Tag: John Hutton

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the TUC Disabilities Conference on 24th May 2006.

Introduction

Thank you Mandy.

I’m grateful to Brendan and the TUC for giving me the opportunity to join you this morning.

Last year we set out our ambition to deliver substantive equality for disabled people by 2025. It’s a vision that goes to the very heart of what I believe the Labour Party and Trade Union movement are about. An equality of opportunity that goes beyond basic civil rights; that stretches back to Beveridge in seeing the right to work as fundamental to tackling poverty and building aspiration for everyone in our society. An equality that brings recognition and respect for all – from the workplace to the high street – whether as consumers of goods and services– or as workers and citizens.

It’s a vision that we as a Labour and a Union movement have been working towards for many years.

Progress since 1997

In the last few years – thanks to the campaigning work of the TUC and many others we’ve come a long way. Last year the Disability Discrimination Act completed the most far-reaching programme of disability rights legislation that any European country has so far put in place. Among its many provisions – was a duty on public authorities to promote equality of opportunity for disabled people – a real milestone in helping to eliminate the institutional disadvantage that many disabled people still face.

The Act fulfilled our manifesto commitment to deliver enforceable and comprehensive civil rights for disabled people. I hope people will see it as a major landmark on the road to a world in which disabled people can be empowered to live independently – fully recognised and respected as equal members of society.

But for all the legislative progress we have made – we know we will not reach our long term goals while many disabled people remain unfairly excluded from the workplace – or poorly supported within it.

Over the last few years – thanks to our investment in Jobcentre Plus and the New Deal – the employment rate of disabled people has risen twice as much as for the population as a whole. The New Deal for Disabled People has seen over 83,000 job entries since its launch in 2001 – with nearly 300,000 disabled people helped into work through the total package of New Deal programmes.

And through the Minimum Wage and tax credits we’ve tried to ensure that work pays.

But for all this progress – we know that we still have very much further to go if we are to achieve our goal of substantive equality for disabled people.

Disabled people are more than twice as likely to have no educational qualifications as non-disabled people. They are over three times as likely to be economically inactive – and when they are in work, they earn less on average than their peers. Indeed, around a third of young disabled people actually expect by age 30 to be earning less than non-disabled people of their own age.

Disabled people are still more likely to be trapped in poverty than non-disabled people; and a quarter of all children living in poverty have long-tem sick or disabled parents.

We simply can not accept these outcomes in our society today.

We share the belief that for those who can – work is the best route out of poverty. It’s the bedrock of personal responsibility, dignity and wellbeing. The challenge we face today is how to build a modern welfare state that allows people to exercise this fundamental right to work, when our national economy is changing more rapidly than at any time since the industrial revolution.

And it is not only our economy that is changing. We are confronted by a rapidly ageing society and a falling birth rate. Soon, and for the first time in our history, there will be more people over the age of eighty than under the age of 5.

We have to respond positively to these challenges. That’s why we have set ourselves the ambitious goal of an 80% employment rate. I do not underestimate the scale of this challenge. It will mean a million fewer claiming incapacity benefit, a million more older people in work and 300,000 more lone parents off benefit.

But its achievement will be critical for the nation and our economic and social well being – for individuals; for families and communities; for wealth creation and economic competitiveness; and crucially – for true equality and social justice.

Meeting the challenge

Our Welfare Reform proposals are designed to help us meet this challenge. They are underpinned by clear principles – the development of a modern welfare state that responds to individual need, balances rights with responsibilities and invests for the long term. That provides work for those who can and security for those who can’t.

A new benefit system founded on the concept of measuring and building up each individual’s capacity rather than writing people off as incapable – and a radical extension of the support available for every Incapacity Benefit claimant – underpinned by the extension of Pathways to Work to every part of Britain by 2008 – bringing new hope and opportunity to some of the most disadvantaged members of our community.

We know the difference that Pathways can make. In the first year of the pilots the number of recorded job entries for people with a health condition or disability had increased by around two-thirds compared with the same period the year before. Their continued success has driven a significant increase in the proportion of people leaving Incapacity Benefit in the first six months of their claim compared with non-pilot areas. And this early success has underpinned our achievements in helping people off Incapacity Benefit – with new cases down a third since 1997.

And with the first falls in the total count – now down 61,000 in the year to November 2005 – we know that the support available in Pathways can make a difference for existing claimants as well as new claimants.

By October this year – around 900,000 Incapacity Benefit claimants will be eligible for the support provided by Pathways – and by 2008, every claimant will be able to access this support if they choose to do so.

And it doesn’t stop there. Our new approach to delivering welfare and employment support services in cities, together with the new Deprived Areas Fund will help to tackle the remaining pockets of poverty and worklessness in our most deprived areas.

But let me make one thing clear. We will never forget our obligations to provide security for those who can’t work – and as we pledged in our manifesto – our reforms to Incapacity Benefit ensure that these people will receive a higher level of benefit while being able to access employment support on a voluntary basis.

So the extension of support that is on offer with these welfare reforms represents a huge opportunity to help all those on Incapacity Benefit who want to work, to exercise their right to do so.

But we can’t grasp this opportunity alone. Every partner must play their role – working together to drive a lasting change in public attitudes towards disabled people. Employers need to see the benefits, opportunities – and frankly economic necessity of employing disabled people.

And within and across Government – we need a properly joined up approach. That’s why we have set up the Office for Disability Issues to co-ordinate and drive forwards our work to deliver substantive equality for disabled people. A new national forum will enable the views of disabled people to be heard by policymakers at the highest level; and, along with the new Public Sector Duty, ensure that disabled people really are at the heart of public policy – able to influence the development of policies and service delivery that affect every aspect of their lives.

The Office for Disability Issues is also bringing Departments together to test practical new ways of delivering services such as through the piloting of “individual budgets” – and it’s championing a genuinely “joined-up” approach to delivery disability equality right across Government. Because disabled people – just like everyone else – do not divide their lives into separate silos – and we can’t properly tailor our services to meet their needs if we do.

Consultation/conclusion

But I do recognise the sensitivity of this issue and the important of ensuring that the detail of our reforms help deliver our objectives in practice.

That’s why we’re working with the Disability Rights Commission in developing a joint “prototype” disability impact assessment of our proposals for Incapacity Benefit.

Later next month we will produce our response to the consultation ahead of introducing legislation to Parliament. I’m committed to engaging with and listening carefully to all who have responded to our Consultation; and to all of you who share our commitment to improving the employment prospects of those currently living on benefit.

And I believe that with your help we can shape the development of our welfare state so that it better responds to individual need, balances rights with responsibilities but provides security for those who need it.

So the time for action is now – to drive forwards that change in public attitudes; to refine and deliver new employment support for disabled people in the most efficient and most effective way; and to enable each and every disabled person to fulfil their ambitions and make their contribution to society – whether that means getting into the workplace – or developing and progressing within it.

Substantive equality for disabled people is our ambition – nothing short of this will do. If we work together we can achieve it – and in doing so build a truly fair society of equal rights and opportunities for all.

Thank you.

Below is the text of the speech made by John Hutton, the then Work and Pensions Secretary, to Parliament on 25th May 2006.

With permission Mr Speaker I should like to make a statement on the future of our pensions system.

Our first priority has been to tackle pensioner poverty.

Compared with 1997, we are spending more than £10 billion extra each year on pensioners. Almost half of this spending is going to the poorest third. We’ve raised the minimum income from a totally inadequate £69 in 1997 to over £114 today. And as a result, for the first time in a generation, pensioners are now less likely to be poor than anyone else.

We have acted to tackle the loss of confidence in the private pensions market. We have legislated to clear up the pensions mis-selling scandal, created the Pensions Regulator and the Pension Protection Fund.

We established the Financial Assistance Scheme to help some of those who stood to lose the most from schemes that collapsed before 14 May 2004. I know, Mr Speaker, that many members have been concerned that the scheme is limited to those within 3 years of retirement.

My Rt Hon Friend the Prime Minister announced in March that we were expediting a review of the Financial Assistance Scheme. I am delighted to announce today that the scheme will be extended to cover eligible people who were within 15 years of their scheme’s normal retirement age on 14th May 2004. Under this extension, the Government will top-up to 80 per cent of expected core pension for those within seven years of scheme pension age, 65 per cent for those within eight to eleven years of scheme pension age and 50 per cent for the remainder.

So we have made real progress on pensioner poverty. Despite these improvements there remain significant challenges.

We established the Pensions Commission in 2002 to consider what reforms might be necessary to meet them. And I am grateful to three Commissioners – Lord Turner, Jeannie Drake and John Hills for the work they have done.

In their report last November, the Commission made clear that there was no immediate “pensions crisis” – but that there would be if we did not act soon. They identified four major challenges.

Firstly, they found that between 9 and 12 million people are not saving enough for their retirement.

Secondly, they estimated that by 2050 there will be 50% more pensioners than today. And over the same period, the ratio of people in work to those in retirement will halve.

Thirdly, as a result of historical legacy, the current State Pension system is complex and delivers unfair outcomes – especially for women and carers. Of those recently reaching State Pension Age, 85% of men have a full entitlement to a Basic State Pension compared to only 30% of women.

Finally, if we maintained currentindexation, the Basic State Pension might be worth only £35 by 2050 in today’s earning terms and over 70% of pensioner households could be eligible for Pension Credit – never the Government’s intention.

The Commission urged the government not to duck the long term challenge of reform. Mr Speaker, I believe the proposals in our White Paper I am publishing today address the challenges the Pensions Commission identified.

We will therefore introduce a new system of personal accounts that will make it easier for more people to save.

We will reform state pensions so that they are simpler and more generous.

We will modernise the contributory principle and make the state pension fairer and more widely available.

