Tag: 2010

Below is the text of the speech made by Iain Duncan Smith, the Work and Pensions Secretary, to the Relate Annual conference on 3rd November 2010.

Introduction

Today, I want to talk to you about the importance of family.

There is absolutely no doubt that family life has a huge influence on the very foundations of society – just how important is a sociological lesson we have learned the hard way over the past 25 years.

That is why supporting families sits high on this Government’s agenda.

Indeed, just this Monday evening, I sat down with David Cameron and the Deputy Prime Minister to discuss what more we can do to help through the Ministerial Taskforce on Families and Children – so this is clearly an issue that is taken extremely seriously right at the top of Government.

We are well aware that every family is different.

As a Government, we should not be in the business of prescribing how people live their lives.

Yet we cannot ignore just how crucial families are to both the life chances of an individual and the social fabric of the nation.

So it is right that this Government is committed to supporting people’s desire to build strong, stable families through practical policy measures.

And it is important that we recognise the role of marriage in building a strong society, especially if we want to give children the best chance in life.

We all know that commitment gets tested regularly in every family.

And all the evidence shows that couples who persevere emerge with stronger relationships.

But it can be hard to get through every test without support, which is why I’m delighted to be here today to support the tremendous work done by Relate.

Define the Problem

All the evidence shows that family influences educational outcomes, job prospects, and even life expectancy.

That means that positive, family-friendly policies can bring wide-ranging benefits to society.

But when government abandons policies that support families, society can pay a heavy price.

Take poverty:

lone parent families are more than twice as likely to live in poverty than two-parent families

Or Crime:

children from broken homes are 9 times more likely to become young offenders

and only 30% of young offenders grew up with both parents.

And overall wellbeing:

Children in lone-parent and step-families are twice as likely to be in the bottom 20% of child outcomes as children in married families

So this is not some abstract debate.

Family life affects all of us – what happens on our streets, in our communities, and in our economy.

What you learn from a very early age has a great deal to say about the person you will eventually become and the life you lead.

That is far from saying that your life is determined by your family circumstances.

Many people overcome early difficulty to achieve great things.

But we would be foolish to ignore the weight of evidence that shows just how influential family can be to life outcomes.

Cost of failure

That is why, as the Centre for Social Justice estimates, the cost of family breakdown is £20-24 billion.

And the Relationships Foundation puts the figure at nearer £40 billion.

The fact remains that these are huge numbers – yet they represent just the direct costs.

The costs to society as a whole through social breakdown, addiction, crime, lost productivity and tax revenues are very difficult to quantify – but research suggests they could be up to £100 billion.

Yet, according to research by the Centre for Social Justice, what we spend on the prevention of family breakdown is only around 0.02% of what is spent on dealing with the consequences.

This is something which you at Relate know only too well.

In an era when we are constantly challenged by social breakdown, the family must be placed right at the heart of our solutions.

The real price of family breakdown is measured in the human costs – which is why it is critical we get the right policies in place to support the desire everyone has for a strong, stable family.

That is why we cannot go on ignoring the evidence that working with couples before they break up brings great benefits to their families and society.

People’s expectations of marriage are unsustainable. We have seen expectations rising but understanding falling.

There are people who don’t marry because they cannot afford a ‘fairytale’ wedding. Their attempts to do so can lead them to start their lives together in debt – often a precursor to failure.

There is a need for help to be available to people both pre- and post-marriage.

Which is why I want to pay tribute to you here at Relate and the other guidance organisations who provide such vital services.

Coalition Commitment

The scale of the challenge is huge:

Britain now has amongst the highest divorce and teenage pregnancy rates in Europe

– a recent OECD report, “Doing Better for Children” showed that despite having higher than average family incomes, outcomes for children in the UK are among the worst of all OECD nations

– it also showed that the UK has some of the highest levels of lone parenting and family breakdown

– and the report highlights the very high levels of alcohol and drug consumption among our young.

In 2008/09 we spent over £35 billion on financial support for children and yet 2.8 million children were still living in poverty.

What this tells us is that throwing money at the problem will not solve it.

Overcoming child poverty requires a more strategic approach, where parents, families and their communities are provided with the means and incentives to help themselves out of poverty and give their children the very best start in life.

