidized employment or full-time training (Hasluck, 2000a). The proportion of clients placed in subsidized employment has fallen markedly over time, dropping from 26 per cent of starts to 14 per cent in the third quarter of 1999 for reasons that are unclear but seem to reflect either an absolute shortage of vacancies or increased difficulty matching clients to the vacancies available. Education is the commonest option, accounting for 60 per cent of starts at the highpoint, although numbers have fallen partly on account of providers being unable to organize year-round starts on courses but also because of policy concern that too many clients were initially taking this route. Sanctions, in the form of full or partial reduction of benefit, are applied for non-compliance. In 2000 about 13 per cent of all “Options” clients were sanctioned, including 27 per cent of those admitted to the environmental task force (Bivand, 2001a). About 13 per cent of clients who start “Options” find unsubsidized work, with 19 per cent of those placed on the subsidized employment option doing so. Over two-thirds, however, move onto the third element termed “Follow-Through”. The objective of Follow-Through is to sustain the benefits acquired in earlier stages of New Deal through intensive job search and practical encouragement. It is intended to last for a maximum of 13 weeks, although about 10 per cent of participants who reach this stage remain for more than six months. Part of the reason for this is the diversity of clients in Follow-Through. According to qualitative research, they fall into four major groupings: those with a strong drive to find work; those who have changed their career aspirations; those waiting to return to an option; and those with severe personal difficulties (O’Connor et al., 1999). The success of New Deal for Young People has been such that by November 2000 the government could claim that it had met its manifesto commitment of returning 250,000 young people to work. Three-quarters of the 269,210 young people who had at that time moved off New Deal had moved into jobs lasting for more than 13 weeks, 87 per cent of them unsubsidized (DfEE, 2001). However, these gross figures include “deadweight”, young people who would have secured work even in the absence of New Deal. Econometric modelling based on the 12 Pathfinder areas in which International Social Security Review, Vol. 56, 1/2003



New Deal was first implemented suggests that deadweight may be as high as 50 per cent (Anderton et al., 1999). Even so, cost benefit analysis suggests that the scheme is self-funding, while other modelling indicates that there is no evidence of substitution (that is, young people from New Deal do not seem to be taking jobs that would otherwise have been taken by other people). New Deal for Young People has not been immune from problems or criticism (Hasluck, 2000a). Early heavy promotion of the scheme stimulated employers to offer more places than could be filled, and when recruits were found, many lacked soft skills — that is, communication, personal presentation, teamwork, self-management and coping skills — and basic literacy and numeracy. The gap between employers’ expectations and the job-readiness of some young people continues to be an issue. Labour’s 2001 manifesto includes the commitment to increase the focus on numeracy, literacy, presentation and IT skills and to provide all New Deal participants with IT training. An additional challenge is that employers who recruit from New Deal expect recruits to be of similar quality to those acquired from other sources. Ensuring that personal advisers accurately match client to job is likely to be central to the continued reputation of New Deal. The obligation on employers to ensure that clients receive training has also proved contentious. Smaller employers, especially, argue that they have the resources neither to release nor supervise New Deal recruits, while larger enterprises have in some instances proved unwilling to modify existing training programmes to facilitate accreditation (Woodfield et al., 1999). A further problem has been the variability in the service received by clients. Quality differs between areas, reflecting mode of delivery (there is some evidence that private-sector suppliers are comparatively ineffective), size of office and, perhaps inevitably, the local labour market conditions (House of Commons, 2000). Outcomes for ethnic minorities are notably worse than for other groups (Bryson et al., 2000). A partial response to these problems has been the development of Core Performance Measures to provide a yardstick against which the performance of supplier partnerships can be addressed. A related concern, growing in importance, is that almost a quarter of the clients placed fail to retain their employment. Research is under way to identify the reasons for this and to assess policies that have been adopted in other countries to address the issue. Other New Deals for unemployed people. New Deal for the Long-Term Unemployed (later known as New Deal 25+) was announced at the same time as New Deal for Young People but was introduced six months later (in June © International Social Security Association, 2003