We will increase the State Pension Age – keeping the proportion of life spent receiving the state pension stable for each generation and helping to secure the long term financial stability and sustainability of the state pension system.

Let me take each of these in turn.

A new system of personal accounts will be introduced from 2012, providing over 10 million people with the opportunity to save in a low cost savings vehicle. Employees will be automatically enrolled into either their employer’s scheme or in the new personal account but will have the right to opt out.

The accounts will provide a simple way for people to take personal responsibility for building their retirement income.

Employers will be required to contribute 3% of employee earnings in a band between £5000 and £33,000. Employees will contribute 4% on the same band of earnings and a further 1% will be contributed in tax relief.

I recognise Mr Speaker, that these changes represent a major change in the pension system. Accordingly we are taking steps to help smooth the introduction of this reform. Employer contributions will be phased in over at least 3 years. The contribution rate will be fixed in primary legislation. In order to minimise the burden on the smallest businesses, we will consult on additional transitional support and whether a longer phasing period is needed.

However, the government is clear that reforms to private pensions must go hand in hand with reforms to the state pension system.

Mr Speaker, during the next Parliament, we will re-link the value of the Basic State Pension to average earnings. Our objective, subject to affordability and the fiscal position, is to do this in 2012, but in any event at the latest by the end of the Parliament. We will make a statement on the precise date at the beginning of the next Parliament. This will help to preserve the value of the basic State Pension. We will also simplify the State Second Pension so that it gradually becomes a flat-rate weekly top-up to the Basic State Pension.

This means that a person retiring in around 2050 who has been in employment or caring throughout their working life could receive a contributory state pension worth £135 a week in today’s earnings terms – which is £20 a week above the guaranteed income level. Without these reforms people retiring in 2050 would receive a total contributory state pension worth between £90 and £100 a week – well below the means tested threshold.

We will continue to up-rate the standard guarantee in the Pension Credit with average earnings from 2008. The Pension Credit will continue to help the poorest pensioners. But we will also be able to limit the spread of means testing. We will make an immediate start on this by modifying the calculation of the Savings Credit from 2008. This gives a clear indication from the outset of our determination to make clear people’s incentives to save. As a result of this change and our restoration of the earnings link, by 2050, far from rising to 70%, we estimate that only about a third of pensioners will be eligible for Pension Credit.

Our reforms to the State Pension must also achieve fairer outcomes for women and carers. But we do not believe that a residency test for future accruals as proposed by the Pensions Commission would be the right way to achieve this. It would offer no immediate help to a group of women aged 45 and over who have poor contribution records and no time to put this right.

That’s why, Mr Speaker, from 2010 we will introduce radical changes to the current rules – reducing the number of years needed to qualify for the Basic State Pension to 30 and improving the system of credits to better reflect the different ways in which people contribute to society.

As a result, by 2010 70% of women reaching the State Pension Age will receive a full Basic State Pension, compared with 30% today. By 2020 up to 270,000 more women will get a full Basic State Pension – approximately three times the number under a residency-based approach.

Mr Speaker, we propose to increase the State Pension Age in line with life expectancy. The State Pension Age for women is already due to rise from 60 to 65 between 2010 and 2020 to equalise with men’s State Pension Age. There will be a subsequent rise for both men and women from 65 to 66 over a two year period from 2024 – and further increases, also over two years, to 67 starting from 2034 and to 68 from 2044. No-one over 47 today will be affected by these changes.

Finally Mr Speaker, today’s White Paper proposes a number of simplifying measures that will streamline the regulatory environment. We will abolish contracting out for defined contribution schemes at the same time as we restore the earnings link. We will reduce the burdens on schemes by bringing forward legislation to allow them to convert Guaranteed Minimum Pension rights into scheme benefits – reforms that will, I believe, be of significant benefit to employers and employees.

We will bring forward legislation to begin implementing these reforms in the next session.

Mr Speaker, in November I set out five tests for the reform of our pensions system. They needed to promote personal responsibility, be fair, especially to women and carers, simple to understand and affordable and sustainable for the long term. I believe we have met these tests.

Today’s White Paper seeks to entrench a new pensions savings culture where future generations can take increasing personal responsibility for building their retirement savings.

Mr Speaker, while there will always be specific individual circumstances, such as debt or stock market performance, which will affect people’s savings, fundamentally these reforms mean that people should be better off in retirement by having saved.

What’s more, this package of reforms continues to protect the poorest pensioners from poverty. And for the first time, delivers fair outcomes for women and carers with a modernised contributory principle operating within a more simple overall architecture.

Over the period to 2020, our proposals broadly keep spending on pensioners as a proportion of national income constant at today’s levels – helping pensioners to share in rising national prosperity.

In the long term, the rise in the state pension age will help secure the long term financial stability and sustainability of the state pension system

Together it represents a comprehensive, integrated package of reform. I believe it can lay the foundation for a new and lasting consensus on a long-term resolution of the pensions challenge we face as a country.

I commend this White Paper to the House.

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the NAPF Conference on 8th June 2006.

I’d like to start by thanking the NAPF, its members – and many of its guests here today – for all that you have contributed to the pensions debate – not just in the last few months but over a number of years – as we have sought to build a long term response to the pensions challenges that we face as a nation.

No-one should underestimate the scale or the importance of that task. Building a long term approach requires all of us – whether individuals, policy experts or political parties – to see to what extent we can agree our objectives and then to work together to develop new and innovative solutions to achieve them.

The voice of the NAPF has been at the centre of the national pensions debate and your contribution has been crucial to the progress we have made. Our White Paper builds on long-standing big picture NAPF ideas – a simpler, fairer state pension, with broader coverage less means-testing and a clearer foundation on which to build private savings. And I think it’s important to recognise that when you welcomed our White Paper at the end of last month – you were setting aside previous disagreements over specific policy measures in favour of getting behind this wider package – showing real leadership in being prepared to work with us to develop the detail of our proposals and consolidate the emerging consensus on a lasting pensions settlement. I want to thank you for the leadership you are showing.

I do believe that the proposals we announced in our White Paper address the three big questions at the heart of the pensions challenge.

Firstly – how we remedy the problem of undersaving – affecting perhaps as many as 12 million people. The introduction of personal accounts combined with compulsory minimum employer contributions and automatic enrolment will help to embed a new pensions savings culture and overcome some of the many practical barriers that prevent people from saving for their retirement.

Secondly – how we make the State system fairer and simpler, with less means testing – ensuring it provides a better platform on which to encourage and support a sustained expansion of private savings. I believe that our reforms to modernise the contributory principle and enable more women and carers to qualify for the State Pension will deliver much fairer outcomes more quickly than other approaches. And that by restoring the earnings link and simplifying the State Second Pension we will make the State Pension simpler and more generous – while reducing the spread of means-testing.

By 2050 only about a third of pensioners will be eligible for pension credit, instead of some 70% if current uprating policies continued. And of this third, only about 6% will be receiving the guarantee credit alone – meaning that in the vast majority of cases, those receiving pension credit will be actually being rewarded for voluntary saving. That has got to be the sensible thing to do.

And thirdly – but absolutely critically – how we make the reforms affordable and therefore sustainable over the long term. That’s why we’ve said that we will aim to make the changes in 2012, subject to affordability and the fiscal position. We’ve made it clear that we won’t risk jeopardising the public finances – it would be completely irresponsible for any Government to say otherwise. Over the period to 2020, our proposals broadly keep spending on pensioners as a proportion of national income constant at today’s levels – taking advantage of the savings realised by the decade of State Pension Age equalisation and helping pensioners to share in rising national prosperity. And, of course, over the long term the rise in the State Pension Age in line with life expectancy, will help to secure the financial stability and sustainability of the state pension system.

With these reforms, I believe we can begin to change the pensions landscape in Britain. Our challenge now is how we take this forward. And it’s this, rather than the reforms themselves on which I would like to focus my remarks today.

Just as the NAPF has played a crucial role in laying the foundations for a consensus on a long-term solution – so we must now work together as we refine the detail of our proposals and seek to implement them.

Of course, one key area will be around the specific design of the new personal accounts. We have already said that we want to consult on the best administration model for personal accounts – particularly on whether there is value in offering consumers a choice of branded provider. And we announced earlier this week that will be hosting a summit before the end of July on their design and introduction – as well as engaging with our key stakeholders in advance. I hope the NAPF will be at the centre of this work.

Over and above this, I am conscious that personal accounts have to work alongside existing and future provision – and as we said in the White Paper, while we don’t think that Supertrusts have all the features needed for Personal Accounts, we are interested in looking at whether Supertrusts could work alongside personal accounts to offer more choice in pension provision. We need to test this idea further.

Because it’s not about one type of provision at the exclusion of another – but actually supporting the widest range of suitable options that will allow people to plan and achieve the income in retirement that they want.

This brings me to two immediate challenges that I think we need to address as we seek to develop our reforms over the coming months and to embed that long-term consensus. And they are challenges where I believe the NAPF and its partners can play a particularly important role.

The first is around strengthening existing pension provision, reducing the burden of regulation and making it easier for employers to provide good workplace schemes. And the second is around how we encourage and enable people to make the most of this existing provision and support people in the retirement planning decisions they make today.

I’d like to say just a few words about each.

The proposals in the White Paper are designed to encourage a radical extension of private pension saving – but this must be in addition to, not in place of, existing pension provision. Many of you here today will be associated with employers who already provide high quality pension schemes with valuable employer contributions and high-quality support and advice for their staff.

This has been one of the fundamental pillars of the success the UK pensions system to date – and the NAPF has been at the heart of supporting such provision for over 80 years.

The evidence for why this matters speaks for itself. In 2004, nearly 80% of contributions to funded occupational pension schemes came from employers. And the evidence about the value of an employer contribution was one of the main reasons why we opted to make employer contributions compulsory with the new system of personal accounts.

