WORK IS THE BEST FORM OF WELFARE (SAVINGS):

THE PROCESS IS THE POLICY.

BILL WELLS

BEVERIDGEAN WELFARE STATE PRINCIPLES: in

‘SOCIAL INSURANCE AND ALLIED SERVICES’. [1944]

The first principle is that any proposals for the future, while they should use to the full the

experience gathered in the past, should not be restricted by consideration of sectional

interests established in the obtaining of that experience. Now, when the war is abolishing

landmarks of every kind, is the opportunity for using experience in a clear field. A

revolutionary moment in the world's history is a time for revolutions, not for patching.

The second principle is that organisation of social insurance should be treated as one

part only of a comprehensive policy of social progress. Social insurance fully developed

may provide income security; it is an attack upon Want. But Want is one only of five

giants on the road of reconstruction and in some ways the easiest to attack. The others

are Disease, Ignorance, Squalor and Idleness.

The third principle is that social security must be achieved by co-operation

between the State and the individual. The State should offer security for service

and contribution. The State in organising security should not stifle incentive,

opportunity, responsibility; in establishing a national minimum, it should leave

room and encouragement for voluntary action by each individual to provide more

than that minimum for himself and his family.

AT LAST THE 1948 (TO 1966) SHOW:

In terms of UK employment ‘We’ve done a lot….

66

68

70

72

74

76

78

80

82

84

86

88

% o

f P

OP

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AT

ION

AG

ED

16

TO

59

/64

TOTAL WORKFORCE JOBS & LFS EMPLOYMENT (PEOPLE): AS % OF WORKING AGE POPULATION; [HERE 16-59/64]

Workforce Jobs LFS Employment 16+ LFS EMPLOYMENT 16-59/64

‘…but – to hit 2 million jobs this parliament – there is still more to do.’

The ‘ageing population’ is already here.

Over 50s – who work less – up by 2 million. With half over 65

Under 50s – who work more – down by ½ million.

-91 -129

216

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255163

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297

170

542

685

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1,500

1,750

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POPULATION CHANGE 2015-2020: BY AGE/SEX:ONS: 2012 PROJECTIONS:

MALES FEMALES

So, it is difficult to see employment growth of more than ¾ to 1 million

over the next 5 years without substantial policy reform.

Reforms would need to deliver 1- 1¼ million more people in employment

-121 -121 -89-52

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189 221

313

569

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900

1,000

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PROJECTED EMPLOYMENT CHANGE 2015-2020 WITHOUT REFORM:CONSTANT EMPLOYMENT RATES & EXCESS UNEMPLOYMENT (BACK TO PRE-RECESSIONARY LEVELS)

Constant Employment Rates Excess Unemployment (+ve Only)

REFORM: BACK TO THE FUTURE? Complete the process of Beveridgean welfare to work that was

RESTART-ed in 1986?

SOCIAL SECURITY MUST BE ACHIEVED BY

CO-OPERATION BETWEEN THE STATE & THE INDIVIDUAL

The State should offer security…

State sorts out individual’s benefits quickly & accurately & provides certainty.

…for service & contribution.

Every individual is expected to behave in a way that improves their situation

– despite receiving benefits – and so minimise the time spent on benefits.

The State in organising security should not stifle

incentive, opportunity, responsibility;

• Individual agrees contract of behaviour with state. Based on jobsearch

• Regularly and frequently check and review the individual’s behaviour.

• State provides more help to individual the longer they are on benefits.

The rise in UK average living standards – as measured by GDP per

head – has been amongst the fastest in the OECD over the past 30

years or so.

This is despite a fall of 2% between 2007 and 2014…

427

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78 77 75 74 72 71 69 67 66 66 66 66 65 60 5850 49 48 42 39 34 27

87

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RANKED OVER WHOLE PERIOD 1983-2014

GDP PER HEAD: %AGE CHANGE 1983-2014: OECD: $PPP

1983-2014 2007-2014

…and (much) more of this GDP per head is taken by workers in

the UK than in other countries.