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1998). The comparatively limited resources devoted to it meant that the scheme was originally targeted on people unemployed for over two years3 and limited to the Gateway and two options: full-time education, and subsidized employment (the employer to receive £60 a week, not £75 as with New Deal for Young People). Early monitoring demonstrated that the New Deal for the Long-Term Unemployed was proving to be less effective than New Deal for Young People. By November 1998, pilots had been launched in 28 areas to test alternative strategies, a special additional voluntary scheme was introduced for people aged over 50 in April 2000, and an entirely remodelled scheme, New Deal 25+, was launched in April 2001. The pilots revealed that reducing the waiting time for access to New Deal, adding an intensive activity phase and encouraging greater flexibility in approach together increased the numbers leaving benefit for employment by 73 per cent (Lissenburgh, 2001). In the light of this evidence, New Deal 25+ has now been opened to unemployed people after 18 months and comprises a Gateway period of four months, a compulsory period of intensive activity lasting between three and six months and a follow-through period. Apart from subsidized work (with an employer wage subsidy increased to £75 a week), the intensive activity can include basic employability training for those with serious employment problems, flexible packages of intensive support including work experience and placements, and occupational training and soft skills development. This package clearly resembles that available for younger people but omits the rigidity inherent in the fixed “Options”. It remains to be seen whether national implementation can replicate results obtained in the pilots. Whereas New Deal 25+ is compulsory, New Deal 50+ is a voluntary mechanism by which older people can obtain special assistance after only six months of unemployment. The scheme provides the usual access to a personal adviser but also offers a training grant of up to £750 and an Employment Credit that is worth £60 a week for one year to someone who secures full-time work if his or her gross income is less than £15,000. An Employment Credit of £40 a week is available for people who secure part-time work. Finally, New Deal for Partners overturns tradition by imposing work obligations on both members of a couple rather than one. This occurs once one partner has been claiming Jobseeker’s Allowance for six months, if he or she is aged 18 to 25 and has no dependent children. Both partners are required to participate in New Deal for Young People and the couple’s ben3. In this it followed the precedent set by Project Work, although the conventional definition of long-term unemployment used in the United Kingdom is one year.




efit is subject to reduction if either partner fails to do so. New Deal for Partners is available on a voluntary basis to all other people whose partner qualifies for a New Deal scheme. To summarize, the New Deal family of programmes has been expanded and modified to cope with the diverse circumstances of unemployed people. The pivotal role of personal adviser remains, as does a staged approach to service delivery with a focus on active job search followed by work experience and, for young people, accredited training with participation supported by threat of benefit sanction. Programmes have become more differentiated, though with an increasing emphasis on flexible response and the provision of soft skills.

New Deal for Lone Parents Introducing a New Deal for Lone Parents was perhaps more radical than proposing activation schemes for unemployed claimants because there is no clear popular consensus in the United Kingdom that lone mothers should engage in paid work rather than care directly for their children. Indeed, half the population believes that this choice should be left to the lone parents themselves (Hills and Lelkes, 1999). At face value, New Deal for Lone Parents may also seem radical in that it is officially described as a “work first” scheme — hence, for some, carrying US overtones — although its essentially voluntary nature weakens the transatlantic comparison. The sense of radical change was softened as well because the preceding Conservative government had already planned for the implementation of a similar initiative, Parent Plus. This meant that it was possible to introduce the first New Deal prototypes in July 1997, just two months after the election. Conservative governments had been concerned by the tripling in the number of lone parents that occurred in the three decades from 1970 and by the marked fall in the proportion working (due largely to a change in the composition of lone parents: Walker with Howard, 2000). Not only was this seen as evidence of the breakdown of the traditional family but, probably more importantly in policy terms, it meant increased social assistance expenditure: 58 per cent of lone mothers received Income Support in 1998, a year in which they came close to replacing unemployed people as the second largest group of recipients, behind older people. New Labour’s analysis of the problem differed only marginally from that of their Conservative predecessors, but it was projected on a wider canvas. For Tony Blair (1997b), lone mothers claiming benefit reflected a growing dependency culture and underclass. More generally, lone parents were seen as one aspect of the bigger problem of worklessness that was a © International Social Security Association, 2003



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Table 2. New Deal for Lone Parents Target group


Compulsion

Lone parents No restriction No (but from 2002 required to attend an interview in order to claim benefit)

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Content

Remuneration

Subsidy to employer

– help and advice – preparation of an action plan – access to programmes – followthrough

Extra financial help None available: – for registered childcare costs for those working less than 16 hours a week – £15 a week training grant for those who take up training – help with travel costs