So it’s absolutely crucial that we continue to support good quality existing employer provision. The White Paper talked about measures to reduce the regulatory burdens and to make the system simpler for employers and providers. It was probably the part of the White Paper that got the least coverage – but it’s absolutely critical if our reforms are to be successful.

Last year’s NAPF survey highlighted how the regulatory burden is one of the main concerns that schemes anticipate over the next few years.

We have already set out measures which, over the next three or four years, will deliver year on year reductions in administrative burdens. And we will set targets for reducing the burdens arising from requirements for businesses to provide information.

But we are determined to go further in removing unnecessary regulation and simplifying regulatory burdens wherever we can. The abolition of contacting out for defined contribution schemes – as the Pensions Commission recommended – will reduce administrative complexity and remove a key source of confusion for individuals. And the the change to allow occupational schemes to convert Guaranteed Minimum Pension rights into scheme benefits – will all take us further towards a more streamlined, less bureaucratic system.

But the rolling deregulatory review offers further potential for radical change. We’re kicking this off in the next month and many of our key stakeholders, including the NAPF, have agreed to join the Advisory Group that will guide the direction of this work.

The White Paper gave a list of possible elements for this review. I want to make it clear today – that this list is the minimum of what we are prepared to consider. We want the deregulation agenda to be led by those of you out there who are actually involved at the sharp end of pension provision. And we want you to drive both the scope and content of this review. Nothing is off the table. Our objective is not about merely re-writing legislation or tinkering around the edges but a real drive to cut red tape and to make it easier for you to deliver workplace pensions.

Because, ultimately, this is the way to strengthen existing provision and enable employers to continue to provide high quality schemes in a new and changing economic climate. We have to strike the right balance between simplification and protection – between deregulation and good governance. You can help us get this balance right.

The second crucial challenge we face – is how we then encourage and enable people to make the most of this existing employer pension provision.

It was the first of the Pensions Commission reports that first highlighted the scale of this, showing that for the earnings bracket with the most people in it – namely those on £10,000 – £20,000 – there were more people who decide not to join their employers’ contributory scheme than there are workers who have no pension and no access to a scheme. Indeed – there are some 4.6 million workers who are not taking advantage of contributory schemes that their employer provides.

And last year’s NAPF survey found that nearly 1 in 10 of your members work for organisations where fewer than 20% of all eligible employees belong to the scheme and half work for organisations with scheme participation rates below 60%.

The White Paper has proposed automatic enrolment as the norm for pensions in the future. For many this will be into the new personal accounts – but for many others it could be into existing occupational pension schemes. And we know what a difference this could make. In case studies of private sector firms automatic enrolment has been clearly associated with increased participation rates. For example, in one firm the participation rate went from 25% for existing employees to 80% for new joiners who were automatically enrolled.

So there’s a key challenge for us to work with employers, unions and all our partners so more people consider joining their occupational schemes ahead of auto-enrolment being introduced.

Information and education will be crucial to meeting this challenge. That’s why the Pensions Education Fund is so important – in helping people to understand and take advantage of available pension provision. Your “PensionsForce” initiative – launched this afternoon – will help many people benefit from impartial and accurate information that will increase their awareness of the need to plan for retirement and the options available to them. In particular it could help many women, and workers in small and medium sized enterprises who tend to have lower access to a pension contribution and who tend to be bypassed by the advisor community – as well as workers who have access to a workplace pension, and employer contribution, but who do not take full advantage of it.

Pension forecasts are also important tool to help with this. Since their launch in October 2001, over 7 million combined pension forecasts have now been issued showing a State Pension forecast alongside information on private pension savings. Quantitative research is showing that these forecasts can and do influence people’s savings behaviour – and I’m very keen that a much more widespread and regular provision of forecasts should be an integral part of long-term pensions reforms.

Ultimately, that long-term settlement requires us to achieve a shift in public attitudes such that the changes we make are seen not as a personal intrusion into individual lifestyles – but that instead, they genuinely reflect the new expectations of individuals and communities in a changing society.

It is an evolving social contract. One that will hopefully bind the generations together. One that’s based on the notion that risk should be pooled; that all should contribute according to their means and that there is a floor below which no person should be allowed to fall. But one that’s also based on an understanding that the individual has a responsibility to take every opportunity to support themselves and their family – whether it be in employment or in retirement.

I believe the role of the workplace is crucial in helping us to achieve this renewal of the contact between the individual and the state. And the proposals in the White Paper rightly have a central role for employers at their heart. We must now do all we can to support employers in strengthening existing provision and enabling people to start saving now.

I’m confident that we can respond to this challenge – and I look forward to working with you over the coming months as we refine the detail of our proposals and continue to forge a truly national consensus – one that will enable us to put in place a sustainable, affordable and trusted pensions system that will enable both current and future generations to save for a long and healthy retirement.

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the Welfare to Work Conference in Birmingham on 19th June 2006.

In our modern economy, faced with all the challenges of technological, social economic and demographic change, I believe our welfare system can and will play a central role in helping Britain grow and prosper as a country.

It must always ensure there is a floor below which no person can fall. But it must do much more than this. It must support and help people make the most of their talents and skills. It should provide a bridge to walk on – not a platform to stay on. It must help our economy and our people adapt to change.

By investing in the New Deal and Jobcentre Plus we have begun to replace the one-size-fits-all, re-active system of benefit dependency of years gone by, with a new approach based on tailored support to help people back into work and new obligations for people to do everything possible to help themselves.

And throughout this process of reform, we have locked in a set of decent, progressive values – of universality and opportunity; of security and equity – underpinned by an equality of opportunity that stretches back to Beveridge in seeing the right to work as fundamental to tackling poverty and building aspiration for everyone in our society.

So our principle objective in welfare reform today must be to design and deliver the most effective and efficient re-employment services anywhere in the world. With providers being properly incentivised to deliver the best possible services to the customer, and where job seekers are actively engaged in finding work or improving their employability. We are seeing progress in all of these areas.

Today there are more people in work than ever before – with over 2.5 million more than in 1997. The biggest increases have been in the neighbourhoods and cities that started in the poorest position. And, as last week’s OECD report showed, not only do we have the highest employment rate of the G7 countries – now, for the first time in 50 years, we also have the lowest combination of unemployment and inactivity rates.

But we have much further to go. The challenge we face today is how to build a modern welfare state that allows people to exercise their fundamental right to work – at a time when our national economy is changing more rapidly than at any time since the industrial revolution.

Managing such change is one of the biggest challenges facing social and welfare policy – not just in this country, but in developed countries all around the world. But while the pace of change can seem daunting, the forces that lie behind these changes represent progress not decline. They hold out more opportunities than threats. If we can take full advantage of them, they extend the chance to end social injustice, poverty and exclusion in our society.

Our welfare state must adapt to meet this challenge and to seize the opportunities it presents. That’s why we’ve set ourselves the aspiration of an 80% employment rate. I do not underestimate the scale of such an ambition. It will mean a million fewer claiming incapacity benefit, a million more older people in work and an extra 300,000 lone parents off benefit.

But its achievement will be critical for the nation; for our economic and social well-being. For individuals; for families and communities; for wealth creation and economic competitiveness; and crucially – for equality and social justice.

Our Welfare Reform proposals are designed to help us meet this challenge. They are underpinned by clear principles – the development of a modern welfare state that responds to individual need, balances rights with responsibilities and invests for the long-term. That provides work for those who can and security for those who can’t.

A new benefit system founded on the concept of measuring and building up each individual’s capacity rather than writing people off as incapable. And a radical extension of the support available for every Incapacity Benefit claimant – underpinned by the extension of Pathways to Work to every part of Britain by 2008 – bringing new hope and opportunity to some of the most disadvantaged members of our communities.

This is a vision for the future direction of welfare reform that has been widely welcomed during our consultation on the Green Paper published in January. Many of you here today will have been among the 600 organisations and individuals who responded to the consultation – and among the 5000 people who attended almost a hundred events during the formal Consultation Period.

I am very grateful for your input and for all the comments and suggestions that we have received.

Today we are publishing on our website our response to the Consultation – together with our response to the Work and Pensions Select Committee report on Incapacity Benefits and Pathways to Work.

We’ve listened carefully to concerns that the adoption of Jobseeker’s Allowance rates in the Employment and Support Allowance would penalise disabled young people.

We believe that the alignment of the basic rate of the Employment and Support Allowance with JSA is a crucial part of the simplification of the system – and that the abolition of age-related payments is an important part of the shift to a functional, capability-based system that doesn’t simply write-off people’s future potential on the basis of their age or general assumptions about the incapacity associated with a specific condition.

But I am absolutely clear that it would be absolutely wrong to discriminate against young disabled people. It was never our intention to do so. That is why we have decided that young people will now get the same basic allowance in the main phase of the Employment Support as everyone else. Additionally, we have decided that young people will also have special provisions to get access to contributory Employment and Support Allowance without the necessary contribution record, as is the case now with incapacity benefits.

There were also strong concerns from employers over our proposals to simplify Statutory Sick Pay – and in particular to abandon the three waiting days. Our intention was to simplify the process of administering the scheme while maintaining that crucial balance between helping to keep costs down and retaining protection for the most vulnerable employees. Employers felt that the simplicity they would gain from these changes was not sufficient to outweigh the loss of flexibility that waiting days gave them – so we have decided not to proceed with these proposals at this point and instead to continue working with employers’ and employees’ representatives to consider alternative approaches to simplification.

Most importantly – today’s response to the consultation is not the final word. Key elements of the policy consultation are still ongoing. In particular, it’s critical that we get the gateway to the benefit right – and we are continuing to review the design of the new Personal Capability Assessment.

