Tag: Iain Duncan Smith

The below speech was made by the Work and Pensions Secretary, Iain Duncan Smith, at the Cambridge Public Policy lecture on 25th October 2012. The speech was titled “Reforming Welfare, Transforming Lives”.

Thanks to Simon Heffer, Miranda Gomperts and others for arranging tonight’s event.

It is a pleasure to be here this evening.

With a new Masters degree in public policy starting at the University next year, I hope that vigorous policy thinking in Cambridge will filter through to Westminster…

… strengthening the links I know my Department already has with the Centre for Science and Policy…

… and bringing a network of knowledge, evidence and expertise to bear on what we are delivering in Government.

In my area of responsibility – welfare policy – the challenge we face is not an abstract one.

Nor is it simply a question of institutions and systems.

My mission has always been about people – improving the life chances of the most disadvantaged and providing effective support to those in need.

That was the reason I founded the Centre for Social Justice back in 2004, an organisation set up to better understand the drivers of poverty and to find effective solutions.

And it remains my purpose in office – where tens of millions of people rely on the Department for Work and Pensions every day.

We are currently delivering an extensive reform of the benefits system, and I do want to spend some time reflecting on this programme.

But if we are to make a real difference to people’s lives, what we need to deliver is cultural change – both in society and even in Government itself.

Beveridge

To explain what I mean let me start by taking you back to the early 1940s, when Beveridge was laying out his vision for the modern welfare state.

Beveridge was driven by a desire to slay the ‘five giants’ that he identified in society at the time: want, disease, ignorance, squalor and idleness.

But he was also clear about the risks that were attached to this laudable cause.

He warned that:

“The danger of providing benefits, which are both adequate in amount and indefinite in duration, is that men as creatures who adapt themselves to circumstances, may settle down to them.”

And he was clear that the system should not be allowed to “stifle incentive, opportunity, or responsibility”.

In other words he was focussed on the kind of culture that the welfare system could underpin.

Would it be one that fostered a society where people took responsibility for themselves and their families, and treated welfare as a temporary safety net in times of need…

…or one that conditioned people to grow dependent on state support, and treat it as a long-term crutch?

His fear was that if the balance was wrong it would lead to the creation of a semi-permanent underclass.

70 years after the publication of Beveridge’s seminal report, I wonder what he would make of the system now?

Welfare inheritance

Some 4.6 million people –12% of the working age population – on out of work benefits.

1 in every 5 households with no one working, and 2 million children living in workless families – a higher proportion than almost any country in Europe.

This culture of entrenched worklessness and dependency was not just a product of the recession.

There were over 4 million people on out of work benefits throughout the years of growth.

Under the previous Government whilst employment rose by 2.4 million, more than half of that was accounted for by foreign nationals.

Let me be clear, this is not even a point about borders.

It was an issue of supply and demand.

The facts serve to illustrate an issue with our workforce at home – and the enormity of the first cultural challenge we faced.

Large numbers sitting on out of work benefits unchallenged, many unwilling or unable to take advantage of the job opportunities being created.

Whilst companies were unable to get British people to fill these jobs, workers from overseas stepped in.

Overburdened system

Part of the problem was that while our economy was subject to a fundamental overhaul – freeing up the markets and moving power away from the state…

… after Beveridge, governments of all hues seemed to forget about the need for social reform.

They assumed that the renewed economy alone would do the trick of creating a more prosperous and more cohesive nation and so our welfare system was subject to an incredibly reactive process of change.

A new challenge would emerge and governments would respond by tweaking things…

… creating add-ons to employment support – at one stage, the New Deal for young people, the New Deal for those 50+, even the New Deal for musicians…

…and introducing new supplements, even new benefits into the welfare system.

Small wonder we were left with a hugely overburdened system, comprised of over 30 benefits.

For disabled people alone a complicated muddle of 7 additional payments, 3 different premiums, 4 components in the main out of work benefits and tax credits… each with separate rules, rates and purposes… some means-tested, others linked, many overlapping.

On top of this over 25 passported benefits in England, and around 20 in Wales and Scotland.

For example:

Non-repayment of children’s welfare loans. Healthy Start vouchers and vitamins . Exemption from paying the cost of board and lodging on residential trips. Energy Assistance Package Stages 3 and 4. WaterSure.

Ah yes, WaterSure. I had to ask around to find out what this was, and it turns out it is to cap the bills of certain utilities customers who have a water meter.

You might think this is an isolated benefit – but no, there is also one for reduced telephone tariffs called BT Basic.

All these benefits introduced with the best of intentions – yet each with different eligibility criteria and each giving rise to confusion, fraud and error.

It is a system of byzantine complexity.

Worse still, it is a system set around the minority.

An exemption here, an addition there, all designed around the needs of the most dysfunctional and disadvantaged few.

Instead of supporting people in difficulty, the system all too often compounds that difficulty – doing nothing for those already facing the greatest problems, and dragging the rest down with it.

Obsession with spending

What do we find as a result?

Under the last Government, spending on benefits and tax credits increased by over 60%, rising even before the recession – when growth was booming, jobs were being created, and welfare bills should have been falling.

More money spent on welfare than ever before – by 2010, costing every household in Britain an extra £3,000 a year in tax.

Small wonder that the Government racked up the largest deficit since the Second World War.

We were unable to pay our way, with an economy built on debt and consumption.

This then is the second cultural challenge I want to touch on tonight – a problem which lies, to a large extent, in the culture of government spending which has developed.

This is a culture marked by an obsession with inputs – with pouring money into social programmes – so that governments are seen to be doing something.

Of course big spending is attractive because it brings big headlines.

Chasing media attention and placating lobby groups in the short term.

But my concern is that no one asks about the outcome – in other words what impact the spending will have on people’s lives.

Take the fact that 120,000 of the most disadvantaged families cost the Government some £9 billion per year in special interventions, from an array of agencies.

The police, the ambulance service, the Council, youth offending teams…

… all of them administering selective help, most often without discussion with other groups, trying to manage their own bit of the problem rather than addressing what was holding the family back.

We were paying out some £75,000 per family, yet without doing anything to transform their dysfunctional lives.

So we saw social breakdown on the rise at the same time.

And income inequality stretched to its highest level since records began.

That is what I mean when I speak about inputs versus outcomes – we have become comfortable with the idea of measuring the money we put in, but without really caring to ask what that money achieves in terms of life change at the other end.

Pensions

In many ways the problem I’ve touched on here is also relevant to our pension system.

Irresponsible government spending is symptomatic of a wider problem – of a society reliant on debt, rather than saving and investment.

Currently, some 11 million people the UK aren’t saving enough for their retirement.

Why?

Because under the pensions means test, hard-working people who try to save can find themselves retiring on the same income as their neighbour – someone who hasn’t saved at all but is eligible to claim for Pension Credit.

What kind of message does that send out?

It tells people on low incomes that it’s not worth saving – it’s not even worth working. Just sit back and wait for the government to pay out when you retire.

Over the years we seem to have become addicted to debt instead.

Even before the recession we accumulated one of the highest rates of personal debt in the whole of Western Europe, around £1.5 trillion – the size of the whole UK economy.

We embraced a culture of ‘live now, pay later’ and looked to future generations to pick up the bill.

Reform

How far from Beveridge’s original vision.

And clearly a system ripe for reform.

But how do you reform when there is no money?

Gone are the days when governments could buy their way out of a problem.

This Government is rightly committed to the vital task of cutting the deficit – and no department is exempt when it comes to getting the public finances in order.

We have already taken action to reduce welfare bills by £18 billion by the end of this Parliament, and with continuing economic uncertainty we will have to find further savings.

But from day one we have resisted an approach which focuses solely on the amount of money to be saved.

The solution, I believe, lies in structural change – leading to a complete shift in the welfare culture in this country.

We are bringing spending back under control.

But instead of simply top-slicing the budget, we are focused on tackling the demand for welfare…

… changing the incentives in the system so that it acts as a springboard rather than a trap, rewarding those who move into work…

… and redesigning the system in a way that restores fiscal stability whilst restoring lives at the same time.

Journey to independence

This Government will always stand by its promise to protect the most vulnerable and provide support for those whose sickness or disability puts them in difficulty.

Nevertheless, my belief is that where they are able, those in the welfare system should be on a journey. It should be taking people somewhere, helping them move from dependence to independence.

So if you are able to work the system should make work worthwhile and should both support and encourage you.

What it should not do is tug you in the wrong direction, to a place where you receive so much in benefits that a return to work is unaffordable.

If you are sick but able to work in time the system should support you, stay with you as your condition changes or improves, and make sure you can take the opportunities to work when you are able.

What it should not do is consign you to a life on benefits, never check on your condition, assuming that you are better off languishing there indefinitely – as has been the case for the 1 million people on incapacity benefits for a decade or more, many unseen for the whole duration.

To achieve this journey requires an internal and external cultural change – whereby the welfare system supports people in need, but not to remain in need.

Early action

Midway through this Parliament, we have already taken action to remove stumbling blocks on people’s way to independence.

Let me give you just a few examples.

First the changes we are making to cap Housing Benefit.

Under the system we inherited, in certain cases where families were living in areas with incredibly high rents, it was actually possible for them to claim over £100,000 a year for help with housing costs.

Think about what this means for someone who is considering taking a job.

There’s a good chance they won’t, because they will fear losing their home as their Housing Benefit is tapered away.

Unable to pay their rent from a salary, they cannot take that positive step.

That is why we have limited the amount of Housing Benefit that a household can receive…

… a change which means families face the same choices about where they live and what they can afford, regardless of whether they are on benefits or in work.

Take our reforms to incapacity benefits.

We are reassessing everyone, at a rate of 11,000 claimants per week.

This is about staying with those who cannot work at the moment – regularly checking whether their condition has changed, worsened or improved.

And again, for those who can, it is about moving back towards work, and an independent life beyond the state.

Work Programme

In many cases this process requires us to address the factors that cause people to be in difficulty in the first place.

When you are dealing with people who are a long way from the workplace, who lack skills or the work habit… who are homeless or recently released from prison… you need a system that addresses these barriers in order to get them work-ready.

That is what we are doing with the Work Programme.

We have tasked the best organisations in the voluntary and private sectors to get people into employment, and then to help keep them there for up to 2 years.

The Work Programme is already helping some 700,000 people – and is due to support 3.3 million over the lifetime of the contract.

Results

Without a doubt, there are no quick fixes to get people back to work – particularly in difficult economic times.

But whilst the overall economic outlook is still unsure, the labour market is holding up better than many might have expected.

Nationally, we have seen 4 consecutive quarters of positive job growth – up 212,000 this quarter alone – and 3 consecutive quarters of falling unemployment.

There are now more people overall – and more women – in work than ever before…

… and the latest migration data shows that over the past 2 years a majority of the increase has come from UK nationals.