This is why we need to look more closely at the underlying issues.

The family agenda is being driven by the Prime Minister right from the heart of government.

David Cameron chairs the Ministerial Task Force on Children and Families, working closely Nick Clegg and others, including myself.

All of us across Government are working together to support families and family-friendly Government.

And we are already making progress on many of the Coalition’s commitments:

– raising the income tax personal allowance so families can keep more of the money they earn

– taking Sure Start back to its original purpose of early intervention to help parents who are struggling and increasing its focus on the neediest families

– and putting £7 billion into the Fairness Premium to support the educational development of disadvantaged pupils.

I can tell you that allowing families to take greater control and encouraging people to take personal responsibility is a feature that echoes right across Government policy.

Levers for Change

In my own Department, for example, we are tackling welfare dependency through the Universal Credit system and the new Work Programme to help more people escape the poverty trap.

Welfare dependency is a huge problem in this country.

We have one of the highest rates of workless households in Europe and 2.8 million children living in poverty.

Many of the children growing up in these households without a proper role model simply don’t know what it is to aspire to work – one of the surest routes out of poverty.

As a result, their life prospects are severely curtailed and so the cycle of dependency repeats itself across the generations.

I am determined to help people break that cycle by reforming the welfare system.

Because we can only get to grips with the underlying problems by tackling the pathways into poverty:

– worklessness and welfare dependency

– debt

– addiction

– educational failure

– and family breakdown.

In each of these areas, families lie at the heart of our policies.

Families are also central to our thinking when it comes to the Cabinet Committee on Social Justice, which I chair with the support other senior Cabinet members.

We have already commissioned two Labour MPs to carry out work for this Committee:

Frank Field on Child Poverty and Life Chances, and Graham Allen on early intervention.

We know that progress in these areas will translate into real benefits for other areas of society.

Frank Field is looking at a wide range of issues, including how to help stop poverty becoming ingrained.

He is also looking at how we measure poverty as well as how we address it.

What I can tell you is that many people have told Frank about the importance of preventing family breakdown in the fight against poverty.

I am also looking forward to Graham Allen’s report on early intervention. I know this is something he cares deeply about, because I worked with him on this when I was in Opposition.

What is clear is that the earlier we address the life challenges people face, the more likely we are to solve them.

So Graham will be producing a report about best practice in January, followed by another in May on how to fund Early Intervention programmes.

Here again, when we receive the final reports I hope that we will be able to demonstrate that we are addressing the underlying issues that impact family life – not just the symptoms.

Further interventions

We have to do much more to support families in other areas such as:

– relationship support

– parenting support and education

– family and couple therapy

– therapeutic interventions, for example therapy for post-natal depression, debt counselling and mental health support

– family law advice focusing on prevention, child support and child contact

– helping parents reach their own financial and care arrangements for children following separation

– teenage pregnancy, and

– tackling domestic violence and violence towards women, where a report will be published shortly.

These are all issues that we will be looking at through the Ministerial Taskforce on Families and the Cabinet Committee on Social Justice.

But Government cannot do everything on its own.

We all need to work together on this – faith groups, voluntary organisations, health services, Police, community workers, and all the groups represented here today.

Conclusion

We need your continued support, working with us to build stronger families and communities for the future.

Because if there is one message to take with you today, it is this – no Government can ignore the importance of healthy families.

So we will strive to deliver the family-friendly policies this country needs right from the heart of Government.

I know you have expressed concerns about the ending of the Children and Young Persons Strategic Grant. However, as I said before we want to ensure that our focus is on families.

And the Families Task Force will come forward with suggestions for how we best do that.

In the meantime we have allocated £470 million to support civic society.

We are also reforming the welfare system to make work pay, as well as introducing reforms to pensions and Housing Benefit.

If you accept – as I do – that Government has a role to play, then we must also support the best solutions for families:

– committed, stable relationships with two parents that produce the best outcomes for adults and children

– unapologetic support for marriage, recognising that this provides a sound basis for the majority of long-term relationships, and

– proper support for families under stress to minimise the risk of family breakdown.

This is how we support the strong stable families that strengthen communities and forge a better Britain for everyone.

And Relate must be at the heart of that.