We are particularly conscious of how important mental health is within this. There are around 1 million people on Incapacity Benefit because of a mental or behavioural disorder – that’s more than the total number of unemployed people on benefit.

Studies show that many people with mental health problems want to work. Yet people with mental health conditions have the lowest employment rate of any disabled group.

That’s why we have created review groups, involving both technical and stakeholder experts, to look at the mental health as well as physical components of the assessment.

For example, the current PCA mental health assessment does not clearly distinguish between people with a mental illness and those with a learning disability. The review will ensure that the revised PCA provides a more accurate assessment of the cognitive and intellectual difficulties faced by people with a learning disability, through better evidence gathering from more appropriate sources, and better focus on the functional limitations that result.

So we are continuing to listen. And I hope you will continue to work with us as we take forward the detail of our policy proposals.

But I also hope that you will work with us on another crucial area – namely the modernisation of our welfare delivery.

The national roll-out of Pathways and creation of the Cities Strategy offer a huge opportunity for opening up new ways of delivering employment services to some of the most disadvantaged people and communities.

Our economy will benefit enormously from these changes. To lay the foundations for a system of welfare delivery that embraces diversity of provision as the norm and not the exception. That recognises that the world is not neatly divided into two halves – a public sector built on values and ethics and a private sector, somehow devoid of these attributes, but efficient and responsive. That this is an outdated, lazy caricature. Instead, we need a dynamic and effective market where good providers are properly rewarded, whether they come from the public, private or the voluntary not for profit sectors.

Our capacity to manage this new environment – where the boundaries between public and private will necessarily change – will determine our ability to deliver our wider public policy objectives.

So our success in tackling poverty and worklessness – and our ability to preserve the values of social justice which we hold dear – hinge not on preserving the existing system of welfare delivery – but on modernising it; not on standing back and celebrating what we have already achieved with Jobcentre Plus and the New Deal – but on driving forward and building on that success; harnessing the powerful engine for change that markets can provide without sacrificing the principle of equity which markets, if not properly regulated, can so easily undermine.

This new and emerging system of devolved active welfare needs to be managed by Government within a clear framework where outcomes as well as values are prioritised. I believe there are five key tests we need to meet to make this new welfare system work in the way it should.

Firstly – we need to get the right incentives. To attract the best providers and incentivise them to deliver substantially better outcomes – outcomes that match our social objectives. To create an incentive structure that properly rewards providers for helping more difficult cases – and not just focusing on the easiest to help; that supports innovation and enables effective risk management; and that reflects our ambition not simply to help people move into work but to help them stay in work. In developing this new approach we can build on what we have already learned in the Employment Zones.

Secondly, flexibility. To empower local institutions to develop local solutions – combining and aligning their efforts behind shared priorities. Facilitating new contracting structures and delivery models that allow for greater flexibility in inputs in exchange for greater improvements in outcomes; breaking down the barriers of short-term stop-go contracts that too often stifle innovation or even act as barriers to entry for potential providers; and more synchronisation of tendering timetables to allow greater flexibility over the bidding process, for example, enabling providers to bid for larger contracts with clusters of districts.

I accept that in this area we have a lot of work to do. The City Strategy and the roll out of Pathways to Work give us the opportunity to make real progress here. In Glasgow and Manchester for example, real progress has already been made in getting local agencies working together to tackle worklessness with excellent results. We need to see more of this across the UK as a whole.

Thirdly, accountability. The success of this approach will hinge critically on the monitoring of performance outcomes and the clarity of sanctions and rewards. We need clearly defined, robust mechanisms for monitoring performance which recognise the power of the consumer and don’t try to micro-manage from the centre or obstruct local innovation. We have reached the high-watermark of centrally imposed targets. We need a different type of intervention from the centre – one that successfully balances the tension between achieving high quality bespoke services that are sensitive and responsive to the needs of millions of different individuals – and yet still operates within a nationally defined rules structure, regulating quality with clear sanctions and rewards.

Fourthly, information. Providers need clear information over what’s expected of them and when. They need confidence in the transparency of the procurement decision making process and a stronger sense of stability and co-ordination across Government and its agencies contracting with this market. Accuracy and availability of Information on quality of outcomes will be the critical currency for evaluation and will underpin the effectiveness of the rewards structure. And we need a clear assessment of the potential for new players to enter and the impact they could have on existing players. It’s not just Government that needs to know which providers are doing well. So do those who are seeking work.

Finally, personalised outcomes. The ultimate test of the effectiveness of these reforms is the extent to which it can embed a new degree of personalisation into welfare delivery – with ever greater tailoring to the specific needs of individuals – and an ever greater range of tools with which to help people.

So I believe that in meeting these tests, the next decade has the potential to be the most exciting time for providers of welfare services. But it will also be the most challenging.

I hope and expect that new providers will emerge. Existing providers will need to adapt to the new demands of a welfare delivery system that is characterised by a clearer focus on customer service; a new degree of efficiency that delivers real value for money for the taxpayer; more risk management and potentially bigger scale commitments and greater choice, not just within programmes but potentially even between providers.

It won’t be one-way traffic however. There will be similar challenges for Government – in developing skills and capabilities at the centre to procure, commission and manage networks of providers. In working with other Government departments, agencies, devolved and local governments to construct models of delivery that allow us both to create and transform the quality of a national welfare market whilst at the same time sharing power, responsibility and accountability with devolved structures; and sharpening our focus on public policy outcomes, with a real and explicit commitment to be in it for the long term – clarifying the role of politicians and Government about how and where we intervene and providing clear political leadership against which these objectives can be assessed.

If we can rise to this challenge and deliver a model that meets the five tests I have set out, then I believe we can take a major step towards a modern, active and devolved welfare state that tackles poverty at community level and enables individuals to overcome the multiple barriers they face in getting back to work and progressing through the labour market.

We know what a difference such locally-tailored solutions can make. Last week I visited the Harlem Children’s Zone in New York – an inspirational initiative that offers a comprehensive network of social service, education and community-building programmes to transform opportunities for children and families in some of New York’s most deprived neighbourhoods. Locally based and independently-run – it gives people the belief they have the power to improve their services from the ground up. And you can see the difference in the educational achievements of those young people going through its programmes.

This is the best way to build and maintain sustainable solutions to reducing poverty and social exclusion. That should be our priority now and into the future. A shared agenda, common objectives, dialogue and debate; and a willingness to listen and learn can help us realise it.

And there is one simple, stark fact that unites New York with every city in the UK and around the world. Intelligence is equally distributed between people wherever they are born – but the opportunity to succeed is not. That is what we must put right with these reforms to our welfare system in the UK.

Thank you.

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the Future Services Network on 22nd June 2006.

I’m grateful for the opportunity to join you this afternoon and to add my support for the work the Future Services Network is doing in bringing together public, private and voluntary sectors to shape the future of public service delivery and achieve better outcomes for individuals and communities.

If we are to deliver world class public services, then I believe we need to continue to build on the steps we have already taken to combine increased investment with a new model of delivery – one that rejects the old world of top down monolithic public services run from the centre in favour of greater devolution, diversity and choice. One that puts the customer first, shifting the focus onto meeting the individual needs of those who use our services; and prioritising the quality and not just the quantity of public service provision.

It means embracing new partnerships and working with new providers – whether in the public, private or voluntary sectors. It means ensuring the right incentives are in place so that improvements in quality are self sustaining. And it means getting away from the outdated belief that Whitehall always knows best. Because it doesn’t.

So we should remain focused on improving the quality of publicly funded services and be prepared to change things that aren’t working. I don’t, however, believe the problem we face is one of values. The values of public service are the right ones. Universality, opportunity, security and equity. They don’t need revising or changing. But they do have to be combined with a new discipline that offers the consumer the best service; and the taxpayer the best value for money in today’s rapidly changing world. One that deliberately puts the power of choice and therefore control into the hands of the people who use these public services – because when it comes to public service reform, we should always trust the people.

It is this combination of the right values and a new customer focused approach to service delivery that will lay the foundations for the success of publicly funded services in the future – from health and education to welfare.

But achieving this requires Government to change its approach as well. Central Government will always want to prioritise national goals and objectives. But our challenge is to match this with our desire to continue to expand operational flexibility for the newly created and empowered foundation hospitals or trust schools, or welfare to work providers – so that they themselves can make a real difference to individuals, families and communities.

And we know what a difference locally-tailored solutions can make. Last week

I visited the Harlem Children’s Zone in New York – an inspirational initiative that offers a comprehensive network of social service, education and community-building programmes to transform opportunities for children and families in some of New York’s most deprived neighbourhoods. Locally based and independently-run – it gives people the belief they have the power to improve their services from the ground up. And you can see the difference in the educational achievements of those young people going through its programmes.

Here in the UK, in Glasgow and Manchester, for example, we’re seeing real progress in getting local agencies, both public, voluntary and in the private sector, working together to reduce worklessness with excellent results. We need to see more of this across the UK as a whole.

And that’s why the national roll-out of Pathways to Work and the creation of the Cities Strategy are such crucial elements of our welfare reforms – opening up new opportunities for delivering employment services to some of our most disadvantaged communities.

Our principle objective in welfare reform today must be to design and deliver the most effective and efficient re-employment services anywhere in the world. With providers being properly incentivised to deliver the best possible services to the customer, and job seekers actively engaged in finding work or improving their employability.

We are seeing important progress – with more people in work than ever before and last week’s OECD report finding that, now, for the first time in 50 years, we not only have the highest employment rate of the G7 countries but also the lowest combination of unemployment and inactivity rates.

But we have much further to go. The challenge we face today is how to build a modern welfare state that allows people to exercise their fundamental right to work – at a time when our national economy is changing more rapidly than at any time since the industrial revolution.

