John Hutton – 2006 Speech on the Active Welfare State

Below is the text of the speech made by John Hutton, the then Work and Pensions Secretary, on 16th January 2006.

I’m grateful to David and the Work Foundation for hosting today’s event. It’s very appropriate that a speech about the future of welfare should be here at an organisation focused on work. Because ensuring people have the right to work is a fundamental responsibility of any modern Government. It’s a central tenet of Beveridge’s original Welfare State. And it’s the foundation upon which the Labour Party itself was built.

The challenge we face now in Government, is to find the best way of ensuring that this fundamental right can be exercised within an economy that is changing more rapidly and profoundly than at any time since the industrial revolution. To meet this challenge we do not need a big state with more and more centralised bureaucracy. Instead, we need an enabling state – one that empowers local institutions to develop local solutions. Where we mobilise the resources not just of the public sector; but of the private and voluntary sectors as well in a new drive to extend opportunity and prosperity.

When Keir Hardie led the fight against unemployment in the early years of the 20th Century it was not State benefits that he sought – but the opportunity and the support to work. He knew that with work would come autonomy, dignity and self-fulfilment. And that through work, the Labour movement could achieve its ultimate goal – to tackle poverty and build aspiration for every member of our society.

Forty years on, the welfare state – designed by William Beveridge, created by Clement Attlee’s government – recognised the right to enter the world of work as fundamental to forging a decent society by allowing people to exercise personal responsibility to support themselves and their families.

Beveridge’s welfare state was envisaged as an active, empowering force. It sought to provide government help to slay the Five Giants – want, disease, squalor, ignorance and idleness – through universal health and education, decent housing, and a benefit system that would provide security for those who could not work with help in finding a job for those who could.

Beveridge did not think that security from his five giants could be provided by the State alone. Personal responsibility – empowered by government action – was key to how security could be provided in each area.

Want was to be defeated by providing security when sickness, unemployment and retirement meant an end to earnings. But to have this security people had to work and contribute through their National Insurance.

Disease was to be defeated by the NHS. That organisation would be free – but the part played by the individual would be to maintain their own health.

Ignorance was to be defeated by the extension of secondary schooling to all. The State and churches would provide the schools – but ignorance could only be overcome when children and adults did the hard work at school.

Squalor was to be defeated by a combination of council housing and house-proud tenants. If the tenants failed to look after the housing they would reduce their own environments back to squalor. Again, collective provision of housing would be important but the family had to play their role in lifting themselves out of hardship.

Idleness was to be defeated by a combination of full employment and people being prepared to work. The provisions in Beveridge’s plan for unemployment benefit were clear. The task of the unemployed person was to keep themselves “fit for service”. Beveridge assumed that the work ethic would be reinforced by the benefits system and that the individual unemployed person would be prepared to work if they had the opportunity to do so. By combining effective management of the economy with individual effort, people would have greater security against idleness – but only if they played their part in taking work when it was made available.

So from education and health to unemployment benefit and welfare – the Beveridge plan had security at its heart – but with work as the main driver.

And since the main pillars of our modern welfare state were established, there have been huge strides forward. Our society is fairer. Opportunities as well as prosperity have been more widely distributed. People live longer and healthier lives. More people are benefiting from a University education. None of these advances would have been secured without the political courage and determination of previous generations of Labour politicians. But in all these areas, it is the need of today’s society, the rising aspirations of this generation that we have to respond to. And the bar is going up not down.

Our predecessors – Hardie, Atlee, Wilson, Callaghan – would have been horrified to see how the notion of personal responsibility gradually became obscured over the decades as parts of our welfare system trapped people between the twin vices of benefit dependency and poverty. Once inside the benefits system, it was often difficult to get out. People were frequently better off on benefit than in work. There was little help on offer to acquire new skills.

In particular, the legacy of Thatcher’s Britain was one of passive benefit dependency as a means of managing industrial decline. In a world where discrimination already scarred the lives of many disabled people and older workers – we saw millions of people written off onto benefit – with no expectation of a return to work. While Britain got steadily healthier as a nation, the numbers on Incapacity Benefit trebled between 1979 and 1997. The number of people claiming unemployment benefits rose by 50 per cent whilst the number claiming lone parent and incapacity benefits more than trebled. Overall, by 1997 there were 3 million more on benefits than in 1979.