Thank you.

Below is the text of the speech made by Iain Duncan Smith, the Secretary of State for Work and Pensions, to 11th November 2010.

Introduction

Welcome to the Arlington Centre where Broadway provides its key services – projects like this change lives and transform communities long forgotten by others – they prove a better future is possible for people on the margins of society.

My contract

Several weeks ago I set out my contract with the British people.

In the clearest possible terms it says:

If you are vulnerable and unable to work we will support you.  This is our fundamental responsibility in office.

It says this Government is unashamedly ‘pro-work’.  We believe in work and its wider benefits.  We recognise it is the best route out of poverty, and we should always reward those who seek a job.

Thirdly, it was a pledge to deliver fairness for those who fund the system: taxpayers.

So today, based on my contract, this vision and our consultation, I am delighted to publish “Universal Credit: welfare that works”.

The vision: understanding poverty

For me, this programme represents much more than a Ministerial brief or initiative.

My passion for welfare reform, and my desire to fight poverty within Government, has been driven by the stark reality of what I’ve encountered.

As I travelled to many of Britain’s poorest communities I concluded that tackling poverty had to be about much more than handing out money. It was bigger than that.

I could see we were dealing with a part of society that had become detached from the rest of us.

People who suffer high levels of family breakdown, educational failure, personal debt, addiction – and at the heart of all of this is intergenerational worklessness.

Only in understanding this can poverty be defeated.

A Coalition Government for Social Justice

Let me explain why I believe the Coalition can be different.

We recognise both the symptoms and the causes of poverty.

We have Frank Field’s review – let me here pay tribute to Frank’s tireless efforts on poverty throughout his time in Parliament.

We recognise there is no better shield from child poverty than strong and stable families.

And we know that our poorest children should be inspired and equipped to secure a better future.  And here I also want to thank Nick Clegg for his work championing this issue through Government.

As a result of this work we have announced £7 billion targeted early years support for two year olds, and the pupil premium to help the most disadvantaged school children.

We will help people out of debt and utilise the brilliance of the voluntary sector to move addicts into recovery.

And, crucially, we will ensure that welfare works.

Reforming welfare to secure economic growth

To achieve all of this we need fundamental welfare reform.

Some have said recently that it is jobs not reform which is important. But in doing so they miss the point.

Let us take the last 16 years, a period of sustained growth.

63 consecutive quarters, passed from one Government to another.

Around 4 million jobs were created in the UK during this period, and yet some 4.5 million people remained on out of work benefits before the recession had even started.

So inactivity was persistent, despite the unprecedented level of job creation.

That is one of the reasons why around 70% of the net rise in employment under the previous Government was accounted for by workers from abroad.

Businesses had to bring people in from overseas because our welfare system did not encourage people to work.

And there is a deeper tragedy – almost 1.5 million people have been on out of work benefits for nine of the past ten years – during the longest sustained period of economic growth this group of people never worked at all.

So it is not just jobs – something else is wrong.

Our reforms are about reconnecting with that group.

We want them to be able to seize the opportunities of work as the economy grows – even today there are around 450,000 vacancies in the economy, and I want everyone to have the opportunity and support to fill these roles.

In prosperous times this dependency culture would be unsustainable.  Today, it is a national crisis.

The working-age welfare budget has risen by 40 per cent in real terms during the last decade – the decade of growth.

Therefore, I hope the publication of this White Paper sends an unequivocal message that this Government will not back away from necessary reform.

Reforms – headlines messages

I will outline the specifics of our White Paper to Parliament later, but this morning I want to draw out some key ways in which it will deliver the change we urgently need.

First, to those who are vulnerable and unable to work, this White Paper proves we remain absolutely committed to supporting you.

We will continue to provide extra support for those with disabilities, caring responsibilities and children.

Second, for those out of work who are capable of working, our reforms mean it will always pay for you to take a job.

And by unifying out-of-work benefits, Housing Benefit and Tax Credits into a simplified single Universal Credit, we will end the risk and fear associated with moving in and out of work.

But this is a two way street.  We expect people to play their part too. Under this Government choosing not to work if you can work is no longer an option.

That is our contract – we will make work pay and support you, through the Work Programme, to find a job, but in return we expect you to cooperate.