What’s more, we are seeing some positive signs that our reforms are having an effect.

There are now 170,000 fewer people claiming the main out of work benefits than when this Government entered office – driven by falling numbers on incapacity and lone parent benefits.

This is important. It means even though we’ve had four years of difficult economic times, we no longer let people just drift away from the labour market.

Let’s contrast this with what has happened in America.

There the unemployment rate has been similar – last month it fell to 7.8%, just below the UK figure of 7.9%.

But since the recession, the inactivity rate in America has risen by 2 percentage points, that’s 2% of the working age population giving up on work.

In the UK, despite the recession, and despite more young people staying on longer to study, the inactivity rate is close to the lowest in a generation.

The biggest demotivating factor

Despite these promising signs, there is still more to do.

For if we are to build a new journey, we have to recognise a simple fact.

Not everyone is starting from the same place.

There is no point assuming – for example – that everyone understands the intrinsic benefits of work, the feelings of self-worth, or the opportunity to build self-esteem.

For someone from a family or peer group where no one has ever held work, the pressure to conform is enormous, underscored by the notion that taking a job is a mug’s game.

Thus, across generations and throughout communities, worklessness has become ingrained into everyday life.

Take somewhere like the London Borough of Hackney, which has a high number of people claiming Jobseeker’s Allowance – almost 10 thousand people in just one district.

Yet in September alone, Jobcentre Plus took some 8,000 new vacancies in Hackney and the neighbouring boroughs.

Overall, there were over 40 thousand new vacancies across London, and across the UK there are almost half a million unfilled vacancies at any one time – many in low skilled jobs.

So as well as providing people with support to get back to work, it is vital to tackle the biggest demotivating factor that many people face…

… the fact that the complexity of the system and the way it is set up creates the clear perception that work simply does not pay.

Under the current mess of benefits and tax credits, people on low wages face losing up to 96 pence in every pound they earn as they increase their hours in work.

In other words for every extra pound they earn, 4 pence goes in their pocket and the rest goes back to government in tax and benefit withdrawals.

It is this factor which can stop someone’s journey back to work in its tracks.

Universal Credit

Changing this is what Universal Credit is all about.

From 2013, it will replace the main out of work benefits and tax credits with single, simple payment withdrawn at a clear and consistent rate.

By removing the cliff edges in the current system which mean it’s worthwhile working either 16 hours, 24 hours, 30 hours or not at all…

… Universal Credit will make work pay – at each and every hour.

80% of financial gains will go to those in the bottom 40% of the income distribution, lifting some 900,000 adults and children out of poverty.

Rebalancing the system

Importantly, our guiding principle in designing the new system is that it should be set around the majority.

Over 75% of people in work are paid monthly in arrears.

Over 78% of working age benefit claimants use the internet now.

And over 71% of those receiving housing benefit in the private sector already take responsibility for paying their own rent.

That is why as a default, Universal Credit will be paid monthly, online, and directly to claimants themselves.

We are rebalancing the system so that it caters to the needs and expectations of the mainstream, and making it a seamless transition into work – meaning Universal Credit will be simpler both to use and to administer.

But more than that, because we are no longer going by the lowest common denominator, Universal Credit will enable us to identify the most vulnerable people much more quickly than now.

For the minority who cannot budget, cannot pay their debts, or are struggling to manage…

… instead of maintaining them on benefits or waiting for them to crash out of work…

…. we should be doing more to address the root cause of this hardship – whether it be financial illiteracy, addiction, mental illness, or another problem.

Using interventions targeted and coordinated to restore stability to those who have been left behind, Universal Credit offers an opportunity to help these individuals rejoin the rest of society.

A new contract

Underpinning this improved support is conditionality.

By this I mean the set of obligations that claimants must meet in return for benefit – too often confused, poorly communicated and inconsistently applied in the current regime.

Under Universal Credit we are changing this, requiring everyone to sign up to a claimant commitment as a condition of entitlement to benefit.

Just as those in work have obligations to their employer, much like a contract, this commitment will clearly set out claimants’ responsibilities to the taxpayer.

Those who can work but are unemployed will be expected to engage with us, treating their search for work as a full-time job.

If someone fails to do so without good reason, the commitment will also spell out the robust set of sanctions they face – losing their benefit for 3 months for the first offence, 6 months for the second and 3 years for the third.

This marks the renewal of personal responsibility within the welfare system, just as for those in work.

Clarity that will lead the claimant to commitment or to conditionality.

By ending the something for nothing entrapment we can make a meaningful, sustainable change to people’s lives…

…and one that is likely to be more affordable in the long term, as we put individuals on the path to independence and reduce the churn in the system.

Pensions

As in welfare, so too in my other area of responsibility. We are plotting a journey in our pensions system as well.

Here we are looking to set people on the road to a decent and sustainable retirement.

The solution here is to get people saving – and to get them started early.

That is why we have introduced auto enrolment, helping up to 9 million people into a workplace pension scheme – making saving the norm.

But that still leaves us with the problem of the means test, which acts as a disincentive to saving.

So the second thing we are doing is pushing ahead with plans to radically simplify the State Pension system – creating a ‘single tier’ pension set above the level of the means test, so that if you contribute, you will see the rewards.

Universal Credit and the single tier pension are two sides of the same coin – ensuring that it pays, first to work and then it pays to save.

Positive action which will change lives.

Going further

In all this, we take our lead from Beveridge.

His guiding belief, that a “revolutionary moment in the world’s history is a time for revolutions, not for patching” is as true now as it was in the 1940s.

All too often, Government’s response to social breakdown has been a classic case of “patching” – a case of handing money out… containing problems and limiting the damage… but supporting – even reinforcing – dysfunctional behaviour.

This has to change, and is beginning to.

Yet if we are committed to a radical overhaul, there is scope to scrutinise the existing system further still, driving out perverse incentives.

First, you have to ask which bits of the system are most important in changing lives.

And you have to look at which parts of the system promote positive behaviours, and which are actually promoting destructive ones.

Should families expect never ending amounts of money for every child… when working households must make tough choices about what they can afford?

Is it right that young people should be able to move directly from school to a life on housing benefit, without finding a job first… when so many of their peers live at home, working hard to save up for a flat?

As Beveridge said: “The insured persons should not feel that income [from the state] can come from a bottomless purse.”

Especially so, when the economy isn’t growing as we had hoped, the public finances remain under pressure and the social outcomes have been so poor.

So these kind of questions need to be asked as we develop this theme.

Government spending

Yet there is one final piece to the puzzle.

I have covered a cultural change in society at large, and cultural change in the welfare system.

But we must also achieve a shift in the culture of government spending.

We have to reject the old tendency to lavish money on programmes in the hope that they will succeed.

The history of such programmes is of great hope followed by embarrassing failure… with taxpayers carrying the risk when they failed.

Instead of focussing solely on money going in, we must open up a whole new dimension – one focussed solely on the impact that spending has.

Every pound for life change.

That means changing not just how much we spend, but how we spend it.

Work Programme

So let me return to the example of the Government’s Work Programme, where we have been pioneering the use of payment by results.

We do that by putting the cost of helping people back to work onto the 18 Prime Providers who compete to deliver the Work Programme in different parts of the country.

They raise the money to deliver the programme alongside their subcontractors…

… we then pay them when they deliver the results – with the biggest payouts of up to £14,000 for supporting the hardest to help into work, and sustaining them there.

Because we are paying for results we will only pay for what works, reducing the risk on the taxpayer…

… and making sure each pound is having a transformative impact on someone’s life.

Early intervention

A payment by results system works best when the timescales for success are short and the metrics relatively straightforward.

But across Government, we are prioritising early intervention – getting to the root of social problems before they arise, rather than waiting to pick up the pieces.

Whether in welfare, health, education or family policy, we are focusing our attention and spending on improving life chances.

Take an example in my own Department, where we are acting on Dame Carol Black and David Frost’s Sickness Absence Review…

… preventing workers from dropping out of the labour market altogether when they become sick, rather than trying to catch them in the benefits system once they’ve fallen.

In doing so, we will reap the benefits further down the line – alleviating the social problems which so are often more difficult to tackle once they become entrenched.

But because these are dynamic interventions, the impact is trickier to measure and more difficult to forecast.

So beyond payment by results, this makes it vital to establish a measurable quality to programmes that deliver over a longer period…

… whilst unlocking new streams of funding.

Social investment

In particular, we are making good progress in opening up the social investment market.

I see this as a huge and exciting opportunity to get much more private money working in pursuit of the social good.

Historically it has been assumed that people could either be ‘good citizens’ and put their money into charitable works, but without expecting anything in return…

…or they could be ‘profit maximisers’, who invest their money in commercial ventures and have to forget about the social consequences.

Social investment is a way of uniting the two – it is about saying to investors:

‘You can use your money to have a positive impact on society, and you can make a return.’

We are leading the field in putting this idea into practice.

Of the 7 Social Impact Bonds established in the UK, 6 of them are being delivered by the Department for Work and Pensions…

… with government money working in partnership with businesses and charities.

This is the model being piloted in Peterborough, where investors are funding charities to run rehabilitation programmes with prisoners.

If reoffending falls by 7.5%, the investors receive a return paid for out of the reduced costs of social breakdown.

Just last week the Prime Minister announced his intention to roll out an outcome-based approach across the probation and rehabilitation services, making payment by results the norm.

But to replicate the success of social bonds elsewhere, we need programmes that have a real chance of seeing a return.

They need to be proven to be effective.

That’s why we’re testing a variety of cutting edge programmes through our £30 million Innovation Fund, so practitioners can develop a proof of concept – in turn making it easier to access alternative funding streams.

And it’s why we are establishing the Early Intervention Foundation which will accredit programmes of work and provide a rigorous assessment of their likely social returns.

Huge potential

There is still more to do to grow the market – with researchers and academics playing a crucial role in developing evidence-based policy.

But if we can get it right, I believe social investment has huge potential.

First, it has the potential to greatly increase the amount of funding available for social programmes by bringing in private investment money on top of that provided by Government or pure philanthropy alone.

Second, it brings a whole new level of discipline and rigour to how government delivers social programmes. Because the money follows the outcome, it therefore requires that spending has a demonstrable purpose – we must invest in proven programmes that change lives, rather than chasing a few media headlines.

But third – and perhaps most importantly – social investment could be a powerful tool for building a more cohesive society.

The gap between the top and bottom of society is in many cases larger than it has ever been.

We have a group of skilled professionals and wealth creators at the top of society who have little or no connection to those at the bottom.

Yet in so many cases what divides the two is little more than a different start in life.

I believe social investment gives us an opportunity to lock not just the wealth but also the skills of those at the top of society back into our most disadvantaged areas.