Implementation

Pilots: July 1997 Nationwide: October 1998

root cause of poverty and a major contributor to the intergenerational transmission of disadvantage (HM Treasury, 1999). Lone parents therefore stood to benefit from the raft of measures put in place to address worklessness, and they have been major beneficiaries of the National Minimum Wage and Working Families Tax Credit. They stand to gain, too, from the National Childcare Strategy to ensure “good quality childcare for all children” and increased nursery provision. Changes to the child support system introduced in late 2001 are intended to ensure that lone parents on social assistance gain financially from maintenance payments made by absent parents. New Deal for Lone Parents is, therefore, just one element in a larger package of support for lone parents, albeit an important one. It is a voluntary, employment-orientated advice service covering job search, training, childcare and benefits that is targeted on lone parents whose youngest child is at least five years three months old (and hence at school) (Table 2). Lone parents who enrol in the programme are assigned to a personal adviser. The programme was initially implemented in three stages, including a prototype in eight areas, before going national for all lone parent claimants of Income Support in October 1998. It is not possible to give a precise measure of voluntary take-up of the New Deal, but it is thought to be in the region of 20 per cent of all lone parents on Income Support, with over half either joining the scheme ahead of invitation or being parents of pre-school-aged children and hence falling outside the initial target group (Millar, 2003). Of those who attended an initial interview, about 35 per cent had found work by the end of October 2000, although about a third of these remained in the programme either reInternational Social Security Review, Vol. 56, 1/2003



ceiving active support or because in that way they could access the programme more readily if they lost their jobs. Analysis based on the prototype implementation in eight areas suggests that the programme led to a 1.5 per cent reduction in benefit caseload after six months, rising to 3.3 per cent after 18 months at a net cost of £724 a participant (Hasluck et al., 2000).4 Seventeen per cent leaving benefit did so for employment (but this proportion was no greater than in control areas). Between 1997 and 2000 the proportion of lone parents in employment rose by seven percentage points. Based on the prototype findings, the contribution of New Deal for Lone Parents to this change is unlikely to have been large. Other policies — and economic growth — were probably much more important. The importance of New Deal for Lone Parents is that for the first time it provides access to advice and training for lone parents considering work. However, Labour strategists are not content with the level of success attained, not least because HM Treasury has set a target to increase the proportion of lone parents in work from 50 to 70 per cent by 2010 (Brown, 2000b). Achieving this may require greater compulsion; steps in this direction are already apparent with the obligation to attend workfocused interviews under Jobcentre Plus, although the New Deal itself remains voluntary.

New Deal for Disabled People Like New Deal for Lone Parents, New Deal for Disabled People (NDDP) is voluntary. Unlike that scheme, it extends the principle of work-based welfare to social insurance benefits and to people who are deemed incapable of work. During the recessions of the 1980s and early 1990s, unemployed people with health problems were more or less actively encouraged to claim incapacity benefits, not least because this reduced the claimant unemployment rate. Concerned, in the 1990s, that incapacity benefit caseloads continued to rise when unemployment was falling, Conservative governments tightened eligibility and enforcement regimes, a strategy inherited and continued by the 1997 Labour government. Two New Deal pilot schemes were implemented in 1998: one soliciting innovative methods from the voluntary sector; the other applying the personal adviser model developed in the other New Deals. In Autumn 2001 the New Deal for Disabled People National Extension, which draws on elements of both the earlier pilots, was implemented nationwide for an initial period of three years. 4. This figure takes full account of set-up and fixed costs. Taking operational costs only, there is a net benefit of £2,778 for each case to the Exchequer (Hasluck et al., 2000).




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Table 3. New Deal for Disabled People National Extension Target group


Compulsion

People with disabilities

People receiving No qualifying benefits on grounds of incapacity

Content

Subsidy to Implementation employer

Gateway interview: Not applicable None – adviser will identify and refer them to suitable vacancies and/or Job Broker Job Brokers: – job matching – advice and support – referral to training – rehabilitation – work experience

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Remuneration

Pilots from September/ October 1998; national extension from July 2001 A national network of about 75 Job Brokers is provided by the private, public and voluntary sectors

The Extension comprises a national network of Job Brokers largely run by the for-profit and not-for-profit sectors (Table 3). All new and existing claimants of incapacity benefits are interviewed by Jobcentre Plus staff who identify and try to place job-ready clients and provide others with details of potential Job Brokers for them to choose to contact.5 Job Brokers are paid on the registration of clients; when a person moves off qualifying benefit and into work; and again when clients have achieved sustained employment lasting six months. Higher amounts will be paid for full-time work (16 hours a week or more) and none for work of less than eight hours. The earlier pilots identified some of the limitations of the voluntary caseworker model when applied to recipients of incapacity benefits. Only 6 per cent of claimants participated, in part because proactive marketing was limited but also because the possibility of employment had little salience for those believing themselves to be permanently unable to work. Many others saw themselves trapped in a double bind, fearing loss of entitlement to benefit because incapacity benefits are paid on condition that the recipients do not work. The vast majority of those who did participate (the number of people who approached the service without receiving an invitation slightly exceeded invitees) felt that they benefited from contact with a personal adviser, and about a quarter secured some work within the 14month lifetime of the pilot. However, there is no evidence that seeing a personal adviser directly increased the number of people with disability re5. Different procedures apply while Jobcentre Plus is being phased in, with benefit recipients being invited by letter to participate in an initial Gateway interview.