That is why we are developing sanctions for those who refuse to play by the rules, as well as targeted work activity for those who need to get used to the habits of work.

Impacts of reform

These reforms will transform lives.

Some 2.5 million households will get higher entitlements as a result of the move to Universal Credit.

We expect to lift 350,000 children and 500,000 working-age adults out of poverty by the standard measure.

This is just our analysis of the static effects of reform.

Analysing the dynamic effects isn’t easy, but we estimate that the reforms could reduce the number of workless households by around 300,000.

And around 700,000 low-earning workers will be able to keep more of their earnings as they increase their hours.

Third, this White Paper delivers a fair deal for the taxpayer.

We expect to reduce administrative costs by more than half a billion pounds a year, and to reduce levels of fraud and error by £1 billion a year.

And clearly everyone will benefit if we move people off welfare and into work.

Conclusion

These announcements are an important step towards reform.

They aren’t driven by a desire to moralise or lecture.

Instead, they begin with recognition that as a political class we have got this wrong for too long.

Our antiquated welfare system has become a complicated and inflexible mess.  It has been unable to respond to our evolving job market and the changing nature of our workforce.

Society has changed but the benefits system has failed to change with it.

So it is time to bring welfare into the 21st Century.  We want a system which isn’t seen as a doorway to hopelessness and despair but instead as a doorway to real aspiration and achievement.

I don’t say our programme is a panacea.

I can’t say it will change everything.

But I do say it’s a start.

Below is the text of the speech made by Iain Duncan Smith, the Secretary of State for Work and Pensions, in London on 27th May 2010.

Introduction

Good morning.

I am pleased to be here as Secretary of State for Work and Pensions, heading a strong and committed team of Ministers – Lord Freud, Chris Grayling, Steve Webb and Maria Miller.

I would also like to take this opportunity to thank the Permanent Secretary, Leigh Lewis, and his staff for the hard work and dedication they have shown over many years.

Walking around the building I have got some idea of the depth of enthusiasm of the staff who work here. People are keen to be involved in our programme of reform.

In fact, some of the people I have talked to – while in no way commenting on the previous government – have told me that the system they administer with such dedication is indeed breaking and in need of urgent attention.

But then, that is why I took this job.

Poverty Pathways

Six years ago, I launched the Centre for Social Justice, determined to deliver on a promise that I made to a number of people in some of the most deprived areas, that I would work to improve the quality of life of the worst off in Britain.

I had a vision that if people of good will and determination could come together – ignoring party labels and rooted in the most difficult communities in Britain – we could find a way to deliver on that promise.

We wanted to understand the root causes of poverty.

From this starting point, the team refined the work into five pathways to poverty – family breakdown, educational failure, addiction, debt, and the fifth, worklessness and economic dependency.

This, it was agreed, was what drives poverty.

Yet far too often, these pathways have not been reflected in the priorities of successive governments.

You can see that every day right here in London – one of the richest cities in the world where great wealth lives in close proximity to the harsh realities of poverty.

What, perhaps, is most remarkable is the degree of consensus among academics and, most importantly, inspirational leaders and community charities, that we need a new approach to tackling persistent poverty.

How, they asked, can it be right for generations in families to live and die without ever holding down a regular job?

How can it be right that we ask the unemployed to take the greatest risk for the least reward?

And how can we find new ways of breaking the cycle of dependency and re-discover social mobility?

The Problem

I want this Department to be at the forefront of strategy to improve the quality of life for the worst off.

But this will be no easy task. As last week’s poverty statistics showed, the challenge we face is huge.

Income inequality is at its highest since records began.

Working age poverty, after flat-lining until 2004, has risen sharply and now stands at the highest level seen since 1961.

There are more working age adults living in relative poverty than ever before.

Some 5.3 million people in the UK suffer from multiple disadvantages.

And today, 1.4 million people in the UK have been on out of work benefits for nine or more of the last 10 years.

Crucially, this picture is set against a backdrop of 13 years of continuously increasing expenditure, which has outstripped inflation.

The figures show that at current prices, we spent £28bn in 1978/79, excluding pensions.

By 1996/97, the figure was £62bn.