Our success in tackling poverty and worklessness – and our ability to preserve the values of social justice which we hold dear – hinge not on preserving the existing system of welfare delivery – but on modernising it; not on standing back and celebrating what we have already achieved with Jobcentre Plus and the New Deal – but on driving forward and building on that success; harnessing the powerful engine for change that markets can provide without sacrificing the principle of equity which markets, if not properly regulated, can so easily undermine.

So a devolved active welfare system needs to be managed by Government within a clear framework where outcomes as well as values are prioritised. It needs to step beyond old antiquated caricatures and recognise that the world is not neatly divided into two halves – a public sector built on values and ethics and a private sector, somehow devoid of these attributes, but efficient and responsive.

And we need to move away from a 19th Century view of the voluntary and not-for-profit sector as providers of last resort to a 21st century view where they rightly take their place alongside the public and private sectors as providers of first resort, across the whole range of publicly funded services.

We’re already seeing the voluntary and community sector playing a crucial role in welfare delivery and the recent New Deal competition – which overall broadly maintained the numbers of different providers involved in New Deal delivery – saw the proportion of New Deal providers from the third sector increase from about one fifth to around one third.

But we need to go further and deliver a truly dynamic and effective market where good providers are valued and properly rewarded, whether they come from the public, private or the voluntary not for profit sectors. I believe there are five key tests we need to meet to achieve this.

First – we need to get the right incentives – to attract the best providers, from all sectors, and incentivise them to deliver outcomes that reflect our social objectives – with the support to innovate and an incentive structure that rewards providers for helping more difficult cases and which reflects our ambition not simply to help people move into work but to help them stay there.

Second – we need to give providers the flexibility they need to forge new cross-sector partnerships; breaking down the barriers of short-term stop-go contracts that too often stifle innovation and prevent new potential providers from entering the market; and synchronising tendering timetables to allow greater flexibility over the bidding process – including, for example, enabling providers to bid for larger contracts with clusters of districts.

Third – we need clearly defined, robust mechanisms for monitoring performance, which enable us to regulate quality with clear sanctions and rewards, while recognising the power of the consumer and avoiding the temptation to micro-manage from the centre and inadvertently obstruct local innovation.

Fourth – providers need clear information over what’s expected of them and when. And they need confidence in the transparency of the procurement decision making process with a much stronger sense of co-ordination across Government and its agencies contracting with this market.

And the fifth and final test is around the delivery of personalised outcomes – and the extent to which we can embed a new degree of personalisation into welfare delivery – with ever greater tailoring to the specific needs of individuals and an ever greater range of tools with which to help people.

I want to achieve more consistent, standardised and ultimately simplified procurement processes in the DWP; better forward planning and communication of changing Jobcentre Plus requirements; and more effective use of management information to help improve provider performance – including exploring a version of the provider “Star Rating” system such as that currently used in Australia, where high-performing providers are clearly identified and benefit from a simpler contracting process. I know the demands we make of our providers are more diverse than those in Australia – so we can’t simply transfer a system from country to another. But the key point is that we have to find an appropriate way to take unnecessary bureaucracy out of the contracting system, while maintaining a level playing field that is open to new players.

We’re also keen to ensure that output-focussed payment systems are designed in such a way as to ensure that smaller organisations also have a chance to compete. We want our competitive tendering processes to deliver the best possible local delivery systems – so we need to get the balance right between providing the flexibility that allows large-scale providers to enter the market and to pitch for large contracts with clusters of districts – with the need to ensure that smaller providers with specialised programmes or local expertise can also compete on a level playing field.

This is particularly important if we are to ensure that voluntary and community based providers in the third sector are fully able to play their part in this new partnership to tackle worklessness and poverty in some of our most deprived areas.

Voluntary and not-for-profit providers are not looking for special favours – they just want the ability to compete fairly and not to make a loss. If we fail to ensure a level playing field, we deny ourselves the commitment and contribution of some of the best and most innovative providers who I believe have a crucial role to play in enabling us to meet our social justice goals.

That’s why, over the summer, as part of a wider examination of the welfare to work market, I have asked my Department to carry out a specific review to ensure the competitive neutrality of the welfare to work market – so that as we take forward the modernisation of welfare delivery – we do so with a level playing field.

It shouldn’t matter whether a provider comes from the public, private or voluntary sector. That isn’t the issue anymore. What matters is the service they provide, the values they communicate and reflect, and the difference they can make to the lives of their customers.

The times we live in will require from us a very different approach to welfare from the one pioneered by Atlee and Beveridge in the post-war period. But it’s underpinned by the same values and the same ambitions. To provide opportunity as well as security; to promote full employment and the right to work. To enhance personal responsibility – not undermine it. And by creating a mixed economy of welfare provision and bringing together the public, private and voluntary sector in a new mission to transform some of Britain’s most disadvantaged communities, we are setting out a modern vision of welfare of which William Beveridge and generations of progressive politicians that have gone before us, would, I hope, have been fully able to support.

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the Joseph Rowntree Foundation on 6th July 2006.

I’m grateful to Ann and Donald for the opportunity to join you today. I very much welcome this report. It is a comprehensive analysis of the issues. It highlights, rightly, the important progress we have made. But, as we have seen, it also makes clear the scale of the challenge we face if we are to meet our historic goal of eliminating child poverty by 2020.

As a Government we remain absolutely committed to this goal – and we are ready to meet it.

That is why I have made tackling child poverty my Department’s number one priority. We’re already reviewing the work of the entire Department – to assess what more we can do. And last week we appointed Lisa Harker to advise us as we work towards a renewed strategy this Autumn.

Child poverty is the principal determinant of life chances. Children born into poverty are more likely to die prematurely. They are less likely to attend school regularly – or get qualifications and go to college; more likely to be forced into the worst jobs – if any job at all; and more likely both to be victims of crime and to offend themselves.

When in 1999 this Government made the decision that it would act to end child poverty in a generation – we were not simply responding to an obvious moral imperative to act – though this was clear. We were also seeking to address the huge social and economic cost of poverty to our society. Social mobility – the opportunity to progress – to have the chance to be all you can be – must be the hallmark of any decent society. If this is true then poverty is its number one enemy. The social and economic exclusion that poverty inevitably generates undermine our society and can fuel an endless cycle of deprivation. As Joseph Rowntree Foundation research has suggested, one million children growing up poor, on average, could produce an additional 120,000 poor children in the next generation.

I believe there are five key areas where we need to make more rapid progress.

Firstly, to further improve the targeting and tailoring of our employment support – to help all those who can work do so – whether someone is a lone parent or in a couple.

Secondly, to provide the right financial support – balancing incentives to move into work with support for those who can’t.

Thirdly, to renew our cross-Government drive against social exclusion – with public services that offer ever greater choice and flexibility to meet individuals’ needs.

Fourthly, to tackle in-work poverty, with better skills and progression in the workplace and a renewed strategy to support partners of those in work.

And fifthly, to ensure that our reforms to the Child Support system have the greatest possible impact on our child poverty ambitions.

I’d like to say just a few words about each.

First and foremost, if we are to achieve a lasting reduction in child poverty we need to ensure that, whereever possible, people have the opportunity to work, so they can provide for themselves. This is the fundamental premise on which the Welfare State was built – and it’s underpinned our welfare reforms – from the New Deal and Jobcentre Plus – to the Welfare Reform Bill introduced to Parliament earlier this week. It was right then. It is the right way now for us to proceed.

Since 1997, the number of children living in workless households has fallen by over 370,000, yet the UK still has the highest proportion of all children living in workless families anywhere in Europe.

Our Welfare Reforms offer new opportunities to turn this around. Underpinned by the extension of Pathways to Work nationwide, they offer new and ever more tailored support to help Incapacity Benefit recipients return to work – and a measured increase in obligations on lone parents to talk to a personal adviser about the options open to them; to be actively engaged in the process of returning to work.

Children of lone parents not in work are over five times more likely to be in poverty than children of lone parents in full-time employment. If we can reach our 70% employment aspiration it will mean a further 200,000 children lifted out of poverty. So we must monitor the effectiveness of our lone parent interventions and potentially consider further support and incentives to help get more lone parents into work.

We also need to go further in modernising our welfare delivery – which is why our Cities Strategy will improve the tailoring of employment support – by empowering local communities and rewarding local providers who are successful in helping people move off benefit and into work.

We’ve developed a new child poverty proofing tool which we are using to assess and maximise the impact all our existing and future policies have on child poverty. But that is just the start. If we are serious about ultimately eradicating child poverty, we must be prepared to take the necessary decisions that allow faster progress to be made. That is why we want to make the welfare state better targeted at helping families with children in the years ahead. I have asked the Welfare Reform Minister, Jim Murphy, to explore whether and how we can refocus our employment programmes, as well as the delivery of our future reforms, so they make helping parents back into work their number one priority.

The second key area is financial support. Today’s report analysed the cost and effectiveness of increases in benefits and tax credits.

We will always consider raising benefit levels where it is appropriate and affordable to do so.

But even increasing benefits in line with average earnings will do little to help families escape poverty, if median income is increasing at roughly the same rate.

At the heart of our strategy must be an integrated approach that balances incentives to move into work with support for those who can’t. And the DWP is working closely with the Treasury to keep this balance under continuous review.

This is particularly important in supporting the transition into work – where we know, for example, that part-time work is often enough to lift most lone parents out of poverty.

And it means we also need good quality childcare – building on our investment in Surestart and early years education, to deliver universal, affordable childcare for 3 to 14 year olds by 2010.

Thirdly – we need a joined up cross-Government approach – working with the new Taskforce set up by Hilary Armstrong – in a new drive to tackle every facet of social exclusion in our communities – from poor health and education to crime and anti-social behaviour.