turning to work, and more people left the scheme because they were dissatisfied with it than found employment (Walker, 2003). It is possible that employment-oriented performance targets caused personal advisers to concentrate on the most work-ready clients, who may have been able to secure work without additional support, thereby reducing the effectiveness of the programme. While personal advisers can inform and motivate, it was clear that the vast majority of people with disabilities in the United Kingdom confronted barriers not of their own making (Loumidis et al., 2001). Indeed, the NDDP pilot evaluation concluded that nothing less than a shift in “the culture of expectations regarding the employment of people with impairments or health conditions” was required among employers, health professionals and the public (Loumidis et al., 2001, p. 249). The National Extension is accompanied by targeted tax reforms (the Disabled Person’s Tax Allowance) that increase the payoff to work, and by strengthened anti-discrimination legislation. However, it is doubtful whether enough measures are yet in place to bring about the desired change in the “culture of expectations” to which the pilot evaluation refers. The New Deal programmes illustrate the magnitude of the policy and institutional developments unleashed since 1997.6 Albeit in some cases reassembled from existing policies or policy ideas, they have replaced piecemeal provision with a comprehensive but tailored programme of activation measures for people of working age, irrespective of their reason for claiming benefit. Design and implementation has been dynamic, informed by success and failure observed en route but guided by goals of modernization and promoting opportunity and personal responsibility. Moreover, the creation of Jobcentre Plus and the implied increase in reliance on compulsion may yet prove to be the most important development (Lewis and Walker, 2000).

Reflections While the institutional frameworks underpinning New Labour’s reform are inevitably unique, readers will recognize some components that feature in the regimes of other European countries. Activation is commonplace. Caseworking has always been a feature of continental European social as6. There are other New Deals that have not been discussed, for Communities, Schools and, even, for Musicians, that also typically take paid work as the engine of personal and social change (Cloonan, 1999). New Deal for Musicians was launched as an Option within New Deal for Young People in October 1999. It offers subsidized advice and training within the music industry, provided under the auspices of Music Industry Consultants (MICs) who are subcontracted by the Employment Service to provide this service.




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sistance. Compulsory contractual obligations on claimants are growing (Lødemel and Trickey, 2001). Implementation by intermediary agencies is a longstanding feature of French provision and emerging elsewhere, while Germany, France, the Netherlands and others have in-work benefits designed to make work pay (Evans, 2001). However, the United Kingdom has gone further, faster, in applying work-based welfare strategies to all working-age claimants, irrespective of the reason for receipt or the type of benefit received: social insurance or social assistance. It has also done so explicitly to foster labour market flexibility and to create an adaptable labour force to achieve both economic and social goals. These developments warrant critical attention in their own right and on their own terms. New Labour’s greatest achievement since coming to power in 1997 has been to articulate a set of strategic objectives within which it has begun to formulate a reasoned strategy of reform across much of welfare provision. They include macroeconomic stability and growth; labour market flexibility; investment in skills; higher in-work incomes and better incentives; and modernized government built on rights and responsibilities to foster inclusion, eradicate (child) poverty and enable society to be more adaptable in the event of inevitable structural change. This conclusion might surprise a British readership, since Labour has been accused of opportunistic, knee-jerk government with “all spin and no delivery”. Certainly, it has emphasized presentation and, like all governments, been willing to claim more success than it deserves (for example, quoting gross programme effects rather than net ones). It is debatable how much credit the Labour government can claim for the macroeconomic stability that the United Kingdom has enjoyed since 1997, or for avoiding a recession following the dramatic 2000/2001 stock market crash and the events of 11 September 2001. What role, if any, activation policies played in above-trend economic growth, below-trend inflation, falling unemployment and rising employment is equally disputed. Nevertheless, New Labour is on track towards many of its goals (UK Government, 2001) and, while child poverty has fallen less than hoped (Table 4), independent analysis suggests that the transformation of the Working Families Tax Credit into the combination Child Tax Credit and Working Tax Credit can be expected to boost the rate of its decline (Brewer and Gregg, 2003). Labour has succeeded in implementing a comprehensive policy of activation available to all groups, individualized and tailored through personal casework. It has ratcheted up obligations and sanctions but complemented this by creating greater financial rewards through in-work subsiInternational Social Security Review, Vol. 56, 1/2003



Table 4. Proportion of children below poverty thresholds (%) Percentage of con- 1996/97 temporary equivalized median household income