6260 59 58 56 56 56 55 55

5351 50

48 47

42

38

3330

35

40

45

50

55

60

65

PE

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LABOUR INCOME SHARE: 2013 (MOSTLY): ILO

UK main rates of benefit are low by international standards.

They are, however, more universal, flat-rate and indefinite…

20 31 35 39 39 48 49 50 53 55 55 55 55 56 59 59 61 62 63 64 64 65 68 68 69 70 72 74 75 76 76 77 78 83 84 85 86 89 90 93

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OECD NET REPLACEMENT RATES: 2013RATIO OF OUT-OF-WORK BENEFITS TO A SINGLE PERSON'S TAKE HOME PAY

[FOR 67% OF MEDIAN EARNINGS: INITIAL PERIOD OF UNEMPLOYMENT: WITHOUT HOUSING BENEFIT]

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

OECD POVERTY RATES:% OF POPULATION BELOW 40% & 50% OF MEDIAN INCOME

40% [2005] 50% [2011 OR LATEST]

…this delivers a (far from generous but) relatively universal benefit floor

of income support at around 40% of average income.

Also it does help to reduce the ‘unemployment trap’ & ‘make work pay’...

…and once in work the average income of UK workers (wages net

of tax/NI Contributions) is amongst the very highest in the world.

This is despite poor growth in take-home pay since the recession.

142

109 109105 105 104

100

9795

92 90 9086 85 83 82 82 81

79 78 77 7771 71

6356 51 47 46 46 45 45 41 39

29

2825

19

33

23

9

3

19

11 9

2825

19 19

3022

26

20

37

14

2522 24

15 -119

27

38

61

28

39

26

39

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AVERAGE TAKE HOME PAY 2014: OECD ESTIMATES: INDEX UK =100ANNUAL EARNINGS: $US USING PURCHASING POWER PARITY EXCHANGE RATES:

[FOR A SINGLE PRIVATE SECTOR WORKER, NO CHILDREN: ON AVERAGE EARNINGS:]

2013 %AGE CHANGE 2007-14

So, achieving full employment is central to dealing with UK poverty.

Currently the UK has one of the highest employment rates in the world

and amongst the highest in its history...

44

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EMPLOYMENT RATES BY AGE: 2014AS %AGE OF WORKING AGE POPULATION (16-64): OECD

AGED 16-64 AGED 65 & Over

Growth has generally been more ‘job rich/productivity poor.’

.…with, in line with most but not all, other countries,

a big improvement in rates from the ‘80s mass unemployment period.

Equivalent in the UK to around 3 million more people in employment.

-8

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4

8

12

16

20

24

28

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CHANGE IN EMPLOYMENT RATES BY AGE: 1984 TO 2014AS %AGE OF WORKING AGE POPULATION (16-64): OECD

AGED 16-64 AGED 65 & Over

…and since the recession, growth continues to be ‘job rich’.

What is more the biggest improvement has generally been amongst

those that started off in the worst position…

[With young people as a major and important exception.]

-7.1 -6.9

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CHANGE IN LFS EMPLOYMENT RATE BY SEX & AGE:MAR-MAY 2008: TO FEB-APR 2015:

…rates have grown for UK nationals, most other EU nationalities & most

ethnic groups.

They have fallen for non-EU nationals (outside the Indian sub-

continent), the new EU2 states and for the Chinese…

1.2 1.1 0.5

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11.5

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2.31.4 0.8 0.5

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CHANGE IN EMPLOYMENT RATE BYNATIONALITY (16-64) & ETHNIC MINORITIES (16 & OVER):

LFS: (16-64): N.S.A.: JAN-MAR 2008-14

…and all types of households have also benefited. Again the biggest

improvements in those that started off in the worst position.