And with benefit dependency came poverty. By the mid-to-late 1990s, the UK suffered higher child poverty than nearly all the other European nations. Over a period of 20 years, the proportion of children in relative poverty had more than doubled and by 1997, one in every three babies born in Britain was born poor. By 1997, nearly six million adults in this country were dependent on benefits to survive.

Far from indicating the success of welfare policies, these figures reveal their most abject failure. Because as we all know, the best form of welfare comes from the security of having a decent, well-paid job. Not from the myth that being on benefit alone can provide this level of security.

Even if our economy could support keeping people on ever higher benefits with little expected in return, which it demonstrably cannot – where would be the value in that? Worklessness can decimate and demoralise families and entire communities.

The clear link between benefit dependency and poverty is shown by the simple fact that half of the most severe pockets of deprivation in the country are contained within the hundred parliamentary constituencies with the highest numbers of incapacity benefit claimants.

So by creating a welfare state where rights properly match responsibilities we have the potential to end the ignominy of a system that can trap people in benefit dependency rather than helping them into work. While the solutions we apply may be different to those of 1945, New Labour is seeking a modern reflection of the true nature of the original Beveridge and Attlee reforms. A system of welfare built on the solid foundations that Beveridge laid down, but delivered in new ways that reflect the needs of our modern society. To restore the original Beveridge ethos of the welfare state as an enabler – empowering people to fulfil their potential, their hopes and their expectations. As the Prime Minister said on Saturday, empowerment is the theme running through this Government’s whole reform programme.

We have already taken great steps to replace the one-size-fits-all world of benefit dependency with an active service where tailored support to help people back into work is matched by the obligation for people to do everything possible to help themselves. Adopting a more individual approach is vital to the New Deal which has taken us far beyond the concept of the traditional labour exchange where employers looking for labourers were simply brought together with men and women looking for work.

In today’s labour market the acquisition and updating of skills are essential pre-requisites for success. It is estimated that by 2012 over two-thirds of all new jobs will require qualifications at or above level 3. So it is not just labour that employers are looking for – it’s skills.

And because of the decisions we have made on the economy and the reforms we have already delivered, including making work pay, we are today making good progress in tackling these real challenges. There are more people in jobs than ever before; 2.3 million more than in 1997. With almost three-quarters of the working age population in work, our employment rate is the highest of the G8 countries. And youth unemployment has fallen dramatically – with long-term youth unemployment down 90% since 1997. The numbers on benefit have fallen by around a million.

By supporting people in work and providing financial security for those who can’t work, we have lifted 2.1 million children and 1.9 million pensioners out of absolute poverty since 1997.

And we’ve tackled discrimination – with last year’s Disability Discrimination Act completing the most far-reaching programme of disability rights legislation that any European country has put in place. When we came to office, despite 14 previous attempts to produce legislation, only the most blatant forms of direct discrimination against disabled people had been outlawed and there was no protection at all for disabled employees of small firms or for disabled pupils and students.

Last year’s Act fulfilled our manifesto commitment to deliver enforceable and comprehensive civil rights for disabled people and represented a major landmark on the road to a world in which disabled people can be empowered to live independently, fully recognised and respected as equal members of society.

Our New Deal for Disabled People has seen nearly 75,000 job entries since its launch in 2001 – with 200,000 disabled people helped into work through our total package of New Deal programmes.

And we’ve developed new approaches – such as the cutting-edge Pathways to Work pilots – which bring together Jobcentre Plus, the Health service, GPs and employers to improve the package of support we offer to people on Incapacity Benefit.

In the first year of the pilots the number of recorded job entries for people with a health condition or disability had almost doubled compared with the same period the year before.

Yet massive challenges remain.

The need for Britain to compete in the ever-changing global economy means it is essential we do more to get everyone who is able to work to do so. Global trade is doubling every decade – China’s trade doubling every three years. The economies of developed nations that can not adapt to the pace of change risk falling further and further behind.

Maximising employment is equally essential for Britain to cope with the demographic challenge of a nation where people are living longer and healthier lives. By the late 2020s, nearly half of the adult population will be over 50. Over the next forty years or so, the numbers of pensioners will increase by 50%. Originally there were ten people of working age for every pensioner. Now there are four for every one pensioner; By 2050, two of working age for every one in retirement. Unemployment levels for people over 50 are relatively low, but economic inactivity rates are high and many people leave work early because of ill health. The economic consequences of these trends could be serious unless we take action now.

It is for those reasons that we have set ourselves the aspiration of working towards an 80% employment rate – reducing the numbers on sickness benefit by one million, and getting one million more older people and 300,000 extra lone parents into work.