Imagine you create a social bond in a particular deprived neighbourhood. Investors buy into it and as with any investment, will want to see it flourish – taking an interest in that community where they would otherwise be totally detached.

At the same time, these wealth creators can have a dramatic effect on the communities themselves – showing those at the bottom that they have an opportunity to turn their own lives around and move up the social ladder.

Conclusion

Our failure to make each pound count has cost us again and again over the years.

Not only in terms of a financial cost – higher taxes, inflated welfare bills and lower productivity, as people sit on benefits long-term.

But also the social cost of a fundamentally divided Britain – one in which a section of society has been left behind.

We must no longer allow ourselves to accept that some people are written off.

Our reforms are about improving the life chances of the most disadvantaged – not changing people but restoring them.

Breaking the spirals of deprivation, and giving them the opportunity to take control of their own lives.

The prize for doing so could be immense.

It pays to work…

…. it pays to save…

… and spending is about outcomes not inputs.

Amounting to sound public finances and a modern economy, matched by a fairer and more unified society.

Below is the text of the speech made by Iain Duncan Smith, the Secretary of State for Work and Pensions, to the Leonard Steinberg Memorial Lecture on 9th May 2012.

Introduction

It’s a pleasure to be here to give the second Leonard Steinberg Memorial Lecture.

I knew Leonard personally. He was a remarkable man.

In his inaugural speech in the House of Lords, he described his life as follows:

“I was born in Belfast into a Jewish middle-class family. When I grew up … I joined the Ulster Unionist Party; when I emigrated to Manchester, I became a member of the Conservative Party…. Along the way, I became a bookmaker and an ardent Zionist. Therefore, [you] can well imagine the heavy burden that I have had to bear.”

Though said in a deadpan manner, it was true – Leonard was different in almost every way.

But instead of sitting back and saying that he couldn’t succeed in such an environment, with his background, it drove him on.

Against the odds – and even in the face of death threats – he became a successful businessman, a public-spirited citizen, and a great philanthropist – and I am proud to say my good friend.

Leonard embodied the principle that life is not what is given to you, but what you make of it and what you leave behind for others.

How we apply that principle in reforming our welfare system and renewing our society is the topic of my lecture tonight.

Cultural change

I note that this week marks the two year anniversary of the formation of the Coalition government.

I don’t intend to use this evening for an in depth analysis of that period.

But I do want to spend some time reflecting on the particular challenges which we face in my area of interest – the welfare system…

…as well as explaining how we are dealing with that challenge.

My lecture – you might be relieved to hear – will not be primarily a technical one.

The real purpose of this speech is to set out my mission in the job.

Put simply, what we need to achieve in the coming years is not political and technocratic welfare reform, but internal and external cultural change.

By this I mean cultural change both within society, and within government itself.

Beveridge

To explain what I mean let me start by taking you back to the early 1940s, when Beveridge was laying out his vision for the modern welfare state.

Beveridge was driven by a desire to slay the ‘five giants’ that he identified in society at the time: Want, disease, ignorance, squalor and idleness.

But he was also clear about the risks that were attached to this laudable cause.

He warned that:

“The danger of providing benefits, which are both adequate in amount and indefinite in duration, is that men as creatures who adapt themselves to circumstances, may settle down to them.”

And he was clear that the system should not be allowed to “stifle incentive, opportunity, or responsibility”.

In other words he was focussed on the kind of culture that the welfare system could underpin.

Would it be one that fostered a society where people took responsibility for themselves and their families, and treated welfare as a temporary safety net in times of need…

…or one that conditioned people to grow dependent on state support, and in turn treat it as a long-term crutch?

His fear was that if the balance was wrong it would lead to the creation of a semi-permanent underclass.

I wonder what he would think now…

Welfare dependency

Let me just give you a flavour of some of the figures we were confronted with when we came into office:

5 million people on out of work benefits

1 million there for a decade or more

1 in every 5 households with no one working

And almost 2 million children growing up in workless households

So this was the first cultural challenge we faced – entrenched and intergenerational worklessness and welfare dependency.

And before you protest that this was just a product of the recession, remember that there were over 4 million people on out of work benefits throughout the years of growth.

Under the previous Government employment rose by some 2.5 million, yet more than half of that was accounted for by foreign nationals.

And I’m not just talking about computer scientists or smart bankers – I’m referring to the low-skilled jobs.

To be clear I am not trying to make a point about immigration – rather the facts serve to remind us that we had a huge challenge with our workforce at home.

Put simply, it was a question of supply and demand.

Large numbers were on out of work benefits, yet many were unwilling or unable to take advantage of the job opportunities being created.

It became increasingly apparent that while we had a modern economy, transformed under Mrs Thatcher…

…the nature of one section of society was left lagging behind.

Broken welfare system

The problem was that while our economy was subject to a fundamental overhaul, our systems of social support received little more than a patch-up job.

It was an incredibly reactive process – a new challenge would emerge in the system and governments would respond by tweaking things…

…adding new rules, new supplements, even new benefits.

But it was all built on a creaking edifice, and the result was a system of monstrous complexity.

More than 30 different benefits, complicated by additions within each benefit.

This was then compounded by the fact that when an individual started work part time, they found it impossible to calculate if they would be better off or not.

Some of their benefits were withdrawn at 40% as they moved into work, some at 65%, some at 100%…

…some net, some gross…

…some were only available at 16 hours, some at 24, some at 30.

Feed all of that into a complicated computer system – because no normal person can calculate what it all means for their income – and you find that something extremely damaging happens…

People on low wages lose up to 96 pence in every pound they earn as they increase their hours in work.

In other words for every extra pound they earn, 4 pence goes in their pocket and the rest goes back to government in tax and benefit withdrawals.

So suddenly you have a system that is incomprehensible to those that use it, except for one thing that seems clear – it’s not worth the risk of working.

Debt and consumption

And so what did we find as a result?

Even in the decade before the recession, while growth was booming, jobs were being created, and welfare bills should have been falling, spending on working age welfare actually increased by some 35%.

And this wasn’t just about welfare – in healthcare, in crime, in education, Government paid out to manage and maintain social problems rather than tackling them at their root.

This then is the second cultural challenge I want to touch on tonight – understanding how we, as a society, got to a place where we were unable to pay our way, with an economy built on debt and consumption.

I think the problem lies, to a large extent, with the culture of government spending which has developed.

This is a culture marked by an obsession with inputs – with pouring money into social programmes – so that governments are seen to be doing something.

Of course big spending is attractive because it brings big media headlines.

But my concern is that no one asks what will come out at the other end – in other words what impact the spending will have on people’s lives.

Child poverty

Let me give you the example of the approach to child poverty which has predominated in recent years, which has frequently focussed on the task of moving people from just below the poverty line, to just above it.

Some £150 billion was spent on tax credits for families and children between 2004 and 2010, much of it in pursuit of this ambition.

Some people were indeed moved over the poverty line – and in government and amongst lobby groups that was seen as a cause for great celebration.

Yet I am concerned that these celebrations may have been premature.

Moving someone from one pound below the poverty line to one pound above it might be enough to hit a target.

But what about the people stuck at the very bottom?

There are people who weren’t even touched by this poverty drive – for example many of those trapped far below the line on less than 40% of the median income.

But – equally importantly – when you do lift someone above the 60% relative income line, do you really have any idea what impact it actually has on their life?

Do we have any idea what kind of sustainable change has been achieved?

Because if it hasn’t made a sustainable change you won’t be celebrating for long – the family you have moved over the line are liable to fall back again if you haven’t tackled the real reason they find themselves on a low income in the first place.

Let me give you the example of a family with seriously drug addicted parents – simply giving more money to the parents may do little more than feed their addiction, leaving them and their children locked into a cycle of poverty.

But invest the same money in targeting the root causes of poverty, intervene early, and you can make a more sustainable change…

…AND one that is likely to be more affordable in the long term, as you put people back on the path to independence and reduce the churn in the system.

But too often reductions in poverty have been achieved simply through out of work welfare transfers.

That is what I mean when I speak about inputs versus outcomes – we have become comfortable with the idea of measuring the money we put in, but without really caring to ask what that money achieves in terms of life change at the other end.

Saving

In many ways the problem I’ve touched on here is also relevant to our pension system.

Runaway government spending is a symptom of a wider problem – it is symptomatic of a society built on debt and consumption, rather than saving and investment.

We now know that some 7 million people in our country aren’t saving enough for their retirement.

Why?

Because saving simply isn’t seen to pay.

This is the problem we currently face with the means-test.

There are honest and hard-working people on low wages who work all their lives and pay in to the system, only to find that when they reach retirement their neighbour – who has never worked – can receive the same level of support through claiming for Pension Credit.

What kind of message does that send out?

It tells people on low incomes that it’s not worth saving – it’s not even worth working. Just sit back and wait for the government to pay out when you retire.

Over the years we seem to have become addicted to debt instead – in the lead-up to the recession we accumulated one of the highest rates of personal debt in the whole of Western Europe, around £1.3 trillion even before the recession started.

We embraced a culture of ‘live now, pay later’ and looked to future generations to pick up the bill.

The fact is that debt fuelled booms feel good while they last, but like all addictions the detox is long and painful.

The challenge

So we are now faced with a fundamental challenge.

Millions of people stuck out of work on benefits.

Millions not saving nearly enough for their retirement.

And politicians – of all hues – addicted to spending levels as a measurement of success, rather than life change as a measurement of success.

Three areas ripe for reform – but how do you reform when there is no money?

The answer – you change the way you reform.

Not just cheese-slicing, but recalibrating whole systems so that you change behaviours, and change the culture that allowed spending to get out of control in the first place.

This is absolutely critical, and I want to take a moment to explain why.

When welfare spending balloons – as it has done – the temptation for successive governments has been to squeeze it back down again.

But – rather like a balloon – when you squeeze it at one end it will tend to grow at the other.

So whilst savings must be made, they must also be sustainable.

Otherwise, once the public finances are back in order, and the economy grows again, so the bidding war starts once more.

Lobby groups put pressure on government to spend more.

Government in turn dip its hands into all of your pockets to buy media headlines, and the vicious cycle continues.

Welfare Reform

Structural change – leading to cultural change – is the key to this dilemma.

In other words you have to tackle the demand itself, changing the effects of welfare by changing the incentives in the system.

Let me explain what I mean by this.

My belief is that everyone in the welfare system should be on a journey – it should be taking them somewhere, helping them move from dependence to independence.

So if you are looking for work the system should make work worthwhile and it should both support and encourage you.

If you are a lone parent the system should support you with your caring responsibilities while your child is young, but it should also keep you in touch with the world of work and ensure at the earliest that you move back to the world of work.

If you are sick but able to work in time the system should support you, stay with you as your condition improves and make sure you can take the opportunities to work when you are able.

What we will not do is put anyone on benefits and then forget about them, as was so frequently the case for those on Incapacity Benefits.