And today (2009/2010), it stands at £87bn, including tax credits, which takes the overall bill to £185bn once pensions are added.

Worse than the growing expense, though, is the fact that the money is not even making the impact we want it to.

A system that was originally designed to support the poorest in society is now trapping them in very condition it was supposed to alleviate.

Instead of helping, a deeply unfair benefits system too often writes people off.

The proportion of people parked on inactive benefits has almost tripled in the past 30 years to 41% of the inactive working age population.

Some of these people haven’t been employed for years.

Indeed, as John Hutton pointed out when he had this job, “Nine out of 10 people who came on to incapacity benefit expect to get back into work. Yet if you have been on incapacity benefit for more than two years, you are more likely to retire or die than ever get another job.”

That is a tragedy. We must be here to help people improve their lives – not just park them on long-term benefits.

Aspiration, it seems, is in danger of becoming the preserve of the wealthy.

The legacy of the system we have today stands at more than 1.5 million people on Jobseeker’s Allowance; almost 5 million out-of-work benefit claimants; and 1.4 million under-25s who are not working or in full-time education. Nearly 700,000 of those young people are looking for a role in life, but cannot find one.

The Economy

We literally cannot afford to go on like this.

The need to reduce costs is shared across the government, but here in DWP we always have to be conscious that we are often dealing with some of the most vulnerable members of our society.

That is why I will be guided throughout this process by this question – does what we are doing result in a positive Social Return on Investment?

In short, does this investment decision mean a real life change that will improve outcomes and allow an individual’s life to become more positive and productive?

That is how we will be guided on every decision.

We have to constantly remind ourselves that we are here to help the poorest and most vulnerable in our society.

So we will require that when we implement a programme it has a clear and evidence-based outcome.

We will also discipline ourselves and ensure that we are not tempted to alter it according to which way the political wind is blowing that day.

Fidelity to the original objective is vital in getting the best value for money for the taxpayer. And if a programme is not cost-effective against that criteria, then we must look at a better way to deliver.

Making Work Pay

To do all this, there are a number of key problems we must address.

One of the first is that for too many people work simply does not pay.

Let’s say someone on benefits is offered a relatively low-paid job.

If you factor in the withdrawal of, say, JSA, plus Housing Benefit and Council Tax Benefit – all at different rates – it means that for too many people they are left with little more income in work than they received on benefits.

Add to that normal costs of travelling to work and the loss of any passported benefits, and you soon start to see why work may not be the most financially sensible option.

For a young person, the situation is even worse since they are usually ineligible for Working Tax Credits.

Worse again for some people, the move from welfare into work means they face losing more than 95 pence for every additional £1 they earn.

As a result, the poor are in effect being taxed at an effective rate that far exceeds the wealthy.

The system has become regressive.

Extremely high effective tax rates also impact lone parents who want to work more than 16 hours a week.

So our current benefits system is actually disinincentivising people from work.

These prohibitive marginal tax rates mean that for some people, work simply does not pay.

We have in effect taken away the reward and left people with the risk.

It is no wonder they are so resistant to finger wagging lectures from government.

I have always believed that choice in life is about that balance and the ratio between risk and reward.

Get that ratio right and positive decision making will become the norm. Life chances will improve considerably and cost savings will follow as well.

The Work Programme

There has been much talk about sanctions. But I believe it is only right that if we are helping people to get back into work, then we also have a right to expect that those we support are ready and willing to take on work if it is offered.

That is why reform of the Back to Work programme is so important.

We will create a Work Programme which will move toward a single scheme that will offer targeted, personalised help for those who need it most, sooner rather than later.

My Ministerial team is working on the details and we’ll be hearing more about the Work Programme in the coming weeks.

But it seems obvious to me that if we know a particular older worker is going to struggle to get back into employment, it is only fair that we try to get them on to a welfare-to-work programme immediately, rather than pausing for 12 months as is currently the case.

A greater level of personalised support also means more people will be work-ready as the jobs market picks up, so over time we will get a higher return on investment, as well as producing greater life changes for the individual.

To make sure we get the best value for money, we will also be changing the framework to bring the ideas and energy of the third sector and the private sector to the forefront of the process.