Many of the parents of 2020 are still at school. By 2020, it’s estimated that we’ll need 14 million highly skilled workers instead of 9 million today – and we’ll only need 600,000 unskilled jobs – compared with 3.4 million today. If we want the parents of 2020 to bring their children up free from poverty – it’s critical that we get skills and education right now – as we are doing with our programme of investment and reform for schools and colleges; and with the Leitch Review – which will be so important.

Fourthly, education and skills must also be a key part of tackling in-work poverty. Around half of the children living in poverty in Britain today live in a household where an adult is already in work. These are largely couple families who do not work enough hours or earn enough to escape poverty. We must not allow these families to slip through the net. They must receive equal attention as lone parents.

So helping the in-work poor means that we must look at new ways of encouraging second earners into work; continue to ensure that work pays, and do more to improve skills and progression in the labour market. In all of these areas I hope the DWP will be able to do more.

This could include looking at ways in which we can shift the focus of the welfare system towards the family as a whole – with new support for partners added onto pre-existing programmes.

And we need to look at improving awareness and understanding of available benefits such that, for example, more people realise that Housing Benefit and Council Tax Benefit can be claimed in work, where recent evidence has shown this would strengthen incentives to seek employment.

And, as we take forward the Leitch Skills Review, which I mentioned earlier, we must work more closely with employers in developing initiatives like Train to Gain which enables low skilled people in employment the opportunity of in-work training.

Fifthly – child support. International evidence shows that child support income can make a substantial difference to child poverty rates. Joseph Rowntree Foundation analysis published today estimates that in 2000 child support payments reduced child poverty by 10-15% in Italy, Poland, Norway, Belgium and Luxembourg – and by as much as 25% in Switzerland and Austria. By contrast, child support was making one of the smallest contributions to tackling child poverty in the UK – a mere 3%.

The CSA Operational Improvement Plan has the potential to lift maybe 30,000 to 40,000 more children out of poverty by 2010. But it’s clear that our current child support system is a barrier to our efforts in tackling child poverty. The recent NAO report makes this absolutely clear. So this must change. Tackling child poverty will be the first and most critical test that the recommendations in Sir David Henshaw’s report must pass.

Seven years on from setting the target of eradicating child poverty within a generation, we remain absolutely committed to our goal – and we welcome the consensus of ambition now also shared by others across the political spectrum. The debate must now be about the means to get there. Eliminating child poverty can not merely be an aspiration. It must be a clear commitment. And I believe that if we can address the five key areas I’ve outlined today, we’ll be able to make real and sustained progress in ending child poverty in a generation.

As Bill Clinton said: Intelligence is equally distributed between people wherever they are born – but the opportunity to succeed is not.

To put that right would be the greatest achievement of modern progressive politics. To aspire to anything less would be unacceptable. To deliver anything less – equally so.

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to Parliament on 24th July 2006.

Mr Speaker, with permission, I should like to make a Statement on the Government’s plans for the reform of the child support system.

Mr Speaker, parents – whether they live together or not have a moral as well as legal responsibility to support their children. Relationships end. Responsibilities do not.

Government and society has a clear interest in making sure these responsibilities are honoured. This was the foundation on which the 1991 Child Support Act rested. Mr Speaker I believe these are the right foundations on which to build any future system of child support.

But as we know, and despite the best efforts of its staff, the overall performance of the CSA has fallen well short of expectations. When we came to office the agency cost more to run than it collected in maintenance. And it has been taking longer to process claims than the court arrangements it replaced.

The 2000 Act made important changes – simplifying maintenance calculations, allowing parents with care on benefit to keep up to £10 of any maintenance received. Since 1997 the agency has nearly doubled the number of cases receiving maintenance payments.

But problems have persisted. Only a minority of cases handled by the CSA receive any maintenance. There is a backlog of around 300,000 cases. Debts of over £3 billion have built up with limited prospects of recovery. There is a net cost to the taxpayer of around £200 million per year. And levels of customer service, although they have improved recently, have never reached the standards of quality and consistency the public are entitled to expect.

Mr Speaker, the need for radical overhaul is clear.

I do not, however, believe the continuing problems are a failing of the staff of the Agency – but rather the policy framework and the system they are being asked to run.

That’s why, in February, I asked Sir David Henshaw to redesign our system of child support. He has now presented his recommendations to me. Copies are available in the Vote Office and on my Department’s website – together with the Government’s response.

Sir David has recommended an entirely new system for child support which will be simpler to use and administer, tougher on parents who do not face up to their responsibilities, and make a bigger impact on reducing child poverty while delivering value for money for the taxpayer.

There are four main elements to his recommendations.

Firstly, he believes the system should focus on tackling child poverty by ensuring parents with care keep more of the maintenance owed to them. Sir David recommends that lone parents on benefit should be allowed to keep more maintenance, by significantly increasing the extent to which child maintenance is disregarded in income-related benefits.

Secondly, Sir David believes that a new system should promote greater personal responsibility by ensuring that, wherever possible, we should help parents come to their own financial arrangements for the maintenance of their children. This means reconfiguring advice services to improve the quality and accessibility of information and guidance for parents. Sir David also believes that the government should remove the requirement that parents with care on benefits make an application for child maintenance through the CSA even when there is a perfectly satisfactory private arrangement already in place. And as a first step to getting maintenance flowing to children, Sir David recommends that – with up to a fifth of potential child support cases not having their father’s name on their birth certificate – we should consider the joint registration of births.

Mr Speaker, where parents can’t come to an amicable agreement, parents with care need to have confidence that the enforcement arrangements will be effective. So the third element of Sir David’s recommendations is to introduce new tougher enforcement powers – including the withdrawal of passports and exploring the potential to make better use of existing financial penalties.

Fourthly, Sir David has proposed that there should be a clean break with the past. He believes the delivery of child support requires a fresh start with a new organisation. Sir David believes there should be no automatic conversion of cases from the two existing schemes to the new redesigned system. Instead, parents wishing to use the new system would be able to re-apply. He recommends that there should be a separate residuary body to manage down and enforce old debt. And that we consider how best to give the new organisation the power to charge clients for using the new system.

Mr Speaker, Sir David has consulted widely in producing these recommendations and I am grateful to him for his work – and to all those who have contributed to it.

As Sir David’s report shows, tougher enforcement and a substantially higher disregard could increase the number of children receiving maintenance to 1.75 million, compared with just 1.1 million today. This will also lift many more children out of poverty. And a smaller, more focused agency that deals with significantly fewer cases will deliver better value for the taxpayer with administrative costs substantially lower over the long run.

Although there is still a great deal of detail to be worked through, I think it is right that the Government should signal its view of the way ahead.

Mr Speaker, we have decided to accept these principal recommendations.

We will bring forward legislation at the earliest opportunity to remove the requirement that all parents with care claiming benefit are treated as applying for child maintenance.

We agree with Sir David’s recommendation that there should be a higher disregard. But this must ensure a fair deal for taxpayers and avoid sending any signal that families might be better off apart than together. So we intend to significantly increase the level of the current disregard of £10. Details will be confirmed later this year.

Both of these changes will help more families receive more maintenance, and reduce the risk of child poverty. They fully reflect both the rights of children to be properly maintained by their parents and the right of society to ensure that parental responsibilities are properly discharged.

We also agree that the delivery of child support requires a fresh start. We will therefore create a new organisation to replace the CSA. And we will strengthen enforcement powers.

But we will go further. We intend to seek legislation to strengthen the powers available to the Agency to recover maintenance from those who repeatedly fail to pay, including through the imposition of curfews as well as the suspension of passports. We will explore publicising successful prosecutions including the feasibility of naming those so prosecuted. And we will continue the CSA’s current Operational Improvement Plan, which is already improving our capacity to trace people who owe maintenance and which should see the Child Support Agency collecting a further £250 million in unpaid maintenance.

Mr Speaker, there is a great deal of detail in Sir David’s report that should now properly be the subject of fuller consultation and debate. In particular, we want to consult on:

The best way to allow existing claimants to either move to private arrangements or make a claim to the new system. We must ensure that where people currently receive maintenance through the CSA – they continue to do so, if they wish to, under the new system without disrupting the payment of child maintenance;

– how best to deal with the legacy of debt that is left, protecting both the interests of families and the taxpayer;

– the appropriate role for the courts in this new approach;

– how we can improve parental responsibility from birth – including the possibility of compulsory registration for fathers;

– how we can further simplify and improve the current assessment, collection and enforcement processes;

– the details of a new charging regime.

In advance of legislation, I intend to publish a White paper later this year which will set out in greater detail the way forward in all of these areas. In the meantime, I have asked Sir David to report to me on the policy and implementation issues that arise from his first report.

Mr Speaker, during this process of change the staff of the Agency are entitled to expect the full support of my Department. They will have it. In particular, we will do all we can to help and support staff through the transition to the new organisation and in their efforts to ensure that children and families receive the maintenance to which they are entitled.

The original proposals for child support had a wide and broad measure of support. But this consensus over aims was never translated into a consensus over means. We must not repeat the same mistake. That is why I want the new arrangements that must now be established to command the broadest possible measure of agreement.

There is a clear sense, both in this House and outside, that our system of child support needs radical change. It must offer better value for money for the taxpayer. It should enforce the rights of children and the responsibilities of parents more successfully. It must ensure that families and children in particular do not slide into poverty when parents split up.

Mr Speaker, I believe the proposals I have set out today can help us better achieve these vitally important objectives and that is why I commend this statement to the House.

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, on 15th September 2006.

This week the Government set out its plans to go further in tackling social exclusion and poverty in Britain, with a strong focus on tackling the remaining barriers that hold people back in our society. So this is a good time to reflect on welfare reform and its impact on families over the past decade.