But if a journey for people is our purpose, we have to recognise that our current welfare system is not fit to provide it.

That’s why we are redesigning it almost from scratch – making the journey more attractive, smoother, quicker, more supportive.

And we will do so in a way that brings welfare spending back under control….

….whilst changing lives at the same time.

In other words we reduce the effective demand on the system by changing people’s incentives.

In the words of Beveridge, now is “a time for revolutions, not for patching”.

Universal Credit

But if we are to build a new journey, we have to recognise a simple fact.

Not everyone is starting from the same place.

There is no point assuming – for example – that everyone understands the intrinsic benefits of work…

…the feelings of self-worth, or the opportunity to build self-esteem.

If you are dealing with someone from a family where no one has ever held work, or no one in their circle of peers has ever held work, there is no point in simply lecturing them about the moral purpose of work, or in just wielding a bigger and bigger stick.

Politicians have tried this tactic over and over again – and to limited effect.

What you must tackle is the biggest demotivating factor that many people face – the fact that the complexity of the system and the way it is set up creates the clear perception that work simply does not pay.

Thus, after generations in key communities, worklessness has become ingrained into everyday life.

The cultural pressure to conform with this lifestyle is enormous, underscored by the easy perception that taking a job is a mug’s game.

It is this factor which can stop someone’s journey back to work in its tracks.

Changing this is what the Universal Credit and the Work Programme are all about.

Universal Credit is a new system we are introducing from next year, which will replace all work-related benefits and tax credits with a single, simple, payment.

It will be withdrawn at a single, constant rate, so that people know exactly how much better off they will be for each extra hour they work.

And this rate will be significantly lower than the current average, meaning that work will pay for everyone, and at each and every hour.

This requires investment up front – we are spending some £2 billion to get it right.**

But if we do so, and start reaping the effects of cultural change, it will save government huge amounts down the line, as workless households become working households.

Work Programme

But Universal Credit alone is not enough.

When you are dealing with people who are a long way from the workplace, who do not have many skills, and do not have the work habit, you need to provide a system that supports them and helps them to get work-ready.

That’s what we are doing with the Work Programme, and we have asked some of the best organisations in the private and voluntary sectors to deliver it for us.

They are tasked with getting people back to work, and then helping to keep them there.

They are given complete freedom to deliver support – I don’t tell them how to do it, and nor does the Minister for Employment.

This is about trusting that these organisations are best placed to know what works.

Universal Credit and the Work Programme are two sides of the same coin.

Either without the other would not have the same impact.

Together, they will become formidable tools for taking people on this journey.

Of course we need that warning of benefits being removed if some of the unemployed don’t try, but imagine how much more effective that becomes when the majority are motivated to succeed.

Housing Benefit

And what about the other areas where we are making savings?

Again – the journey is key.

Let me give you a couple of examples.

We are making savings in Housing Benefit, but this is in part about removing a major stumbling block as people try to move back to work.

Under the system we inherited some people on Housing Benefit were living in areas with incredibly high rents – it was actually possible for families to claim over £100,000 a year for help with housing costs in certain cases.

Think about what this means for someone who is considering taking a job.

There’s a good chance they won’t, because they will fear losing their home as their Housing Benefit is tapered away – they cannot take that positive step.

That is why we have capped the amount of Housing Benefit that a household can receive.

Incapacity Benefit

And take our reforms to Incapacity Benefit.

Again, this is about moving people who can work back towards work…

…but it is also about staying with those who cannot work at the moment – not parking them for years without being seen, as under the previous system.

Pension reform

And we are plotting out a journey in our pensions system as well – except here we are looking to set people on a journey to a decent and sustainable retirement, whilst also reducing the pressure on the public purse.

The solution here is to get people saving – and to get them started early.

The first battle is to make saving the norm – that’s why we are pushing ahead with plans to automatically enrol all of those without pension coverage into pension schemes.

But that still leaves us with the problem of the means test that I mentioned earlier.

So the second thing we are doing is pushing ahead with plans to radically simplify the State Pension system – creating a ‘single tier’ pension which is set above the level of the means-test, so that people know that it makes sense to save.

Cultural change

This is cultural change._ _

The renewal of a welfare system that is seen as a means of temporary support – the beginning of a journey back to independence.

As Leonard once said:

”Our culture should allow us to make choices, not to be told what to do.”

Government spending

Yet there is one final piece to the puzzle.

I have covered what I call external cultural change, change in society at large.

But we must also achieve an internal cultural shift – changing the culture of government spending.

And it is here that I think we still have much work left to do.

We have to reject the old focus on inputs…

…the old mantra which says that ‘more spending equals good, less spending equals cuts…which equals bad’…

…and open up a whole new dimension – one focussed solely on the impact that spending has on people’s lives.

Every pound for life change.

That means changing not just how much we spend, but how we spend it.

Work Programme

So let me return to the example of the Government’s Work Programme, where we have been pioneering the use of payment by results.

While supporting someone into work obviously has a cost attached, you find that cost is quickly outweighed by the reductions you can make to the welfare bill when you get someone back into work and paying tax.

The trick is to use these future savings to pay for the Work Programme now.

We do that by putting the onus on the 18 Prime Providers who compete to deliver the Work Programme in different parts of the country.

They raise the money to deliver the programme alongside their subcontractors – we then pay them when they deliver the results.

That means first, getting people back into work.

But from day one we’ve been clear that getting people into work – on its own – isn’t enough.

If people do not have ‘the work habit’ – in other words they are not used to the workplace, or convinced that working is right for them – the risk is that they will soon fall out of employment again.

So the providers get the biggest payouts when they keep someone in work for 6 months, one year, 18 months, or up to two years in some cases.

In so doing we remove the risk from the taxpayer, and we make sure that every pound spent is only being paid out because it has a positive impact on people’s lives.

Social investment

A payment by results system works best when the timescales for success are short and the metrics relatively straightforward.

But in addition to Payment by Results there are other areas as well.

In particular, we are really trying to open up the social investment market.

I see this as a huge opportunity to get much more private money working in pursuit of the social good.

Historically it has been assumed that people could either be ‘good citizens’ and put their money into charitable works, but without expecting anything in return…

…or they could be ‘profit maximisers’, who invest their money in commercial ventures and have to forget about the social consequences.

Social investment is a way of uniting the two – it is about saying to investors:

‘You can use your money to have a positive impact on society, AND you can make a return.’

But to get this investment you need to have programmes that are tested and accredited.

That then allows you to create a social bond that people can invest money in.

That is why we have we have agreed to establish an independent foundation that will accredit programmes of work and provide a rigorous assessment of their likely social returns.

It’s why we’re testing a variety of cutting edge programmes through our Innovation Fund, which will help build the evidence base around social investment models.

And it’s why the Government has launched Big Society Capital, capitalised with £600 million, and tasked it with the sole mission of growing the social investment market.

Huge potential

This market may still be in its infancy, but I believe it has huge potential.

First, it has the potential to greatly increase the amount of funding available for social programmes by bringing in private investment money.

Second, it brings a whole new level of discipline and rigour.

Too often in the past good, proven programmes have been introduced by Government but haven’t worked.

This isn’t necessarily due to a problem with the programme itself – rather it is because as the programme has trickled through the system bits have been added or subtracted, modified and changed, so that in many cases the programme has been neutered.

Why?

Because when Government care more about inputs than outcomes it doesn’t have much interest in whether the programme actually works – once it is underway the nature of the programme itself becomes largely irrelevant.

But if the money follows the outcome – as it does with payment by results, or with social investment – we can bring a whole new level of fidelity to the way that civil servants, local authorities, and government at large do social programmes.

It is my personal belief that if we can truly grow the social investment market it will mark the single biggest change to the culture of spending in Government.

Conclusion

So the prize could be enormous if we get all of this right.

Cultural reform – of society, and of government – in a way that restores effectiveness in public spending, and restores the idea of mobility in our welfare system.

In other words it restores the idea that no matter how hard things get for you we will be there with you to help you on an upward path.

But we’ve got to lock this process in – as with the process of making savings that I spoke about earlier, it has to be done in a sustainable way or the problems will pop back up again just a few years down the line.

That means we need to change the incentives in the system.

In welfare that means understanding that work has to be seen to pay, and people have to know that there is support available for them.

In pensions it means understanding that saving has to be seen to pay, and it has to be easy for people to save.

And in government spending it means making the money follow the outcome, so that it is no longer possible to fiddle around with quality programmes or not see them through.

Through this process, and through the tool of social investment, I think we can achieve something else as well.

We can start to lock those at the top of society back into to our most disadvantaged families and communities at the bottom.

We can get our biggest and best business-people bringing their time and their skills to some of society’s most intractable social problems.

I hope and believe that as both a great entrepreneur and a great philanthropist this is an agenda that Leonard would have supported.

He had an instinctive sense that with wealth comes responsibility – and he invested a remarkable amount of time, effort and money in giving back to the community.

Ironically, perhaps, it has taken difficult times to create a driver for change.

When the economy was growing it was just too easy to say ‘not now, but later’.

For after all, this does involve very tough choices.

As we try to reshape our economy, and revitalise and refloat the entrepreneurial spirit that has historically characterised the citizens of this global trading nation, we must accept that we will fail unless we can lock all in society to the benefits of this change.

We must no longer allow ourselves to accept that some in society are beyond our reach.

As our economy moves into the 21st Century, these welfare reforms are about ensuring that a previously disconnected section of society gets there at the same time.

Below is the text of a speech made by the Work and Pensions Secretary, Iain Duncan Smith, at the Institute of Education in London on 27th November 2012.

Introduction

It is a pleasure to be here today – at a conference which I am pleased has ranged far wider than just the Government perspective on ending gang and youth violence.

From grassroots charities… to community leaders… and innovative police initiatives…

…  it has long been clear to me that making a real difference to gang-impacted areas requires an expertise that lies beyond Whitehall.

At the Centre for Social Justice, an organisation I set up in 2004, our report ‘Dying to Belong’ showed how far successive government interventions had failed – allowing gangs to become entrenched in some of our most disadvantaged neighbourhoods.

The riots

Even before the recession, with poor social mobility and income inequality the worst for a generation…

… benefit dependency, dysfunctional families, debt, crime, and drugs became the norm for whole communities.

Whilst there was some awareness of these high and rising levels of social breakdown, the majority of people remained unaware of the true nature of life on our poorest estates.

Occasionally a terrible incident would make it onto the front pages…

… but because they were small in number, people could turn away from the reality.

Even politicians considered gangs a second order issue.

Yet by failing to deal with it, we were storing up trouble further down the line.

In August 2011, the inner city came to call – and the violence we saw on our streets provided a moment of clarity for all of us.

The riots were a wake-up call, revealing all too vividly the deeper problems that we as a society had chosen to ignore.

