John Hutton – 2006 Speech to DWP City Strategies Conference

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the DWP City Strategies Conference on 9th May 2006.

Thanks for coming here today – and to Dave (Simmonds) from Inclusion and the Local Government Association for hosting this conference with us.

When we launched our Welfare Reform Green Paper in January most of the attention focussed on our proposed reforms to incapacity benefit. The replacement of Incapacity Benefit with a new Employment and Support Allowance will, of course, be a crucial step towards modernising the benefit system.

But the Welfare Reform Green Paper was about more than changes to individual benefits. At its heart was the vision of a modern active devolved welfare state, based on a new contract between the State and the individual. A contract that extends support and opportunity in exchange for engagement and responsibility. A contract that lifts the summit of our ambition beyond simply getting people back into work to one that seeks to sustain their careers and progress up the job ladder. And a new contract between State and communities to share the challenge of tackling worklessness and poverty in Britain. This is why the new City Strategy is so important.

We have set an aspiration of an 80% employment rate. It is at the heart of our response to the growing global challenges of social, economic and demographic change.

The measures we proposed in the Green Paper will make a significant contribution to this aspiration – reducing the numbers on incapacity benefit by one million; and getting one million older workers and 300,000 extra lone parents into work.

But as we said in the Green Paper, a modern welfare state also means modern forms of welfare delivery. Delivery that’s effective, accessible and flexible.

In the few months that I have been in this job, I have been struck by scale of the challenge that we now face to renew our welfare delivery system to meet the conditions of the modern economy. Despite the success of the economy and the progress that we have made in improving employment rates across the country, there are still significant pockets of worklessness that blight the prospect of individuals and communities.

When I think about the challenge of getting a million individuals off incapacity benefit, I think about the need to construct a welfare delivery system that is able to adjust to the needs of a million individuals. Each with their own stories and challenges. Each with their own needs. I very much hope that the Welfare Reform Green Paper can be a catalyst for a wide ranging debate about how we can modernise delivery so that it is able to respond to the needs of millions of individuals. I hope that our City Strategies will be a practical expression of that ambition.

Tailored support to tackle worklessness is unlikely to be compatible with a bureaucratic, top down, statist model. Instead, it needs an enabling state – one that empowers local institutions to develop local solutions; one that gives local stakeholders the freedom to innovate and the flexibility to work together combining and aligning their efforts behind shared priorities; and one that mobilises 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.

This I hope is the shared vision and ambition that brings us here today.

Today there are more people in work than ever before – with some 2.4 million more than in 1997 and the biggest increases in the neighbourhoods and cities that started in the poorest position. And we’ve lifted 2.4 million out of relative poverty – including 800,000 children.

But we must now go further in breaking the cycle of deprivation and tackling the remaining barriers that trap people in pockets of worklessness – areas of poverty that are especially prevalent in some of our major towns and cities.

The UK has a relatively small number of areas with an employment rate below the EU average – but nearly all of these are in major cities.

15 of the 20 local authorities with the lowest employment rates are in cities. Nearly one-fifth of the working age population in Glasgow, Manchester and Liverpool are on benefits as either lone parents or incapacity benefit recipients. And, in total, our cities account for almost two-thirds of all those on benefits.

Take London, for example. It is the wealthiest city in Europe; productivity 25% higher than the rest of the UK; and a quarter of the workforce educated to degree level. And yet London now has the highest level of worklessness – and the highest level of child poverty in mainland UK. Nearly half of children in inner London are poor. We can and must improve on this.

We know that worklessness causes poverty. And 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 number of incapacity benefit claimants.

If we were to increase the employment rate for London merely to the current national average – over a quarter of a million more Londoners would be in work. And if we were to do the same for the 20 biggest cities in the UK – again just increasing their employment rates to the current national average – we’d see over half a million more people in work – helping themselves, their families and their local economies.

We know what a difference local initiatives and local solutions can make. The Welfare to Work forum in Glasgow, for example – a private sector led initiative working in partnership with Jobcentre Plus, the Scottish Executive, the City Council and other public sector bodies – has set ambitious targets to reduce the numbers claiming out-of-work benefits by 15,000 by 2007 and 30,000 by 2010. By the end last year they had already reduced benefit dependency by 11,000 – with around 3000 of those having been on incapacity benefit. It has been a huge success story.

Manchester City Council are already aligning £1.75m per annum of Neighbourhood Renewal Fund money to fund a Stepping Stones Project that has helped more than 1000 people on Incapacity Benefit get back to work – by bringing together the support of Jobcentre Plus, Manchester City Council and The Employment and Regeneration Partnership.

And in Edinburgh, the Capital City Partnership and the Joined up for Jobs Strategy launched in 2002 has seen a hugely successful move towards the development of demand led programmes, better aligned funding, and a delivery model which can help the most disadvantaged get into work. One of many achievements from this project has been to bring all of the city’s blackspots to within 5% of the city employment rate of 75.5%.