Before Tony Blair became leader of the Labour Party, there was in truth, no real debate about welfare reform. Quite the opposite. In the 1980s, welfare [reform] policy was driven by an unrestrained ideological impulse to cut benefits; to moralise about people’s lifestyles and stigmatise those who did not conform to a narrow definition of the family.

The effects of this approach were stark. The number of children living in poverty doubled. The number of people claiming lone parent or incapacity benefits trebled. Twice in a decade, the numbers of people unemployed exceeded three million. Youth unemployment was a scandal. There was little help or support on offer to ensure people could get back on their feet quickly again, if they hit hard times. Our welfare state was failing.

Things are different now. The New Deal has helped hundreds of thousands of unemployed people get back to work. We have a clear set of rights and responsibilities. People have a ladder of opportunity, but we expect them to take the first step on it. The National Minimum Wage and tax credits have helped make work pay so that people are better off in work than on benefit, helping parents get jobs and lifting hundreds of thousands of children out of poverty. Thanks to the Pension Credit, pensioners are now less likely to be poor than any other group in society. There are more lone parents now in work than ever before. Today the numbers on Incapacity Benefit are falling not rising.

All of these reforms have been guided by our values. As a Government we have tried to make tackling poverty, extending opportunity, and fairness, the key goals of our welfare reforms.

My argument today however, in noting the progress we have undoubtedly made, is not to claim that every problem has been solved. It hasn’t, and people know this. Instead, I want to set out my view that the centre-left in Britain should see support for the family in tackling these problems as being absolutely critical to our prospects of making further progress.

For government, I believe that supporting strong family life is one of the most critical policy challenges of the next decade.

But this support needs to be built on an understanding of the changing nature of family life in Britain.

In 1950, the number of marriages each year in the UK stood at 408,000. Over the next 20 years it increased to more than 480,000 a year. But since then it has fallen by almost half.

Despite a recent fall, the rate of divorce has increased significantly. Of all the marriages ending in the 1950s – around a tenth ended in divorce. Now it’s over two-fifths. Today, the average marriage in the UK lasts for 11 years. And, as longevity increases, it is not unreasonable to assume that many people will have two or three stable relationships through the course of their lives. Co-habitation has increased dramatically over the last twenty years – from around a tenth to around a quarter of non-married men and women under 60 in Great Britain.

And those who do marry are doing so much later: In 1970 the median age of marriage in England and Wales was 24 for men and 22 for women. Today it’s over 32 for men and over 30 for women.

Perhaps most strikingly, statistics show that three times as many people are now living in a lone parent household than in 1971.

The question today is how Government should respond to these changes; how we can support strong and stable families as part of our drive against poverty.

The Government has introduced new rights to request flexible working; a major extension of paid maternity and paternity leave; funded over half a million new childcare places. These reforms are making a real difference. Today we have more people in work than ever before. The lone parent employment rate has risen by 11 percentage points. We now have the lowest combination of unemployment and inactivity of any G7 country. There are 800,000 fewer children in relative poverty. 2 million fewer pensioners in absolute poverty. And 80% of the population have seen a reduction in income inequality.

But there is clearly a lot more that we need to do if we are to reach our goal to halve child poverty by 2010 and eradicate it by 2020.

Children of lone parents not in work are over five times more likely to be in poverty than children of lone parents in full time employment. Work is the best and most sustainable route out of poverty. If we are to end the cycle of intergenerational poverty then we need to accelerate our commitment to supporting lone parents to get into work and progress through the labour market.

Despite the gains we have made in lone parent employment, lone parents are still far less likely to be in work than married or cohabiting women with children the same age. And the employment rate for lone parents is still far below that in other countries, including Sweden, USA, France and Germany.

This is why we have set a target to increase lone parent employment to 70% by 2010. If we can reach this target it will mean a further 200,000 children lifted out of poverty. Our welfare reforms offer new opportunities to turn this around – with a measured increase in obligations on lone parents to talk to a personal adviser about the options open to them. But we may need to consider further support and incentives to get more lone parents into work as part of our child poverty strategy.

But part of our approach as a Government must also involve helping women to balance the pressures of work and family.

Just this week Ruth Kelly set out the Government’s action plan in response to the Women in Work Commission. The proposals represent a clear commitment to support mothers who want to get on at work but often find it difficult to overcome outdated thinking on the type and hours of work mothers should do.

This focus on work and families will be critical to the success of future welfare reform, for one compelling reason – the welfare state provides critical support for millions of families every day, at critical times in their lives. I grew up in one such family. Yet, we always need to remember that the majority of welfare support in Britain is, and has always been, provided by families, not the state.

The family is the bedrock of the welfare state. It is the family which cares for the new born, raises children, instils a sense values, coaxes and encourages children to learn and thrive. It is the extended family – grandparents, aunts, uncles, godparents and family friends – who play a crucial caring role. A role which the State should never seek to substitute but which it should rightly seek to complement. In my constituency I see grandparents looking after their grandchildren so that their sons and daughters can go to work. Without this help and support, many of them couldn’t do this. The value of informal care in our economy is estimated to be over £20bn per annum. And as we live longer it is our children who will often provide the support and care that parents need in their old age – at least that’s what I’ve told mine. This has always been a core principle of the welfare state.

Beveridge himself made it clear in his White Paper on the Welfare State in 1944, that

“…in establishing a national minimum, the State should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family.”

Recent trends have increased the pressure on family life. There is the pace and shape of the modern work place. The extended family has been stretched as people move from one end of the country to the other – if not abroad – to work and develop their career and lives. Modern family life can be a struggle. It is not easy. It can sometimes feel oppressive and daunting. As a Government we can never listen enough to families. We have to find the right way in which we can support parents as they try to ensure their children get the best opportunities in life but are protected from the dangers and the pressures of the modern world. For all of us who are privileged enough to be parents, bringing up a child is the single most important thing that we will do in our lives.

And yet despite this, the left has felt uncomfortable talking about the family. I recognise that this is difficult territory for progressive politicians. Few of us can claim to be moral beacons for others.

Since coming to office the Government has responded to the change in family structure. We have advanced equal rights legislation through measures such as civil partnerships for same sex couples. And we have changed the welfare state so it focuses on expanding opportunity and unlocking aspiration rather than the old approach of stigmatising lone parents and increasing benefit dependency.

We must also recognise how tough it can be to raise children alone. Anyone who tells you that being a lone parent is easy, or that being on benefits equates to affluence just doesn’t know what they are talking about. My mother brought me and my four brothers and sisters up for eight years on her own. We experienced hard times as a family. For most parents, lone parenthood is not a deliberate choice at all and for many it brings powerful emotions of regret, guilt and real hardship.

What is critical is that even when relationships end, society is clear that responsibilities do not. Parents must continue to play a part in their child’s life. Part of the role for Government is to reflect society’s view that both parents should take active responsibility for the welfare of their child from conception. Children whose fathers continue to take an active role in their lives are likely to have better outcomes even if they don’t live with the child’s mother.

I believe we should do what is necessary to create a clear sense of personal responsibility about the contribution that both parents should make to the welfare of their child. That’s why I made personal responsibility a central theme of the child support reforms in July.

It is why I am examining the potential benefits of introducing a system of compulsory registration of births for both the father and the mother. Seven percent of births in the UK are registered to only one parent. In Australia, where the comparable figure is three per cent, they have a compulsory system of birth registrations with safeguards for mothers who are at risk of violence. I believe it is right that we should consider how we can send the strongest possible signal that part of the process of becoming a parent must always mean acknowledging the responsibilities that go with it.

But alongside this, we cannot ignore the increasing evidence that points to the benefits for children of a stable family life with two parents living together. For example, children from separated families are more likely to have no qualifications than those from families with two parents living together. Children from separated families are less likely by the age of 23 to have obtained a University degree. And not only are children in lone parent families more likely to be living in poverty at any one point in time – but they have a consistently lower probability of moving out of poverty.

In my lifetime, the debate about the family has been dominated by two very different views. The traditionalists clung – and still do – to a limited view of the family that flies in the face of the enormous social and cultural changes that have occurred in our society. This outlook was largely based on a narrow prescriptive interpretation about the role of women in society and the illegitimacy of same sex relationships. Then there was the 1960s liberalism – where, for a while, it seemed like anything goes. There should be no going back to either. We need to forge a progressive consensus about support for the family.

Our principal challenge is to develop the best way of ensuring our welfare society helps support families combine the opportunity to work with the opportunity to care.

These are, of course, difficult issues to deal with. How far can and should the state intrude into private family life? And given the limitations on the ability of Government to influence the personal decisions people make about their own relationships, what more support should we give couples to help them stay together given the challenges and pressures of modern life? How should we balance people’s freedom to live their lives as they choose with the need to ensure the welfare of children? What more can we do for carers?

Our views on all of these issues have already evolved in Government. In 1997 I doubt we would have proposed parenting programmes or earlier intervention in families where we think problems might develop; or the sort of pioneering work that Louise Casey has led to confront anti-social behaviour and the responsibility that families, communities and society has to deal with the problem. But the evidence suggests that this is exactly what is needed if we are to tackle the cycle of deprivation – which is why we proposed these measures in the social exclusion action plan.

Family policy is difficult, complex territory for any politician – not least one from the centre-left. Talking about the family involves taking political flak from every quarter. But if we are to make sustainable reductions in child poverty – on the way to its eradication by 2020, these are questions we cannot afford to ignore. We will need fresh approaches. Ones that recognise – as the Joseph Rowntree Foundation did in July – that we can not tackle child poverty through benefits or income transfers alone.