Employment rate growth has also been concentrated amongst people

with disabilities/work limitations…

0.5

1.61.1

2.2

7.9

0.5

4.1

6.8

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-1

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6

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CHANGE IN EMPLOYMENT RATES (16-64): LFSFOR VARIOUS GROUPS OF HOUSEHOLDS/INDIVIDUALS [OCT-DEC 2007-14: JAN-MAR 2008-2015]

…with active management of disability benefits contributing to this shift

from welfare to work. They are now at 20 year lows and 250-300 thousand

lower than its peak. But still over 1m higher than the mid 1980s.

Then, by mistake, a temporary sickness benefit for people without jobs

became a permanent incapacity benefit…

0

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DISABILITY BENEFITS (ESTIMATED):[Including & Excluding Effect of Equalising State Pension Age]

EMPLOYMENT SUPPORT ALLOWANCE (ESA), INCAPACITY BENEFITS (IB) & SEVERE DISABILITY ALLOWANCE (SDA):

All ESA/Incapacity Benefits ESA/Incapacity (Net of Females Aged 60-64)

…but, history suggests that active management is not enough.

As the UK is one of the few countries with indefinite benefits the state

needs to stay in constant contact, maintaining effective jobsearch

behaviour & provide more help the longer the individual stays on benefit.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 7 20 23 31 32 33 35 47 51 51 58

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OECD NET REPLACEMENT RATES: AT 5 YEARS DURATIONRATIO OF OUT-OF-WORK BENEFITS TO A SINGLE PERSON'S TAKE HOME PAY: 2013

[FOR 67% OF MEDIAN EARNINGS: WITHOUT HOUSING BENEFIT]

Since Restart in 1986 the original Beveridge approach has been re-

introduced successfully for unemployment benefits.

Virtually all of the improvement has been amongst longer durations as

the state has continuously promoted behaviour by the individual that

minimises their time on benefit by getting a job.

0

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GB: UNEMPLOYMENT BENEFITS BY DURATION: 12 MONTH AVERAGE

Total Claimants 0-4 Weeks Claimants 0-26 Weeks Claimants 0-52 Weeks Claimants

Total Registrants 0-4 Weeks Registrants 0-26 Weeks Registrants 0-52 Weeks Registrants

UK Claimants (Inc. UC) UK Registrants

…’activation’ of lone parent benefits has been similarly successful. And

again the biggest improvement has been amongst the longest durations.

Down over ½ million since its peak and back to mid 1980s levels…

0

100

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Lone Parent Benefits

Total 0-13 Weeks 0-26 Weeks 0-52 Weeks 0-104 Weeks

…and, most recently, the ‘activation’ of 60-64 year olds.

The equalisation of state pension age - moving women (and men) from

the state endorsed inactivity of early retirement back into working age.

Down around 200 thousand – largely amongst the long durations.

0

50

100

150

200

250

300

350

400

450

500

Th

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PENSION CREDIT: AGED 60-64

TOTAL MALES FEMALES TOTAL DURATION UNDER 6 MONTHS

And, although labour intensive, the active management of benefit

registers throughout the duration of the claim is cheap.

The object of ‘activation’ is to get the claimants to do all of the work –

to find a job that suits them.

Much less expensive than training or work experience programmes.

0.0

0.5

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SPENDING ON ACTIVE & PASSIVE LABOUR MARKET POLICIES: AS % OF GDP: 2013 (MOSTLY):

PUBLIC EMPLOYMENT SERVICES TRAINING & OTHER LABOUR MARKET POLICIES PASSIVE MEASURES (PRIMARILY BENEFITS)

The improvement in disability benefits has been smaller. It also takes a

different form with little improvement amongst the long durations.