A cause and a symptom

In the aftermath, the Prime Minister rightly called for a report into Britain’s street gangs.

The riots showed that in many inner city areas, gangs dominate – in London, at least one in five of those convicted was known to be part of a gang.

Even where they are small in number, gangs can have a disproportionately negative impact on their local area – bringing with them crime, drug abuse and pulling others around them into their destructive cycle.

But gangs are not just a cause of social breakdown – they are also an important symptom.

The majority of rioters were under 24.

Most of these young people had poor academic records.

Nine out of ten were known to the police and a third had been in prison.

70% of those arrested came from the 30% most deprived areas.

So whilst we must be tough on the instigators of violence, we cannot simply arrest our way out of the problem.

Making a real difference to Britain’s gang culture requires us to tackle the problem at its source…

… addressing the educational and social failures, which all too often mean children from broken homes and the back of the classroom falling into the clutches of gangs.

A new approach

This principle underpinned the Government’s Ending Gang and Youth Violence Report, published in November last year – which established a new cross-Government approach.

Focussed on the 29 local areas facing the most challenging situations…

… the report made clear that alongside intensive police action and enforcement to end violence and bring perpetrators to justice…

… we must match this with an offer of support to exit gang life, and an equally intensive prevention strategy.

The key here is early intervention: as well as offering a way out, it is vital to do all we can to stop people from joining gangs in the first place.

Putting the structures in place

A year after embarking on this new strategy, it is right that we consider our progress.

That is why today, the Government is publishing a paper outlining what has been achieved in the last 12 months.

To start, what this shows is that although we’re not completely there yet…

…. we are making progress in putting the right structures in place to end gang and youth violence.

A multi-agency approach

Importantly, instead of a disconnected, siloed approach…

… with different Departments and agencies all focussing on their own narrow brief, but no one seeing the whole picture…

… we are now pushing ahead with a co-ordinated, multi-agency approach.

This is led by a frontline team delivering peer support to each gang-impacted area – drawing together the expertise of around 70 independent advisers, from health and education, to employment and welfare, safeguarding and community engagement.

Using a standard definition, the Association of Chief Police Officers has now mapped gangs across the country.

And with my Department driving improvements in data and knowledge sharing, different organisations are now working together to better identify and address gang-related issues.

There is still more to do to strengthen local partnerships – and the recently elected police and crime commissioners will need to play a central role…

… joining up with community leaders and voluntary organisations to develop effective local solutions.

To do this, they will need a robust evidence base – and over the next year, we will be doing more to develop and share best practice around what works.

Forging a positive future

What we already know is that the greatest gains stand to be made when policies are focussed on preventing gang and youth violence, rather than waiting to pick up the pieces.

Take the fact that boys assessed by medical practitioners at the age of 3 as being ‘at risk’ had two and a half times as many criminal convictions by age 21, as those deemed not to be at risk.

So whether it be investing £30 million in relationship support, ensuring children have stable families and positive role models in their early years…

… funding over 360,000 apprentices last year alone and raising the participation age, to keep pupils engaged in structured education and off the streets…

… across Government we are working hard to close off the pathways that lead young people to gang life in the first place.

To take just one example, consider the impact of our £30 million Innovation Fund – which has now backed 10 social impact bonds…

… supporting around 17,000 of our most vulnerable young people over a 3 year period.

With a remit that extends to those aged 14 and 15, the Fund enables providers to intervene even earlier in a young person’s life…

… and in the second tranche of projects launched last month, two are specifically focused on supporting those at risk of involvement in gangs…

… including both a prevention programme focused on reducing knife crime, and workshops which expose the reality of prison and the impact it has on young people’s prospects.

These are cutting edge solutions – but by giving providers the opportunity to develop a proof of concept, proven programmes can be rolled out locally or nationally.

Overall, current projects are expected to improve the educational and employment outcomes for up to 28,000 young people – helping them forge a positive future, away from the negative influences of gang membership.

Full and sustainable rehabilitation

This last point is crucial.

All our interventions must translate into meaningful outcomes – transforming the lives of people most in need and entrenched in disadvantage.

As I have said, early intervention is one side of the coin, improving the life chances of would-be gang members.

The other is rehabilitation – prioritising full and sustainable recovery and providing a second chance for those whose lives do go off track.

The rioters who were convicted received an average sentence of just under 17 months – almost exactly the length of time that has now passed since the riots themselves.

As individuals are released from prison, the One Year On report outlines the crucial steps we have taken to rehabilitate ex-offenders into the community – rather than letting them fall back into a life of gangs and crime.

Evidence shows that being in employment is vital, reducing the risk of re-offending by between a third and a half.

That is why in collaboration with the Ministry of Justice, my Department is setting offenders on a journey back to work before they leave prison.

Claims for Jobseeker’s Allowance, which has a requirement to actively seek work at its heart, can now start to be processed prior to release…

… and we have introduced a new provision in the Work Programme so that prison leavers can receive tailored support to get them work-ready, find a job and remain there for a sustained period – from the first day they are out.

What’s more, through piloting a new approach to joint commissioning in 2 areas across England and Wales, we are paying providers for the results they achieve both in terms of employment outcomes and reducing re-offending.

In all this, because we are paying by results, we will only pay for what works – ensuing that every pound spent is a pound that leads to life change.

Get someone free of violence… out of gang life… and into work…

…and you help them find a foothold in society again – and stay there.

Long-term commitment

This is just a snapshot of some of the work now underway to tackle gangs and youth violence.

One year on, I believe we are on the right path.

Now we must consolidate that progress, working collaboratively across and beyond Government to achieve more.

For whilst this summer saw a welcome contrast to that of 2011…

… the scenes of Jubilee street parties and Olympic celebrations should not eclipse the continuing severity and complexity of the problem we still face.

A lasting legacy will not be achieved through a knee-jerk response to the riots.

Rather, if we are to transform the lives of our most disadvantaged young people, it will require a long-term commitment.

Conclusion

As well as progress to date, the One Year On report outlines our next steps –signalling that further action is needed to drive support on the ground and momentum across Government.

It is my mission to keep gang and youth violence at the top of the Coalition’s agenda, over the next year and beyond.

Today we reiterate our commitment to end gang and youth violence.

We owe it to young people in communities across the country not to let our gaze drop…

… or let them fall back into forgotten shadows…

… but to deliver on that promise and break the destructive cycle of gang life that can ruin so many lives.

Below is the text of the speech made by Iain Duncan Smith, the Work and Pensions Secretary, in London on 31st October 2011.

Introduction

It’s a pleasure to be here tonight to celebrate the life and work of Michael Young.

Lord Young was a visionary of our time.

His approach to public service reform was a lesson to us all.

A lesson that we achieve far less from sitting in ivory towers drawing scientific conclusions on public policy…

…and far more from actually listening to ordinary people, understanding their problems, and proposing practical solutions.

I’m also very grateful to the Young Foundation and Grandparents Plus for arranging for me to be here tonight, and I congratulate them on reaching their 5th and 10th anniversaries respectively.

Both organisations are building an honourable legacy for Lord Young.

7 billionth person

I’d like to begin this evening by considering a remarkable fact.

Today, the United Nations announced the birth of the world’s 7 billionth person.

What is notable is that the world’s 6 billionth person – Adnan Mevic of Sarajevo, Bosnia – has only just celebrated his twelfth birthday.

So that’s an extra one billion people in the world, within a space of just over a decade.

Compare that to the fact that it took 250,000 years to reach 1 billion people in around 1800, and over a century more to reach 2 billion in 1927.

The huge population growth we’ve seen in recent decades has given rise to some incredibly young societies.

Take Zambia, where half of the population are under the age of 16.

But there is another side to this story.

For while countries in Sub-Saharan Africa have been getting progressively younger, societies in the West have been ageing at a tremendous rate.

Ageing population

In the last century or so the UK has seen a surge in the retired population relative to those in work.

So back in 1926 – when the State Pension age was first set – we had some nine people of working age for every pensioner.

Today, that ratio is just 3:1, and it will be moving closer to 2:1 by the second half of this century.

Sitting behind this shift are declining fertility rates and huge improvements in medical science, pushing life expectancy inexorably upwards.

Take the fact that a baby boy born today has a one in four chance of making it to 100.

The chance of a baby girl making it to 100 is one in three.

Young versus old societies

In the press coverage of the UN’s Population Report there have been a number of contrasts drawn between these younger and older societies.

When discussing the younger societies, the talk was a “demographic dividend” – a chance for high investment and growth on the back of a young workforce, as long as the right conditions can be fostered.

But when focus turned to the ageing societies the “dividend” became a “liability”, with foreboding descriptions of “disproportionately more old people depending upon a smaller generation behind them”.

This was followed by statistics about how many “dependents” western societies would have in relation to the number of working-age adults.

Ageing challenge

Now I am the first to accept that we face a demographic challenge.

Age-related spending currently accounts for some 12 per cent of GDP, and is projected to grow by around 5 per cent of GDP by 2060.

And I’m certainly concerned for the next generation – a generation that will have to foot the bill for a crippling national debt, at the same time as helping to pay for their parents retirement and trying to save for their own.

But if we continue to use the language of “dependency” to talk about older people in our society then we will get nowhere.

As Michael Young recognised, we miss the point when we arbitrarily cut the life-cycle into standard segments, with:

“People turned into numbers and the galaxy of differences between individuals deliberately ignored.”

We have to look at how we can change things so that older people are no longer seen as a liability, but are more and more involved in society…

…changing the attitudes that push them to the sidelines…

…and recognising the vital roles they must play in the future.

Working longer

So we need to change our attitude to ageing.

Someone of 60 or 65 can no longer be lazily considered as “past it” – such attitudes are patronising and just plain wrong.

When I arrived in the Department, British business could still force someone to retire at 65 even if they didn’t want to.

This process was called the Default Retirement Age.

It led to lazy business practices and a failure to find out how best to use the talent and experience of an older workforce.

As Young eloquently put it, this provision meant that:

“When the clock strikes sixty-five, the   magic wand of the State turns not coachmen into mice but men into old men…[with] no transition. When the wand is waved millions of people have at once to obey”.

Well I am enormously proud that this Coalition Government acted on Young’s admonition and finally consigned the Default Retirement Age to the dustbin of historical discrimination.

But that is only the start.

We need businesses to stop thinking of old people as having a “sell by date”, and to look more closely at the skills and experience they bring with them.

At my Department we’ve been working with employers and employer organisations through the Age Positive initiative, challenging outdated assumptions about older people.

There certainly seems to be a trend in the right direction – the past decade has seen the age at which people leave the labour market increase.

And this is likely to continue, especially once you factor in the changes we’re making to the State Pension age – changes that are difficult but necessary, given how much life expectancy has changed since the State Pension age was first set.