To do that we must extend the principles of active, tailored welfare across the entire welfare state – providing help and support to the key groups that remain left behind.

Incapacity benefit remains one of the greatest barriers to social justice in Britain today. While 80-90 per cent of people coming onto the benefit expect to get back to work – many never do. After two years on the benefit, someone is more likely to die or retire than to find a new job. This is just not good enough.

Our industrial heartlands remain scarred by the Tory legacy of shuffling people off the unemployment lists onto a life of sickness benefit.

Yet the problem is now changing as the nature of our working lives change. As many people seek to balance busy lives which are becoming less physically demanding but more stressful, support that was originally envisaged for people with industrial injuries after long years of manual labour now often goes to people who have quit their office work or profession due to mental health problems.

Indeed, a third of new claimants now cite mental health problems as the main reason for coming onto the benefit, compared to a fifth in 1997.

So the problem is spreading to new areas and new groups of people – there are more incapacity benefit claimants in the South East than the North East, and 40 per cent of claimants are women.

Put simply, rather than the traditional stereotype of male workers off with a bad back, people coming onto incapacity benefit today are increasingly likely to be women or people suffering from stress.

For all claimants, it is the passive system itself that traps people in poverty.

Nothing expected of claimants, and little support is offered.

The gateway to the benefit poorly managed, with some claimants receiving IB before even passing the medical test;

There are perverse incentives to stay on the benefit – you get paid more the longer you claim;

And those who try to plan their return to work through volunteering and training run the risk of proving themselves capable of work and losing their entitlement;

Even the name of the benefit sends a signal that a person is incapable – that there is nothing that can be done

We cannot allow that to continue.

The proposals I will publish later this month will set out the details of a new benefit system for new claimants, the essential elements of which will be in place by 2008. The new benefit will be placed on a new concept of measuring and building up each individual’s capacity rather than writing them off as incapable.

The green paper will introduce new measures to help those on the existing benefit back to work – we must not abandon those who have been failed by the current system.

Let me be clear about one thing. This is not about forcing people to work when they do not have the capacity to do so. I believe that the mis-treatment of disabled people typical of the last century – and still too often the case today – is one of the last great emancipation issues of our time. This Government has pioneered both legislation and support to tackle this. Matching rights with responsibilities will not mean doing anything to undermine this.

But equally – when people do have the capacity to work they have the right to expect support to achieve this and not to be written off onto benefits. Helping disabled people and others with health conditions is in fact fundamental to our ability to take the next step in our pursuit of true equality – to change attitudes in society.

Our Pathways to Work pilots have given us the platform, but we need to aim even higher. The largely voluntary approach of Pathways has been a success, but it is not enough on its own to reach our goal. That is why the increased support we offer to people seeking to get back in the workplace must be matched by increased obligations. A “something for something” approach demands that state help is matched by increased responsibility on the part of claimants to take advantage of the support programmes government can offer.

Radically changing incapacity benefit is critical to giving more opportunity to those trapped by the current system, but the green paper will also seek to do more for other key groups who still face barriers to accessing the benefits that work can bring.

We will set out proposals to do more to help lone parents balance their need to care for their children with the huge benefit to their family that a job can bring.

We will bring forward measures to do more to help older people overcome the barriers to work which make their employment rates significantly lower than the population as a whole.

And we will reform housing benefit so it better promotes personal responsibility and does not hold people back from working.

It will be important to consult fully on these changes, yet we must move forward as swiftly as we can. That is why I intend to bring forward legislation in this session to set in motion the changes we need to make.

I very much hope that all of you here will join with us in examining our proposals over the coming months – sharing with us your expertise and working with us to turn these aspirations into reality.

With these welfare reforms we can harness the power of modern advances in health and employment support and foster a society of genuine equal rights and opportunities for all. We can build a lasting legacy for the future of our children and grandchildren. And we can deliver an active Welfare State that doesn’t simply cushion people from the effects of poverty and unemployment – but prevents these conditions from occurring in the first place and gives them the support they need to rebuild their lives when they do.

Our proposals will set a new direction of travel for our welfare system. They must provide opportunity as well as security. They must promote full employment and the right to work. They must enhance personal responsibility – not undermine it. And we should bring together the public, private and voluntary sector in a new mission to transform some of Britain’s most disadvantaged communities.

That, I believe, is a modern vision of which William Beveridge and generations of progressive politicians that have gone before us, would have been justifiably proud.