Not surprising given that the active management concentrates on the

start of the claim – not continuous management throughout the claim -

and on measuring claimant’s health status - not promoting jobsearch…

0

400

800

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2,000

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2,800

3,200

Th

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DISABILITY BENEFITS (ESTIMATED):TOTAL AND DURATIONEMPLOYMENT SUPPORT ALLOWANCE (ESA),

INCAPACITY BENEFITS (IB) & SEVERE DISABILITY ALLOWANCE (SDA):

0-6 Months (Old Est) 0-12 Months (Old Est) TOTAL ESA/IB/SDA

0-6 Months 0-12 Months

…and the numbers moving on to ESA are primarily means tested as

contributory benefits are now time-limited.

It also seems that the eligibility tests have tended to weed out those

who signed on for NI Credits Only…

0

400

800

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1,600

2,000

2,400

2,800

3,200

Th

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DISABILITY BENEFITS (ESTIMATED):EMPLOYMENT SUPPORT ALLOWANCE (ESA),

INCAPACITY BENEFITS (IB) & SEVERE DISABILITY ALLOWANCE (SDA):

TOTAL ESA/IB/SDA IB/SDA CLAIMANTS IB/SDA CREDITS ONLY

ESA MEANS TESTED ESA CONTRIBUTIONS ONLY ESA NI CREDITS ONLY

…and administration of ESA is poor. Over 600,000 are either still in the

assessment phase or even unknown - a quarter for more than a year.

And, as the focus is on health not Welfare to Work, most of the 1.67

million who have been assessed – 70% - are in the Support Group.

With nearly 1m already in that group for more than a year..

0

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400

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800

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1,200

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EMPLOYMENT SUPPORT ALLOWANCE (ESA), NUMBERS IN EACH PHASE:

ASSESSMENT PHASE WORK RELATED ACTIVITY GROUP SUPPORT GROUP UNKNOWN

In Northern Ireland since 2008 the JSA position relative to GB has got

much worse. This coincides with a shift away from the GB intervention

regime involving a greater focus on the start of the claim and

employability measures rather than activation/jobsearch. This shift

reverses the trend towards a UK-wide welfare to work approach…

0

1

2

3

4

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6

7

PER

CEN

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NORTHERN IRELAND AS % OF GB UNEMPLOYMENT:CLAIMANT COUNT: S.A.

…and for lone parent benefits as well as JSA the Northern Irish position

has worsened during a period when the rest of the GB were introducing

successful welfare to work reforms. Only for ESA – which has been

less successful in GB – has the share remained roughly the same.

3.2

3.6

4.0

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4.8

5.2

5.6

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WORKING AGE BENEFITS: Northern Ireland as % of GB & Abroad

JSA ESA & Incapacity Benefits Lone Parents

Housing benefit is a much bigger part of the UK benefit system than

elsewhere. There is also a different administrative system, it is not

based on household characteristics and it is not flat rate. That makes it

difficult to sort out benefits quickly and concentrate on Welfare to Work.

Most importantly, it is likely to lead to lags in closing down cases…

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 4 5 8 9 12 12 12 21 23 33

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OECD NET REPLACEMENT RATES: HOUSING BENEFIT 'TOP UP'RATIO OF OUT-OF-WORK BENEFITS TO A SINGLE PERSON'S TAKE HOME PAY[FOR 67% OF MEDIAN EARNINGS: INITIAL PERIOD OF UNEMPLOYMENT: 2013]

…despite this, the numbers on Housing Benefit are now falling for

all forms of private and public sector tenants.

Some of this fall may be due to greater active management of the

housing benefit register over the past few years…

0

200

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PR

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)

HOUSING BENEFIT: GBBY TYPE OF HOUSING AND HOUSING ALLOWANCE OR NOT:

Social Landlord Tenants [LHS] Local Authority Tenants [LHS]

Private: Housing Allowance [RHS] Private: Non-Housing Allowance [RHS]

…with the falls in stock due to falls in the numbers flowing on to HB.

They are now greater than off-flows which have not improved as much.