But to keep all of these changes on track, we have to challenge the damaging claim that older workers block employment opportunities for young people.

This is a fallacy, based on the idea that there is a fixed amount of work available in the economy.

In actual fact, evidence from both the UK and abroad suggests that this is far from the case, and that having more people in work is likely to increase the availability of jobs through the effect it has on growth.

Work-sharing

Nonetheless, I wonder if there is more society could do to match the work of younger and older people.

For example could UK businesses look more intelligently at sharing work between older people…

…who may be looking to do fewer hours…

…and the young, who are keen to start getting some experience?

I understand that Germany has some experience with intergenerational mentoring, where older people work with young school leavers to help them find their way into employment.

I leave this to the social innovators out there – the Michael Youngs of today – to think about some more.

Older people caring

But this isn’t all about work.

Far from simply being members of the labour force, the role that older people can – and in many cases do – play in wider society, is enormous.

Whether it be volunteering, providing social care, or looking after grandchildren, we all gain hugely from the time and commitment that many older people give.

We ignore this at our peril.

Though the vast majority of older people give their time willingly…

…and indeed get great pleasure out of doing so…

…we should not forget that many of the jobs they undertake would otherwise fall on the state.

This is family doing what family does best – quietly, with great commitment, carrying out its duties.

But I’ve long believed that the state has become ambivalent about the importance of family structure.

Not just decent parenting but also the role of the extended family.

In an increasingly atomised society, and in a context of growing family breakdown, it is all the more important that we continue to support, celebrate and hold together these wider relationships.

Without them society would simply collapse.

So far from older people being “dependents” supported by the rest of us, it is worth reminding ourselves of the extent to which society is dependent on them.

The economic backdrop

As a country we face an immense economic challenge at the moment.

Sorting out our huge budget deficit and paying off our enormous debt is a priority if we are to restore growth at a sustainable level.

But we also need to recognise that this isn’t all just about economics.

It is also about how families can support each other so that they can take advantage of any work opportunities in the future.

Where possible we’ve tried to design our reforms so that they make this kind of support and caring easier and encourage it where it matters most.

Grandparent Credits and Childcare

This is something my colleagues at the Department for Health and the Department for Education have been working on carefully, from investing money in short breaks for carers to improving GP awareness of carer issues.

And at my Department one of the first changes we made on coming into Government was the introduction of ‘Grandparents Credits’, meaning that those below State Pension age can start building up credits for a State Pension if they are caring for young children rather than working.

This is about recognising the hugely valuable contribution this kind of caring makes to many children’s lives.

I also believe we’ve managed to strike an important balance with Childcare Support through the benefits system.

When we introduce the Universal Credit we’ll be saying – for the first time – that working parents can get help with their childcare costs even when they are working fewer than 16 hours a week.

This is about saying that it should pay to go back to work no matter how many hours you do – and I hope it has the potential to ease childcare responsibilities for the extended family as well as for parents.

Kinship care and conditionality

Another issue that I know has been raised is the conditionality regime in the benefits system.

Kinship carers accessing the benefit system under the new system will fall under the same conditionality rules as biological parents.

But, crucially, there is the flexibility available for the Jobcentre to take their particular circumstances into account.

We want kinship carers to be looked at on a case by case basis.

And the Jobcentre absolutely has the power – indeed the responsibility – to not impose full-time work search and availability requirements on carers of younger children.

There are specific safeguards on this in the Welfare Reform Bill.

Even where work-related requirements do apply, advisers will have broad discretion to limit these, taking account of an individual’s caring responsibilities.

So I hope this strikes the right balance.

But I’m always willing to listen on this kind of thing – and we’re currently talking to kinship care organisations to understand their priorities.

I’ve specifically asked my colleague Lord Freud to look at the kinship carer issue…

…as we have been approached by a number of people on this.

Not just about government

But none of this is just about what government can do.

As I think Michael Young would have agreed, most of the best ideas in the world come from outside Government.

I understand Lord Young pioneered a venture called LinkAge, bringing together older people without grandchildren, and young people without grandparents.

My own colleague Lord Freud has been personally involved for a number of years now with a very similar project known as Grandmentors – something he helped to set up.

And the organisation I founded – the Centre for Social Justice – recently gave an award to a project in Liverpool called ‘Growing Old Together’ which takes young people into care homes and sheltered housing schemes to spend time with the residents and build relationships with them.

This brings me back to the point about atomisation – projects like these can help reconnect the stretched relationships we find in an increasingly mobile and fluid society.

But remember that these important projects have been driven largely from outside Government.

Out there, in our local communities…

…and amongst our social innovators…

…are where the real change will happen.

The change we need if we’re to move from viewing our older people as dependents, to seeing them as one of the lynchpins of our society.

Ageing Well

I’m pleased to say this is something my Department have started to understand.

When we came in to government we launched the Ageing Well programme, which is about driving better services for older people at a local level.

Although this programme was already being considered when we entered government, we were insistent that it needed to be reconfigured so that it drew much more from local knowledge and expertise.

The Young Foundation has been playing a critical role in this project, and I thank them for their continued hard work.

Age Action Alliance

In addition to this we recently helped launch the Age Action Alliance…

…an ever-growing partnership of public, private and civil society organisations…

…which is taking forward a preventative, community based approach to improving the quality of life of the worst off older people.

This hardly involves central Government at all.

We provide a small secretariat, but that is really just facilitating the work of over one hundred organisations who know what works – including a number of those represented here tonight.

Conclusion

So these are some of the areas that we – and society at large – are working on.

But what is more important is that we recognise what each of these different projects means.

A rejection of the idea of older people as dependents, or a burden…

…and an acceptance that we will need to change our institutions to ensure this overarching narrative becomes a reality.

We need to redesign our retirement system so that older people are encouraged to work longer – and are able to do so if they want to.

We need to think hard about the way we recognise and reward caring, so that we don’t lose the invaluable support from friends and family that currently exists.

And we need to work more closely with local groups to redesign projects, products and services so that they are better suited to an older society – and one which is increasingly active.

Lord Young once wrote about the UK as a society that has:

“enjoyed a demographic revolution, even if it has not yet enjoyed it as much as [it] could”.

With the right changes…

…and a firm commitment…

…perhaps we can fulfil Lord Young’s vision…

…and start to enjoy our older society that little bit more.

In fact, maybe now is the time to say that this is the age of the older society.

Below is the text of the speech made by Iain Duncan Smith, the Work and Pensions Secretary, to the British Venture Capital Association on 12th October 2011.

Introduction

It is a pleasure to be here tonight.

I know the economy is on everyone’s minds at the moment.

No more so than in this audience.

Today’s jobs figures are a sobering reminder of the challenge we face.

But before we discuss where the economy is going, I’d like to reflect on where we have come from.

Boom and bust

In the decade to 2008 we saw an uninterrupted period of growth, with employment levels up by over 2 million.

Boom and bust had been eradicated – or so we were told…

Of course we all know what happened when the bubble burst.

But we cannot say that the warning signs weren’t there.

Personal debt had boomed in the years leading up to the recession.

The Centre for Social Justice warned that levels of personal debt were unsustainable in a report published that same year.

Not long after, Northern Rock went to the wall.

And it wasn’t just the banks that were overstretched – it was Governments too.

In fact, the UK had the highest structural deficit of any country in the G7 before the recession started.

Deficit reduction

We were in 2010 that our priority was dealing with this damaging deficit.

And this was a plan that got widespread support – from the OECD, to the IMF, to the CBI.

It also received the support of the Credit Ratings Agencies, with Standard and Poors taking the UK’s Triple A rating off negative watch.

This last step was crucial, and I think we underestimate it at our peril.

While countries across Europe are facing soaring interest rates we have managed to maintain rates comparable to Germany’s, thanks to our consistency in holding the course.

If we deviated from our plan – let’s say we spent just a few billion pounds more – we would face the serious risk of this extra spending being wiped out by billions of pounds more in higher interest costs for families, businesses, and taxpayers.

You simply cannot borrow your way out of a debt crisis.

No complacency

But this does not mean we can be complacent – by any means.

Today’s jobs figures serve as a sobering reminder that while we can protect our own interest rates, we cannot so easily protect against the international economic crisis.

We are riding out a storm at the moment, but it is important that we stay the course.

And it is also important that we do everything we can to stimulate growth.

That doesn’t mean breaking our deficit reduction targets.

It means reducing regulation, freeing up the economy, and getting money moving around the system once more.

So we’re cutting taxes for businesses, reducing corporation tax to the lowest rate in the G7 by 2014.

We’re increasing capital spending on roads and railways, even at a time of deficit reduction.

And we’ve struck a deal with the big high street lenders to increase lending to small businesses by 15 per cent this year.

We have also agreed to the Bank of England undertaking another round of Quantitative Easing…

…and, as the Chancellor confirmed last week, we are looking at whether there is more we can do to get money directly to businesses in the form of Credit Easing.

Private equity and venture capital has an important role to play in this growth story.

I understand that, just last year, private equity and venture capital between them invested some £1.75 billion in high technology companies in the UK.

That’s real money, in the real economy, pushing the technological frontier and promoting growth.

Pensions

But, for me, there is another side to the growth story.

In my role at the Department for Work and Pensions I’m responsible for two of the groups that really matter here: workers and pensioners.

Take pensioners: a significant chunk of our economy is devoted to retirement spending, and so it can have a huge impact.

Our first priority was to secure the position of today’s pensioners.

But we also knew that we needed to reform for the future.

We had a pension system that was increasingly unfunded, and the trend was only set to get worse as life expectancy increased, year on year.

So we were clear that if we were not going to fall back into a debt crisis of a different kind – with the resultant effects on growth – we would need to get the house back in order.

For me this is about asking what kind of society we want for the next generation.

We were heading for one marked by a triple whammy, with our children footing the bill for a crippling national debt at the same time as helping to pay for their parents’ retirement and having to save for their own.

That’s why we are taking the tough decision to ask people to work longer before they receive their State Pension.

And it’s why we are encouraging people to do more to save for their own retirement though automatic enrolment into pension schemes.

Some people have claimed that automatic enrolment is wrong-headed because it will be a drag on growth.

I reject that entirely.

Analysis suggests that automatic enrolment will actually have a positive impact on the economy.

Pension contributions are not somehow lost to the economy.

They are invested in gilts, corporate bonds and equities, supporting increased investment and economic growth.

Social breakdown

So what about the other side I mentioned – the country’s workers?

Britain still has some of the best workers in the world.

But we are increasingly a society divided, because we also have a whole group of people who are cut adrift from the labour market – even from the rest of society itself.

August’s riots forced us – as a society – to take a good hard look at ourselves, and to ask why we had allowed such explosive social problems to become ghettoised.

For these problems have been with us for some time, and were not simply a product of the recession.