We will reform the regime so that we properly reward the providers who do best at creating sustainable jobs that help people move out of benefits and into work. But we are not prepared to pay for anything less.

At the same time, we will also make sure the system is fair by ensuring that receipt of benefits for those able to work is conditional on their willingness to work.

So to be fair to the taxpayer, we will cut payments if they don’t do the right thing.

In addition, we will re-assess all current claimants of Incapacity Benefit on their readiness to work.

If people genuinely cannot work, then we will make sure they get the unconditional support they need.

However, those assessed as immediately capable of work will be moved on to Jobseeker’s Allowance straight away.

At the same time, those who have the potential to return to work will receive the enhanced support they need through ESA (Employment and Support Allowance) and the Work Programme.

Again, this is about fairness in the same way as ensuring that we get rid of the jobs tax so that employers are not penalised for giving people a chance to get back to work.

Pensions

The principles of fairness, responsibility and social justice also inform our agenda for pensions.

For example, we are phasing out the default retirement age so that we are not penalising perfectly healthy people who want to keep working and keep contributing.

The idea of someone being fired just because they turned 65 is nonsense.

People who are good at their job and want to work for longer should be able to do so.

In my view, that’s only fair. But of course this policy area rests with BIS, so the detail of how we do this is really their decision.

However, one of the big issues we have to face up to as a society is that we are all living longer and healthier lives.

That has huge implications for the pensions regime.

When the contributory state pension was first introduced in 1926, men were not really expected to live much past their pension age.

In fact, average life expectancy for a boy born in 1926 was just 64 years and 4 months.

By contrast, one in four babies born today will live to 100.

Shifting demographics means that the pensions landscape has changed massively.

That is why we have to make sure that pensions are affordable for the country and that is why we have to increase the pension age.

Another thing we are doing on pensions is to end the rules requiring compulsory annuitisation at 75.

This will simplify some of the rules and regulations around pensions. But it also means we will have a fairer system where people take proper responsibility for the decisions that make best financial sense for them.

And, of course, from April 2011 we are triple-locking the value of the Basic State Pension so that it will rise by the minimum of prices, earnings or 2.5%, whichever is higher.

So if earnings are going up fast, the pension will increase in line with earnings. If prices are going up fast, it will increase in line with prices. And if neither is going up fast, it will go up at least 2.5%.

Next, we also have to find ways to encourage greater personal saving. That means we need a vibrant private system too.

We want to encourage employers to provide high quality pensions for all their employees, and I look forward to working with employers, consumers and the industry to make automatic enrolment and increased pension saving a reality.

Real freedom in retirement comes from planning ahead for the future.

It would be one of the most positive changes we could make in office.

Welfare Reform

The third strand of reform we have set out covers the welfare system and it reflects my determination to make it simpler and more transparent so that work always pays.

We know that work provides the most sustainable route out of poverty, so it is absolutely vital that we get this right and people see a clear link between work and reward.

Less complexity in the system will also save money in administration costs, as well as cutting back on the opportunities for fraud and error.

However, the biggest savings of all will come from putting clear incentives in place to get people back into work and off benefits altogether.

By putting a dynamic approach to benefits in place, we will make sure that individuals and households are always better off in work so that they can take a sustainable path out of poverty.

Challenges Ahead

However, none of this will be easy.

There are major challenges ahead.

Some are technical – for example, how do we link all the various benefit systems that generate such complexity and confusion?

Some are practical – such as working out how we get the best out of the third sector and private sector providers on the Work Programme.

Some of the most difficult challenges will be cultural though. Because for too long, we have discouraged people from taking up their responsibilities as the Welfare State has pushed in to fill the gap where family and society used to function far more effectively.

Conclusion

Social Justice will define my role as Secretary of State at this Department…from jobseekers in our agencies, to families, carers and pensioners.

Indeed, I am pleased to announce today that I will chair a Cabinet Committee on Social Justice with the cooperation of my Coalition colleagues.

My drive is for social justice to run through the fabric of our government, in all that we do.

I also want to reinforce my personal determination to remove the barriers to social mobility and equal opportunity.

And I wish to set out my determination to build a fairer society.

In doing so, let me underline my personal commitment to equal opportunities for all.

This is my commitment to social justice and a welfare system that is fit for the 21st Century.