1997/98

1998/99

1999/2000

2000/2001

50

13

13

12

11

11

60

26

25

24

23

21

Source: Household Below Average Incomes Statistics available from http://www.dwp.gov.uk (visited on 1 November 2002).

dies, lower direct taxes and a minimum wage. But this success is generating new challenges. The single gateway provided by the new agency, Jobcentre Plus, offers one-stop access long demanded by claimants and jobseekers (Walker with Brittain, 1995) but equally has to serve vast numbers of clients with disparate needs. A key challenge is how best to manage the sensitive assessment of those needs and to direct clients to appropriate service providers with the minimum of hassle. The linchpin of success to date has been the relationship between personal adviser and client. The personal adviser has judiciously to balance provision of advice and counselling against the need to sanction and allocate resources. The evidence from the New Deals is that this becomes harder as caseloads grow and become more diverse, as happens when the single gateway is implemented. A similar threat to the continued success of New Deal is the trade-off between scale and flexibility. The trend in implementation has been towards greater flexibility — New Deal 25+, for example, compared with New Deal for Young People — so as to respond to the diversity and complexity of individual circumstances. To the extent that successfully placing job-ready clients in employment leads to an increasing proportion of hard-to-serve clients in the caseload, the importance of this flexibility will grow. On the other hand, large-scale implementation puts a premium on formal rules and precedent rather than the application of creative discretion. Compulsion is being extended to lone parents and people with disabilities, at least to the extent that they are to be compelled to attend workfocused interviews. Further compulsion is likely if the government is to attain its objective of 70 per cent of lone mothers in work and perhaps to reduce incapacity benefit caseloads (Millar, 2003). This will change the dynamics of the personal adviser role. Personal advisers typically believe that sanctions undermine the trust that they can establish with clients, while service providers often feel that “conscripted” clients are disruptive and undermine effectiveness (Hasluck, 2000b; Loumidis et al., 2001). While voluntary assistance can be offered selectively, considerations of equity de© International Social Security Association, 2003



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mand that compulsion be general, with more staff and better recordkeeping required. Such universality also means that barriers — both in attitude and capability — that cause clients to be passed over in voluntary schemes have similarly to be addressed. Finally, if the exercise of sanctions results in withdrawal from benefit, increased poverty and exclusion may occur. To date, the evaluation of New Deals has concentrated on global impacts rather than on establishing which elements in the package work best in what combination and under what circumstances (Bivand, 2001b). In particular, alternative methods for providing the case management/personal advising service that is the common core of the programmes have yet to be systematically or rigorously studied. There is also little systematic evidence on the comparative effectiveness of public/private partnerships in providing various programme components. The New Deals have focused on returning claimants to paid employment, but substantial minorities rapidly return to benefit and others fail to progress in the labour market (Walker and Kellard, 2001). Unless policies to promote employment advancement are implemented that prevent the claimant poor becoming working poor, child poverty targets will not be met (Dickens, 2002). Pilots are planned but international experience offers few successes to date (Kellard, 2002). To date, New Deal policies have enjoyed (and possibly contributed to) the most favourable of economic conditions. A more severe test will occur in the event of a global downturn. Evidence from the New Deal for Young People and Jobseeker’s Allowance evaluations is that success was largely confined to localities with buoyant economies (Hasluck, 2000a; Smith et al., 2000). On the other hand, Labour strategists would argue that adding more and better skilled people to the labour force will in itself increase the rate of job creation and that employees would be more likely to hold onto their jobs in an economic downturn because of the skills acquired in New Deal and in employment (Layard, 1998). At worst, they might add, the increased pool of skilled workers would cause unemployment to be more widely shared, with less severe social consequences than if concentrated on people deemed to be unemployable. If the conclusion of evaluating New Labour’s achievements within its own terms is one of cautious optimism but real concern about the challenges ahead, others writing from different vantage points will certainly reach contrasting assessments (Driver and Martell, 2002; Peck, 2001; Standing, 1999). They might point to contradictions in promoting employment as an antidote to poverty in the context of a flexible labour market, to the general failure of activation policies in Europe to cut high levels of unemployInternational Social Security Review, Vol. 56, 1/2003



ment, or to the paternalistic and socially divisive nature of welfare-to-work measures that erode insurance principles without strengthening the right to work or income security. In so doing, they stake out limits to the views that can be accommodated within “third way” thinking, but equally Labour strategists might argue that such criticisms ignore policies to address the second, more European half of New Labour’s most testing mantra: “Work for those who can, security for those who can’t” (UK Government, 1998).7

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7. See Brewer and Gregg (2003) for an evaluation of policies to promote security.





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