More than 4 million on out of work benefits.

One of the highest teenage pregnancy rates in Western Europe.

Over a million children growing up in households with parents addicted to drugs or alcohol.

These were problems that the Centre for Social Justice reported on at back in 2007 – in other words, before the recession started, during a period of unprecedented growth.

This breakdown destroyed our ability to compete in the global market.

The cost of maintaining that many people on benefits was a drag on economic growth and a factor in the growth of the deficit.

And it is now well documented that during this period almost half of the rise in employment was accounted for by foreign nationals.

So potential workers were paid to be idle, rather than being skilled up and supported into employment, while businesses imported workers from abroad to do the available jobs.

Yet much of the money being earned here was being sent back home, so the British economy wasn’t seeing the benefits.

Equally tragic was the human cost – people in communities up and down our country unable to fulfil their potential.

Gangs

This unfulfilled potential takes its most potent form in the street gangs that terrorize many of our poorest neighbourhoods.

In many ways these gangs act to fill a vacuum left by other figures of authority.

Frequently from broken families, gang members seem to be searching for that structure and consistency they are failing to find at home.

Many never make it to the age of 25, yet some of these are really bright kids, just born into the wrong circumstances.

Dealing with Britain’s violent gang culture is vital because the simple truth is that that where gangs rule, decent people cannot live, businesses cannot invest, and communities cannot grow.

What we need is a way out for those who’ll take it and the toughest enforcement against those who refuse.  And, crucially, we have to prevent them joining these gangs in the first place.

Broken welfare system

The first step here is getting to grips with our broken welfare system.

The system is complex, contradictory and incoherent.

It takes people’s benefits away at incredible rates as they move into work, meaning work is frequently not worthwhile.

It treats people more as statistics than human beings – as a box to be ticked or a process to be completed.

And it is racked by fraud and error – some £5 billion lost annually because of the immense complexity of the system.

Reform

So first, we are simplifying things with the Universal Credit, a single integrated payment which will replace an array of benefits and tax credits.

It will be clear, it will be consistent and – most importantly – it will make work pay.

That’s the first vital step for people who have been out of work for a long time.

Second, and equally important, we have introduced the Work Programme, a package of support run by the private and voluntary sectors which provides tailored help to get people back into work.

Crucially, we will only pay for what works.

And we will continue to pay these organisations as they keep people in work.

Third, we know how important experience of work is for young people who are trying to get their foot in the door.

That’s why we have funded an extra 100,000 Work Experience places over the next two years.

And it’s why we’ve committed to an extra 250,000 apprenticeships over the coming years.

Making work pay, skilling people up, building their experience of work – that’s how we can start to rebuild our labour force and keep people off welfare.

The challenge

All of this is vital, but we cannot do it alone.

We have had a great response from businesses to our Get Britain Working campaign.

But I want to know if there is more that the financial sector can do.

I want to know if there are areas where you could get involved that you wouldn’t normally look, or where you are currently underrepresented.

The tragedy is that there are plenty of bright kids out there whose start in life means that they will never end up somewhere like this.

I’ve met many of these young people – and let me tell you, when working with numbers and figures there are some who could leave people in this room standing.

But it’s hard for them to get that first break – take the fact that less than a quarter of all employers in England have given a young person their first job after education.

So I have a challenge for you tonight – a direct challenge to the financial sector to get involved in three areas where we are working with young people.

First, through work experience, giving our young people a chance to get a taste of the world of work.

I understand that few work experience placements are currently available in the financial services sector, and I want to know if there is more that can be done.

Second, through apprenticeships, working with my department and BIS to look at placements which bring young people in, help them learn the trade, and set them up for the future.

This is about giving our brightest young people a shot, even if they haven’t gone through the traditional university route.

It’s about letting them prove to you that they can work hard and better themselves.

And third, we need the financial sector getting involved in the early intervention work that Graham Allen has been driving.

Graham’s reports for Government have shown the incredible impact that intervening early in a young person’s life can have.

He has also shown that where we can turn a young person’s life around, the savings to the public purse are potentially huge.

Take the fact that it costs around £59,000 a year on average for a young offender to be placed in a young offender’s institute, or hundreds of thousands of pounds to support an individual for a lifetime on benefits

The tricky bit is getting the money there up front so that we can reap these savings.

And that’s where social investment comes in.

The idea here is that government encourages private investors to back projects…

…whether it be helping young people back in to work, rehabilitating offenders, or helping a drug addict into recovery…

…by investing in ‘Social Impact Bonds’.

These investors are then rewarded with some of the savings to the public purse further down the line – but only if their investments work.

It is still early days, and this is still a fledgling market.

But I think it is a powerful opportunity.

Sir Ronald Cohen – who will be familiar to many of you as one of the father’s of venture capital – is clear about the possibilities here, stating that:

“Social enterprise and impact investing, in short, look like the wave of the future.”

Indeed, in his view: “Impact [social investment] capital is the new venture capital”.

We are already seeing successful projects getting underway…

…from the reoffending social impact bond in Peterborough…

…to my own Department’s ‘Innovation Fund’, which is currently going through its procurement process.

Yes, Government still has more work to do to provide a clearer direction to the market.

But we also need investors to be willing to take the risk and start getting involved.

Repeat the challenge

So let me repeat: these are the three areas – work experience, apprenticeships, and early intervention – where I ask you to think about reconnecting yourself to some of the most troubled parts of our society.

These are places full of young people who – with the right help, and the right support – could aspire to be where you are tonight.

My challenge to all of you is this: don’t just be a successful business – for all the benefits that that brings to our country, and it really does.

We need you to also be thinking about how you can put something back into your local community to change people’s lives.

Conclusion

So let me bring this back to where I started – the state of the economy, where we have come from and where we are going.

Getting the deficit in down is crucial, and so is the plan for growth.

But we cannot assume that these issues are separate from the social side of things – from welfare, from pensions, from family breakdown, from drug addiction, or from gangs.

Whether it be the cost of paying 4 or 5 million people to sit on out of work benefits while bringing in workers from abroad…

…or the cost of putting the same young people over and over again through the criminal justice system…

…the social side is absolutely crucial to the economy.

It is a terrible waste of resources to have people sat on the margins of society, unable to engage with the system.

Ignoring this has been the mistake that too many Governments have made in the past.

But August showed us was that containment is not an option anymore.

For the riots provided a moment of clarity for us all, a reminder that a strong economy requires a strong social settlement.

Our task is to achieve this rebalancing of society,

Restoring our economy must go hand in hand with restoring society.

I believe that this is the challenge of our generation.

Together, I hope we can rise to that challenge.

Below is the text of the speech made by Iain Duncan Smith, the Secretary of State for Work and Pensions, to the Robert Owen Institute on 14th September 2011.

Introduction

It’s a pleasure to be with you this evening.

And I’d like to extend my thanks to the Robert Owen Institute for inviting me to be here tonight.

Robert Owen was ahead of his time in believing that a person’s character was informed by the effect of their environment.

“Any general character, from the best to the worst, from the most ignorant to the most enlightened, may be given to any community…by the application of proper means”

How we achieve a rebalancing of our society by application of those means is the topic of my lecture tonight.

Last month’s riots were a wake-up call.

But while I was appalled by what took place on the streets of some of England’s major cities, I cannot say I was entirely surprised.

For I believe we have seen Britain’s social fabric fraying for some time.

Social breakdown

Before the recession started we had more than 4 million people sat on out of work benefits – many of whom had been receiving them for ten years or more.

We had one of the highest levels of unsecured personal debt in Western Europe, and the highest teenage pregnancy rates.

At the same time we had over a million children growing up in households with parents who were addicted to drugs and alcohol.

And when it came to violent crime we found ourselves to be amongst the leaders in Europe.

Yet this was during a period when the economy was growing – with employment up by more than 2 million in the decade to 2008.

What had become clear and was starkly illustrated in the Centre for Social Justice’s two reports – “Breakdown Britain” and “Breakthrough Britain” – was that one section of society had become semi-detached from the rest.

As social mobility ground to a halt, the part of society on the lowest incomes became static.

Too many find that if they are born into such communities they are likely to remain in the same condition as their parents.

With income inequality the worst for a generation, high levels of benefit dependency, broken families, crime, debt and drugs became the norm for whole communities.

The problem was that we were treating symptoms, not causes.

And by failing to deal with these issues we were storing problems up further down the line.

For many years, while people were aware that there were problems in poor communities they remained largely unaware of the true nature of life on some of our estates.

In a sense, we had ghettoised many of these problems, keeping them out of sight of the middle class majority.

Occasionally some terrible event would make it on to our front pages…

…the names of Rhys Jones, Damilola Taylor, Charlene Ellis and Letitia Shakespeare are tragically well known to many of us.

But because they were small in number, people were able to turn away from the problems faced in certain parts of the country.

But last month the inner city finally came to call, and the country was horrified by what it saw.

And while it is of course a good thing that there were no riots in Scotland, I’m firmly of the view that is an issue we face in the UK as a whole.

While they might manifest themselves differently, the same deep-rooted problems exist on both sides of the border, and as a passionate supporter of the United Kingdom I want us to work together to solve them.

Whether in Manchester or Glasgow, London or Edinburgh, Birmingham or Aberdeen…

…I believe we’re stronger when we tackle these issues together.

Damaging culture

The riots were a wake-up call, and a reminder of the wider problem that we all face.

The scenes of our young people ransacking local businesses…

…sometimes proudly displaying their acquisitions on the internet…

….spoke to a damaging culture which I believe has been on the rise in recent years across the UK as a whole.

I touched on this problem in a recent speech, some time before the riots took place.

There I spoke about a culture of recklessness and irresponsibility, a culture of “live now, pay later.”

I felt that we had seen it in the staggering growth in both public and private debt, with little regard for who would pick up the bill, and in the unwillingness to undertake fundamental reforms of our welfare system to secure our children’s future.

Last month we saw this culture crystallized into its crudest form – not so much “live now, pay later” as “take now, pay never, and damn the consequences.”

This is what the Prime Minister meant when he said that the riots were about behaviour and values.

Gangs

The riots also played a role in heightening awareness of gangs in the public consciousness.

In terms of numbers gangs made up a minority of those actually taking part in the violence, yet their role was significant.

First, the riots showed us that in too many inner city areas, gangs dominate – if not in numbers then in the power they have over their local community.

Speaking to my borough commander in Waltham Forest there seems to be good evidence to suggest that the gangs were coordinating locations and some of the social media networks during the riots.

And, separate to the riots themselves, we know that gangs can have a disproportionately negative impact on their local area, bringing with them violence and drug abuse and pulling others around them into their destructive cycle.

Those who join the gangs are the product more often of broken families and dysfunctional upbringing.