Across the country we see the difference that local solutions can make. But we also see the barriers to those solutions – whether it is a lack of flexibility in the system or complexity around funding and accessing different pots of money.

In London, for example, there are well over 70 different funding streams all designed to tackle worklessness and promote regeneration.

The City Strategy is about pooling these resources and creating new flexibilities for local partners to work together within a community to improve economic regeneration through skills, employment and health. A consortium of local partners using new seed-corn funding and new flexibilities to show how they would deliver real improvements in the proportion of local people in work in their local areas.

We have high ambitions for this initiative; we want to push the boundaries of flexibility and devolution and to do so in a way that best meets the needs of individual towns and cities.

We’re asking towns and cities to submit expressions of interest which identify the key players in the consortium; the key groups that will be targeted for help; the ways the consortium will make better use of existing resources and improve outcomes for the target group; the barriers faced and flexibilities needed to overcome these barriers; and how they will measure progress towards stretching outcome targets.

We’ll be asking for expressions of interest in particular from towns and cities with the highest numbers out of work. Those who have already built a business case as part of the New Deal for Towns and Cities will just be able to use or adapt this business case. I want the process to be as simple and clear as possible.

The Welfare Reform Green Paper Consultation highlighted the importance of minimising the burden on resources needed at the initial selection stage – we have listened to these views and that is why we have avoided a more complex bidding approach. And we’ll be issuing clear light touch guidance very shortly.

In assessing the expressions of interest, we will focus on the degree of disadvantage, the anticipated evidence-based performance improvement, the breadth and effectiveness of the proposed partnerships and the scope of innovation in using resources and overcoming barriers.

We want to focus the initial pathfinders on areas that are furthest from the national 80% employment rate aspiration – but, depending upon the success of this first round, we intend these pathfinders to be the forerunners to a wider roll-out. So areas that are not successful in the initial bidding process will be encouraged to prepare themselves for a later roll-out and, where possible, supported to take forward specific elements of their proposed initiative. This may include, for example, looking to grant additional flexibilities to overcome barriers highlighted in the expression of interest.

We intend to announce the Pathfinder areas that have been successful before the end of July. We will then work with these areas to draw-up detailed delivery plans many of which could be being implemented before the end of this year.

For these successful pathfinder areas, we will make available seed-corn funding as a flexible pot for consortia to spend as they see fit. Outcome-based funding will be then available at the end of the agreement period based on measurable achievement against agreed targets.

We’re creating a new £90 million Deprived Areas Fund which pools together money from the Action Teams, Ethnic Minority Outreach and Working Neighbourhoods Pilots that are coming to a close. This new fund will be more strongly focussed on – and give more money to – the most disadvantaged parts of the country.

It will give each District the flexibility to decide the type of support which would be most effective in meeting the needs of the local area, whilst ensuring value for money. And in City Strategy Pathfinder areas, this money will be seed-corn money over which the Consortia will have complete control and total flexibility to use.

Yesterday’s 2nd report on local Government by Sir Michael Lyons emphasised the importance of greater freedoms and the balance of power between Whitehall and local areas. Real success in tackling worklessness will demand a renewal of that balance – with more local choice to improve national prosperity.

We believe that by empowering you – local organisations and local stakeholders – we can begin the journey towards devolving aspects of the welfare state so that it is responsive to the needs of individuals and local communities. A welfare state that incentivises local partnerships to meet objectives through a new deal with Government that’s based on shared outcome targets and maximum discretion to do what it takes to make a real and sustained difference.

This I believe is the essence of modern welfare delivery. An approach that has the potential to make a radical and lasting difference in helping people off benefits and into work; in making sure that if people get jobs they are able to stay in work and not return to benefits; and in beginning to see people progress through the labour market by acquiring work-placed skills, confidence and ambition to do more.

I am under no illusion that the task of modernising our welfare system to meet these challenges, of changing the culture within Whitehall to respond to local flexibility and delivery, will be difficult. But I believe there is a growing consensus that a one-size fits all, top down solution to policy making and delivery is increasingly unsuited to the challenges we face. I will make sure that at the Department for Work and Pensions we will work with others and play our part in overcoming those challenges. Beginning a process of policy renewal that will help us to better address the endemic problem of worklessness facing many of our major towns and cities. Looking to the future. Being prepared to adapt and change. Always being prepared to develop new and better tools through which we can support local re-generation and economic development.

Many of you here today will be willing to work with us to prove this new approach can succeed. Together we can set a new direction of travel – harnessing the contributions of all those who can make a difference – whether in the public, private and voluntary sectors. And in the process, we can help improve the wealth and prosperity of Britain’s major towns and cities. Thank you.