And I hope that by working together, we can make social justice a reality for Britain long into the future.

The prize is a welfare system that is simple, more efficient and one that helps to restore the social mobility that should be at the heart of British society.

A welfare system that is fit for the 21st Century.

Below is the text of the speech made by Iain Duncan Smith, the Secretary of State for Work and Pensions, to the Institute for Public Policy Research (IPPR) on 7th December 2010.

Introduction

I’d like to thank IPPR for the invitation to speak to you about welfare reform.

It’s important that we have a debate about this.

We currently have:

5 million people on out of work benefits

one of the highest numbers of children in workless households in the whole of Europe

and 2.6 million individuals on incapacity benefits, of which around 1.6 million have been in receipt of benefits for more than 5 years.

And the costs of welfare dependency are unsustainable – the welfare bill has risen by over 40% in the last decade or so.

Complexity

So let me start with an analysis of why we’re in this situation.

First, the system is immensely complex.

A host of benefits, premiums, and allowances interact with each other in a myriad of ways.

And different benefits are delivered by different agencies, making it difficult for people to know who to contact and when.

It’s no wonder the guidance manuals for advisors run to thousands of pages.

Even my officials debate the exact number of benefits – it depends on whether you are counting premiums, additions and so on or not.

Disincentives to work

Once they are on benefits, one of the first questions people ask is whether they will be better off in work.

Too often they find that the answer is no, or only just.

This is because, after a small disregard, benefits are tapered away at a very high rate.

For example, certain lone parents can lose 96 pence of every pound they earn.

Currently around 130,000 people face a marginal deduction rate of more than 90%.

Even worse, around 600,000 individuals face a Participation Tax Rate of over 90%.

For some people choosing not to work is a rational choice.

Long term dependency

And then there is the challenge of long-term dependency.

Many people on Incapacity Benefit suffer from temporary conditions, and could be supported to return to work.

But instead many have remained on the benefit for years, self-esteem often damaged and skills often rendered obsolete.

And we shouldn’t forget that, in 2007/2008, almost half of all claimants who underwent a Personal Capability Assessment for Incapacity Benefit did so by paper-based assessment – they remained on benefit without their condition being assessed in person.

This isn’t about being ‘tough’ on claimants by making them attend face-to-face interviews.

It’s about helping them to keep in touch with the labour market and access the support they need.

And there’s another issue we need to tackle back along the line – we need to do more to stop people falling out of work in the first place and on to sickness benefits.

Principles of reform

So we needed to take a fundamental look at the support being provided – and that is what we have done.

In a sense this is about creating a contract with people.

We have to make the system simple.

We have to make work pay.

We have to help the most disadvantaged to find and take work.

And in return, we expect them to take the work when it is available.

Universal Credit

First, make the system simple and make work pay.

The Universal Credit is at the heart of this.

The Universal Credit will be tapered away at a clear and consistent rate – around 65% before tax – making it easier for people to see how their earnings will change as they move into work.

Clarifying the taper rate will mean that in the future politicians will have to have a more open debate about where they believe the taper level should be set.

Bear in mind that, right now, some people currently lose 96p in every pound they earn.

The Universal Credit will also use variable disregards to allow for different groups, such as lone parents and those with disabilities.

We estimate that the Universal Credit will improve work incentives for around 700,000 people currently in low-paid work, and will pull around 850,000 children and working-age adults out of poverty.

We are now developing our delivery plan for the Universal Credit.

We expect to start introducing the Universal Credit from 2013, testing the system in the Spring before beginning roll-out in October.

From October 2013 all new claims for out-of-work support will be treated as claims for Universal Credit.

And from April 2014 to October 2017 we will work through existing cases.

This will be given the highest priority in my Department, and we are already deploying a strong management team and our most capable and experienced people onto the programme.

There has been speculation about the IT which will be used to deliver this programme.

But the fact is the scale of the IT delivery is similar to that for Employment Support Allowance, which was successfully delivered on time and within budget.

DWP and HMRC are working closely together to ensure the IT required to support Universal Credit is delivered on time, and that customers and employers are transitioned to the new systems in a co-ordinated way.