In turn, they further that process of breakdown by creating no-go areas that make impossible the very things that could help deprived neighbourhoods to rejuvenate.

As products of and creators of social breakdown, their role is hugely influential.

I know this is of relevance in Scotland, particularly areas like East Glasgow where a high concentration of gangs are known to operate in highly deprived neighbourhoods.

But gangs are not just a cause of social breakdown – they are also an important symptom.

In many ways they act to fill a vacuum left by other figures of authority – particularly the family unit.

What these young people fail to find at home they search for on the streets instead.

As Disraeli said:

“Man is made to adore and to obey: but if you will not command him, if you give him nothing to worship, he will fashion his own divinities, and find a chieftain in his own   passions.”

For too many these “divinities” are the gang leaders, and their presence speaks to the absence of something fundamental from our young people’s lives – stability, security and moral guidance.

As the excellent work in Strathclyde shows us our first response must be to deal with the violent and criminal activity of the gangs – but that will only take us so far.

Yes, we will be tough on the gangs.

Of course, where you have gangs leaders who repeatedly commit and foment violence they must be warned of the consequences.

Then the police must deal with them for even the most minor misdemeanours.

But this is only part of the bargain.

If we are to believe, as Robert Owen did, that people are shaped by their environment, then there is a great deal more we need to do.

Because at the moment we are caught in a vicious cycle.

Gangs are shaped by the destructive environment in which their members are brought up, and they in turn breed destruction in their local communities, destabilising families and increasing the chance that future generations will find themselves involved in gang violence.

A criminal response alone fails to deal with the root causes of this merry-go-round.

Again, Robert Owen was right where he explained that:

“instead of punishing crimes after they have permitted the      human character to be formed so as to commit them…”

…we have to instead reach in and break the cycle – and we have opportunities to do it all the way along the chain.

In other words, we have to give people a way out.

As the good projects have shown, being tough on gangs is just one part of the challenge.

Intervening to peel people off from the gangs, and preventing them joining in the first place, is the real task we face.

Early intervention

Of course, as Robert Owen would have agreed, the earlier we get in there the better.

The evidence on the importance of early intervention is overwhelming.

I came together with Graham Allen in 2008 to write a book which established some of the key evidence on this.

In Graham’s subsequent reports for the Government the evidence on early intervention has become incontrovertible.

He cites one piece of research which shows that those boys assessed by nurses at the age of 3 as being “at risk” had two and a half times as many criminal convictions by age 21 as those not deemed to be at risk.

Speaking of the understanding that the character of a child could be moulded from such an early age, Owen asked whether:

“Possessing, then, the knowledge of a power so important…which would gradually remove the evils which now chiefly afflict mankind, shall we permit it to remain dormant and useless, and suffer the plagues of society perpetually to exist and increase?

His was a clear warning that if we fail to get in there early enough to stop young people falling out of the system, then we risk failing altogether.

While much of this area is devolved it remains a common challenge for all nations of the UK.

I know that Graham’s work drew on Scottish examples, such as the rapid reaction model in the Highland region which has been running for the last decade.

The goal in the region has been to get things right for children the first time they are identified as being at risk, so that they don’t appear again later.

And I know that the Finance Committee of the Scottish Parliament backed this principle recently, calling on a shift away from reacting to crises and towards a greater focus on prevention and early intervention.

So this agenda isn’t just cross-party, it crosses Governments.

Evidence suggests that one of the best ways to improve life chances for young children is to link families to trusted local networks and individuals – whether it be family nurse partnerships, health visitors, or something similar.

But much of the responsibility here falls to local authorities.

We know many local authorities already understand the importance of this agenda, and we will increasingly be looking to them to provide the leadership to make sure early intervention initiatives are prioritised.

We need to keep hammering home the message that early intervention offers the best hope for today’s children.

Schools

The next step is to think about how we can provide support at the next level – at school age – to stop young people falling off the rails and into the hands of the gangs.

First, we need to keep them off the streets and in our schools, engaged in education and learning key life skills.

The Government is committed to raising the participation age in England, with measures to ensure that all young people continue in education or training until they are 18.

And I know the Scottish Government is guaranteeing education, training or an apprenticeship to all 16-19 year olds.

But the fact is at the moment some young people do drop out, and for those who do, employment rates have deteriorated substantially in the last decade or so.

Back in 2000 around six in every ten 16-17 year olds who were not in full time education were in work.

That figure is now down to around 4 in ten.

A similar trend holds true in Scotland, where around seven in ten were working in 2000, a rate which has fallen to around four in ten now.

And this is by no means just a product of the recession – in fact, by 2008 the level had already fallen to 5 in 10, so it has been on a steady downward trend over the course of the last ten years.

By the time this group comes into the Jobcentre at 18 they have already suffered a wage scar that leaves them behind their peers in the jobs market.

So we need to do everything we can to support young people who are at risk of disengaging, intervening early to stop them weighing heavily on the benefit system in the future.

Innovation Fund

And that’s what our Innovation Fund is all about.

We’re providing £30 million over the next three years to fund organisations that are able to work with disadvantaged young people to turn their lives around.

And the remit of the fund extends to those aged 14 and 15, helping us get in there even earlier to prevent people falling out of structured training and education, and putting them on track for work in the future.

Key here is the role of social investment.

The idea of the Innovation Fund is to unlock private finance in the pursuit of the social good, getting investors to do something positive for their community while seeing a return on their investment at the same time.

As Graham Allen identified in his second report, social investment could be the key to solving some of our most entrenched social problems, many of which require a significant down payment up front to yield huge savings further down the line.

The Innovation Fund is just the start, but I hope it will be a stepping stone to a smarter approach to social breakdown in the future.

Universal Credit and Work Programme

Once our young people have left school we then need to make sure they are met by a welfare system that works.

First, it has to be a welfare system which makes work pay, which is why we’re introducing the Universal Credit – a new, simpler payment which will be withdrawn at a clear and consistent rate as people move into work.

In the current system some people lose up to 96 pence in every pound earned through benefit withdrawal.

Would any of us here work at 96% tax rates, especially if we could earn a living without any effort at all?

Just ask yourself – why should we expect behaviours from others that we wouldn’t expect from ourselves?

The Universal Credit is designed to change this, reducing the maximum withdrawal rate and simplifying the way benefits are withdrawn as people move into work to reduce the risks associated with taking a job.

Second, we have to work with people to help them find employment.

Too often people who need help have faced bureaucratic and impersonal regimes, motivated more by the number of boxes ticked than the numbers helped into work.

I hope we’re going to change all this with the Work Programme, a package of support we’re putting around people which is designed around them, for them and with them, and will be delivered by some of the best organisations in the private and voluntary sectors.

But this is going to be tough.

We are going to be dealing with people who have come from families where no-one has ever worked – generation upon generation.

They may be breaking the mould, and that won’t be easy to do.

It’s important that we stay with them and support them as they take that step, and we know that many Work Programme providers will be looking to mentor people once they’ve moved into work to help keep them there – we’ve designed our payments structure to encourage this kind of proactive support.

Work experience and apprenticeships

And of course we know that one of the biggest challenges young people face in finding work is a lack of relevant experience.

That’s why we’re providing funding for 100,000 work experience places over the next two years.

These placements will be for up to 8 weeks, but we’ll provide funding for another month where it’s linked to an offer of an apprenticeship or a job.

And we’ve put in place funding for 250,000 extra apprenticeships over the coming years, with 40,000 targeted specifically at young people on Jobseekers Allowance.

I know that the Scottish Government has also committed to creating some 25,000 apprenticeships a year.

So all the way along the life cycle you have these key interventions that pick people up and stop them falling off track – from early intervention with parents, to keeping kids on track in school, to providing a fair and supportive welfare system, combined with positive work experience, that encourages and helps people into work.

It’s part of a sewn up process – not so much cradle to grave as cradle to stability, cradle to a productive member of society.

Family

But all this brings me to one of the most important issue of all, and that is the role of the family.

I described earlier how gangs have acted to fill the spaces left by broken families, and how family breakdown has led to a sort of moral vacuum in some areas of society.

While the Government should be there to support people when they face difficulties, we can achieve so much more by providing the support that families need to grow and sustain, giving young people a stable and secure environment to grow up in.

This isn’t about Government interfering in families.

But it is about saying that we have to create a level playing field, reversing some of the biases against families we’ve seen in recent years, as well as making sure that support is available if and when families want to use it.

It is clear that people respond to incentives and disincentives – and currently in the UK there is a damaging financial discouragement to couple formation, despite its stable outcomes for children.

That’s why I intend for our welfare reforms to make an impact on the couple penalty where it matters most – amongst families on the lowest incomes.

Alongside that the Prime Minister has made it clear that we will, in this Parliament, as and when possible and after other considerations, recognise marriage in the tax system.

And we’ve already made some £30 million available for relationship support over the coming years.

But there is further we can go, and that is something the Prime Minister himself made clear in a speech last month.

We are going to apply a family test to all domestic policy from here on.

And I believe we also need to look more closely at how we tackle disincentives to strong and stable couple formation

Culture

Perhaps in bringing this value back to our personal relationships, we can start to tackle that damaging culture in our society that I spoke of earlier.

The culture of “live now, pay tomorrow” that permeated our society from top to bottom.

From those at the top of our society it was a case of “do as I say, not as I do.”

Whether in the banking crisis, phone hacking or the MPs’ expenses scandal, people have seen a failure of responsibility from their leaders.

And this failure speaks to a wider cultural development in our society, namely a gradual but consistent move to a culture which values conspicuous consumption over the quality of our personal relationships.

We have seen the growth of a culture in which people are valued in terms of how much they earn, how much their home costs, or how they spend on their holiday rather than how much value they bring to their community.

Only today, a UNICEF report has highlighted the damage that consumer culture is doing to our children’s happiness.

Owen saw some of these influences at work himself, contrasting the scant attention given to the millions of poor and destitute he saw around him to the fact that:

“we hesitate not to devote years and expend millions…in the attainment of objects whose ultimate results are, in comparison with this, insignificancy itself.”

This culture has affected everything.

We hear of people putting off getting married because they cannot afford it – not the marriage itself but the ceremony.

With the average cost of a wedding put by some surveys at something like £20,000, some couples risk getting into debt just to meet the costs.

What seems to have been forgotten is that the point of marriage is love, commitment, and creating a safe environment in which to bring up a family.

As Owen would have said, the ceremony is insignificancy itself.

We should worry instead about the human aspect.

Conclusion

Our task now is to achieve this rebalancing of our society.

For too long the political class have understood that we have a social problem, but considered it a second order issue.

The riots have provided a moment of clarity for all of us, a reminder that a strong economy requires a strong social settlement, with stable families ready to play a productive role in their own communities.

The challenge of our generation is to reforge our commitment to reform society so that we can restore aspiration and hope to communities that have been left behind.

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.