HB off-flows are likely to be lower because of an administrative delay in

closing down HB claims – after people move off the main benefit…

1,150

1,200

1,250

1,300

1,350

1,400

1,450

1,500

1,550

1,600

Th

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HOUSING BENEFIT FLOWS: 12 MONTHS AVERAGE: GB[ESTIMATED BASED ON DWP AD HOC ANALYSES]

ON FLOWS OFF FLOWS

…and the administrative delay in closing down claims is likely to have

contributed to the continuous rise in HB for those who are in work.

The numbers on Housing Benefits for those Not in Employment have

fallen by over 300 thousand since the start of 2013.

1,600

1,700

1,800

1,900

2,000

2,100

2,200

2,300

2,400

400

500

600

700

800

900

1,000

1,100

1,200

Th

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Th

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HOUSING BENEFIT: GBBY WHETHER ATTACHED TO BENEFITS (PASSPORTED) OR NOT:

In Work - Not Attached to Benefits [LHS] HB - Pension Credit Benefits [LHS]

Out of Work - Not Attached to Benefits [LHS] HB - Working Age Out of Work Benefits [RHS]

For those in work the number leaving the benefit system entirely has

been increasing rapidly. If administrative delays in closing down claims

can be reduced it would rise further.

Also, if as planned in UC, people leave out-of-work benefits & HB at the

same time (so workers don’t claim HB) HB would fall further.

10

12

14

16

18

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22

24

26

28

30

32

34

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HOUSING BENEFIT FLOWS: FOR PEOPLE WHO ARE IN WORK:12 MONTH AVERAGE: DWP

NEW ON-FLOW ON-FLOW - FROM OUT-OF-WORK BENEFITS

OFF-FLOW- OFF ALL BENEFITS OFF-FLOW - ON TO OUT-OF-WORK BENEFITS

History suggests that integrating administration of Housing

Benefit with its main benefit might lead to a substantial fall in the

numbers on Housing Benefit for those in work.

• Registrants: >200,000 more than Claimants: Oct 1982

– Despite supposedly measuring the same thing.

• Adult Students: >100,000 in each Autumn1975-88.

– Roughly time when Benefit Offices & Jobcentres were separated

– c. 200,000 1983-85 when did not have to sign on at Jobcentres

in order to get benefit.

• Year after JSA introduced (from Autumn 1986): fell

300-350,000 more than previous year:

– JSA integrated Unemployment Benefit (Contributory) and

Unemployment Benefit (Income Support)

Outside the benefit system there is no longer any continuous active

management system of individuals making the transition from

education to work or further education.

Yet, this is where the worklessness problem of young people lies. The

numbers on benefits are at their lowest levels for decades…

162133

190

25

510

611

0

50

100

150

200

250

300

350

400

450

500

550

600

650

JSA LONEPARENTS

ESA/DISAB OTHER'INACTIVE'BENEFITS

ALL ONBENEFITS

NOT ONBENEFITS

TH

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WORKLESS YOUNG PEOPLE UNDER 25: NOT IN FT EDUCATION:(Estimated Rough indications of Scale)

…and this has led to young people leaving education and ‘falling

through the cracks’ – taking longer to move into work or on to FE.

By contrast, the number of young people who have made the move

into the labour market who are workless is at historic lows.

Chart 3.8: Workless under 25 year olds (excluding those in full-time education) who have never had a job and previously had a job: [BIS Analysis of Labour Force Survey: 4 Quarter Average. 2015 NMW Government Evidence]

Also outside the benefit system there is no longer a national job-

matching or career service. For example, not only are students no longer

allowed into Jobcentres but neither are workers looking for better jobs.

This may have contributed to the fall in employment rate of students and

also made it more difficult for workers to move on to better jobs.

-25

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EMPLOYMENT RATES BY AGE: UNDER 25: IN FULL TIME EDUCATION: %AGE POINT CHANGE SINCE APRIL 1992

16-17 YEARS 18-24 YEARS UNDER 25