The timescales we are working to were endorsed by a number of leading IT practitioners at a recent workshop, where the overwhelming view was that with appropriate governance the IT is deliverable in 2013.

The Work Programme

Tackling incentives is important, but it is only one part of the story – we must also offer appropriate work support.

That is where the Work Programme comes in.

We are creating an integrated programme, making the best use of the private and voluntary sectors.

Providers will be paid an attachment fee when a claimant starts on the programme.

Thereafter, they will be paid by results.

We will pay a job outcome fee, rewarding those who manage to get claimants into work.

And, perhaps most importantly, we will pay a sustainment fee, paid to a provider for managing to keep someone in work.

Too often we’ve seen too much churn of people in and out of work. We need to support people as they develop the work habit.

Claimants will be referred to the Work Programme at different times according to the level of support needed.

For example, we expect the majority of customers to be referred after a year, but to make sure we limit wage scarring in the young those aged 18-24 will be referred after 9 months.

Those most in need of support, for example ex-offenders, will be offered early access to the Work Programme to ensure they receive it within a timescale that is most appropriate to them – this could be as early as three months.

IB reassessment

We are also continuing with the previous Government’s plans to reassess those on Incapacity Benefit.

This process is already underway with trial reassessments in Burnley and Aberdeen, and we plan to have reassessed 1.5 million claimants by 2014.

But we know that the Work Capability Assessment isn’t perfect, and that’s why we asked Professor Malcolm Harrington to recommend reforms.

Professor Harrington’s report made a number of helpful recommendations, including proposals for the provision of mental health champions in medical examination centres to help better account for mental and cognitive conditions.

We have accepted all of his recommendations, and will be working closely with his team going forward.

We are also looking to intervene earlier, to stop people falling out of work and on to sickness benefits in the first place.

This is being driven by the Fit for Work Service Pilots, which provide return-to-work services aimed at employees who have been absent from work through ill health for 4-6 weeks.

And when employers need it, they can access professional occupational health advice from national telephone helplines.

Housing Benefit

I know that there will be debates as we take these reforms forward – we’ve already seen that with our changes to Housing Benefit.

But we can’t avoid the facts.

Since 2000, private sector Housing Benefit awards have grown by between 70% and 80%, while average earnings have grown by only 30% to 40%, and expenditure has nearly doubled in cash terms in the last decade.

Without reform expenditure is expected to rise to £24bn by 2014/15.

So taxpayers are increasingly seeing people on benefits living in houses they couldn’t hope to afford themselves.

And, most importantly, there is a growing dependency trap, with people on benefits stuck in housing which they would struggle to afford in work.

So we’ve had to make changes.

But we’ve also made sure the most vulnerable are protected:

We’ve introduced a transitional period for those already on Housing Benefit

We’ve made extra money available for Discretionary Housing Payments

And we have a strategy to drive rents down by temporarily widening discretion for payments to be made direct to landlords.

This isn’t just about creating jobs.

The claim made in response to our reforms is that they won’t work because there aren’t enough jobs for people to move into.

In fact there are jobs even now, in difficult times – Jobcentre Plus alone took around one million new vacancies over the last quarter.

And the Office for Budget Responsibility recently forecast that employment in the whole economy will rise by 1.1m between 2010 and 2015.

But creating jobs isn’t the whole story.

From 1992 to 2008 this country saw 63 consecutive quarters of growth, across two governments, with 4 million more people in employment by the end of that period.

And yet before the recession had even started we had around 4.5 million people on out of work benefits – up to around 5 million today.

But we know that for much of this period of growth the majority of the rise in employment was accounted for by foreign nationals.

This isn’t about pointing the finger – it’s a simple question of supply and demand.

The demand for workers was there, but not the supply.

This is, in a sense, an indictment of our country’s ability to prepare its own citizens for the world of work, or to make work worthwhile.

Our reforms are about reaching the residual unemployed and helping to make sure they are available for work.

Conclusion

These are difficult times, but my concern is that unless we make these changes now, when the economy grows again we will see a repeat story of too many British people written off.

Too many people unable or unwilling to take the work that is on offer, with businesses unable to find what they need in this country and so having to look overseas.

We have to break into this residual group, and start to give them the hope and opportunity that we would all expect.