So what more can we do to help parents work, particularly in households where only one person is in employment? 40% of poor children live in these households. And how can a greater opportunity to work – the bedrock of our anti-poverty drive – be balanced with the natural desire of families to care for each other.

We need to look at ways in which we can shift the focus of the welfare system towards the family as a whole – with new support for partners added onto pre-existing programmes. We won’t reach our goal unless Job Centre Plus and its partners can reach these adults.

We must have better signposts to childcare services such as Surestart. All families, whether couple or lone parents, could benefit from a closer relationship between Surestart and Jobcentre Plus. And there is clear evidence that initially disadvantaged children can benefit significantly from good quality pre-school education.

When New Labour was formed, we had the political confidence to break with the past because we realised that our past was not the country’s future. We had the confidence to change. On welfare reform, defence, crime, wealth creation, anti-social behaviour, patriotism – we had the confidence to challenge outdated thinking within our own party. We reclaimed the public policy ground ceded to the right and made it our own.

Now, as we look back on a decade of reform and look forward to the challenges ahead I believe we have to be confident enough to lead the debate about the next steps in welfare reform. And there is no doubt in my mind that helping families to work and to care will be the key to success in the future.

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the ILO 2006 Global Compact Policy Dialogue on 6th October 2006.

This conference comes at a critical time in the development of the global economy. All of us are confronted by unparalleled demographic and economic change. Change that is testing the capacity of traditional political, economic and social systems to respond and adapt.

The demographic challenge is immense. In the UK there will soon be more people over 80 than under 5. Over the next 25 years the working age population of the EU will fall by 7% while the population aged 65 and over will increase by over 50%.

The economic challenge is greater than at any time since the industrial revolution. In 2005, the new emerging economies accounted for well over half the increase in global output. As China, India and Russia move towards market capitalism, the global labour force is in effect doubling.

And one of the effects of this shift in demography and global labour market pressures is to create a new phenomenon: ‘transient’ mass migration.

‘Transient’ in the critical sense that compared with previous large scale migration to America at the beginning of the 20th century or the UK in the middle of the 20th century, this early 21st century migration is often characterised by temporary economic opportunism. Yesterday, new official figures found that 2005 saw the largest ever entry of foreign workers to the UK since records began. Since 2004, around 450,000 people have come from A8 accession countries to work in the UK. But rather than bringing their families to settle as many as half of those economic migrants did not stay. They came to work and save money for themselves and their families.

This transient mass migration is also different in a second way – around four-fifths of A8 migrants are coming to the UK to work in relatively low-skilled occupations.

We know that recent migration has had a positive impact on our economy – increasing growth rates by between 0.5% and 1%. And with independent research showing that migrants are contributing more than their share of taxes, migrant workers are making a net contribution to the exchequer.

This transient mass migration partly reflects the strength of the UK economy, the diversity of our labour markets, proximity, cheap travel and critically, the differential in economic opportunity between the countries emerging from the shadow of communism and democratic capitalist economies.

But it brings real challenges too. For active labour market policies and welfare systems. For communities that are experiencing immigration for the first time and encounter new pressures on local services.

So managing this shift in the pattern of migration is one of the most important challenges facing our country as a by-product of the globalisation of the economy and the labour market.

For the indigenous population the impact of this migration can provoke uncertainty and sometimes fear. People are anxious about what this means for their way of life, their future. The fear of losing, of falling behind, is not felt just by those with low skills or no skills. It is felt equally by people who have been through university and gained professional qualifications.

People want security – rightly so. But they know too that our future as a successful economy will depend on our ability to work through these changes, not turn away from them.

In the short term the UK faces important decisions about how to manage this transition within Europe following the granting of accession to two new member states, Bulgaria and Romania.

We will decide our approach to labour market access for these countries soon but it must be based on the principle of managed migration.

Overall, the new level of mass transient migration creates a new challenge for our welfare system and active labour market policies. Over the past two years 13 million people have moved into a new job. 450,000 of these vacancies have been taken up by economic migrants from Eastern Europe. And yet we still have 5 million people on benefits in the UK. My response is not to say we should pull up the drawbridge but it is to ask the question, ‘how can our welfare system become more effective at helping UK citizens to compete in today’s labour market?’

In the UK we’ve set ourselves the long-term aim of an 80% employment rate. As we build on our record investment in the New Deal employment programmes and Jobcentre Plus offices around the country, I believe that our system of support will need to radically adapt to meet the challenges of the modern labour market. Support must become more tailored to individual and local labour market needs. Rights must be matched by new expectations and responsibilities on those who are out of work. This will need to happen if we are to realise our ambition to get a million people off incapacity benefit, one million older people and 300,000 more lone parents into work.

In less than a decade in office we’ve already made real progress. More people in work than ever before. We have reduced the time that the unemployed are spending without work. And the biggest improvements have been in neighbourhoods and cities that started from the poorest position. For the first time in 50 years, we’ve achieved the best combination of high employment, low unemployment and low inactivity anywhere in the G8.

But we have much further to go. We know from the impact of A8 migration that the UK economy is able to create and support increasing numbers of low-skilled jobs. The vast majority of A8 migrants are young, single and working full time – mostly in administration, hospitality, agriculture, manufacturing and food processing – many are in what are seen as traditionally “hard to fill” jobs. The key question remains: Why are these jobs so hard to fill? What are the barriers that mean some UK nationals are on benefits rather than taking-up low-skill jobs?

Let me just touch on two things.

Firstly, inactivity. We know that far too many people on benefits have been inactive and detached from the labour market for some time. For too long society asked little of them and offered even less in support. We have to challenge and break the cycle of dependency and despondency by spreading opportunity and aspiration to the millions left behind. That’s why we are investing hundreds of millions of pounds in a new tailored support programme called ‘Pathways to Work’ for the 2.7 million people who still claim incapacity benefit in the UK. It is about renewing a sense of hope and opportunity for those who have been written off by the welfare system for years.

Secondly, in-work support. Not withstanding levels of inactivity or geographical immobility, it is clear that there are some low-skilled jobs at the minimum wage which UK nationals are simply not prepared to do – even when the rewards of work are financially greater than the benefits they otherwise receive.

A low-skilled job with no prospect of training or support offers little hope for that individual to develop. It’s clear that for many this isn’t enough. That other non-financial factors are also important. The attractiveness of the job; the duration of the work or the opportunities that might follow from it.

Through Jobcentre Plus and our wider welfare to work strategy – we have invested heavily in helping people find work. But it’s clear that our future success will hinge not just on getting people into work – but on supporting them to stay in work and to acquire the skills, confidence and ambition to progress though the workplace. This is the new challenge for welfare. Getting people into work is only the start. Keeping them in work and helping them to progress through the labour market must be our objectives.

I said at the start that the global forces of economic and demographic change are creating great challenges for our societies. But they also bring the promise of great opportunity.

As Employment Ministers gather for the G8 in Russia next week, there is a clear path that we must follow. We can not retreat from these global forces; look backwards; try to preserve the status quo; or close our minds to change. We must instead look forwards, embrace these changes and with it lay the foundations for ever greater prosperity. I believe our policy objectives should be clear – decent work for all and an end to poverty. Both are possible. But they will only happen if we embrace these changes. It won’t happen simply if we leave it all to chance.

If we can rise to this challenge; if we can embrace the strong product market competition that will open new and better jobs; if we can break down the barriers that prevent people from participating in the labour market; and support people to progress through the workplace; Then I truly believe we can transform employment opportunities for many who were previously excluded and take a major step towards our ultimate ambition of true social justice for our people.

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the CBI/Real Finance Human Capital Awards on 19th October 2006.

I’m grateful to the CBI and Real Finance Magazine for the opportunity to join you this evening and to offer my support for these – the inaugural – Human Capital Awards.

The calibre of nominations and breadth of organisations supporting these awards tonight, show clearly just how important good people management is to Britain’s top companies. Important, because investing in people leads directly to tangible results for business. To higher productivity. Better performance. More employment. More wealth creation.

As a nation, our future economic competitiveness rests crucially on the productivity of our workforce. Government and business have a shared ambition to ensure our people have the skills and aptitude needed for British business to thrive in the face of increasing global competition. For British workers to be able to compete in a truly global labour market.

Emerging economies accounted for well over half the increase in global output last year. Twenty years ago they produced just 10% of manufactured goods – by 2020 it will be 50%.

As China, India and the former Soviet Union are making significant strides towards a market economy, the global labour force has in effect doubled.

All these changes bring new challenges for our economy and society; for business and for Government. They prompt new questions about how our businesses can adapt; and the best way to help UK citizens compete successfully in today’s labour market.

The Government has asked Lord Leitch to report later this year on the UK’s optimal skills mix to maximise economic growth, productivity and social justice.

In his preliminary report last year, he found that 20% of the productivity gap with our competitors can be explained by poor skills. And that tackling low skills, by upskilling an additional 3.5 million adults, could deliver an average annual net benefit of 0.3% of GDP.

We know that a lack of skills can be a significant barrier to employment. But we also know that the lack of skills alone is not preventing people from getting jobs. Around 1 million low qualified people flow onto Jobseeker’s Allowance every year, of whom about 400,000 leave the benefit within the first 13 weeks of their claim. Additionally, each year around 470,000 low-skilled people move from inactivity to employment. But within three months of getting a job, over a fifth of all these people moving into work return to benefit.

In fact, 70% of all new Jobseeker’s Allowance claims are made by people who have claimed before. Of these, nearly a quarter have no qualifications and 1 in 6 report literacy or numeracy problems. Of course, many of those returning to JSA do so only briefly – they are simply moving between jobs – a sign of a healthy and diverse labour market. But about half of those repeat claimants are spending more time on benefit than in work. So there’s clear evidence that many low-skilled workers are having difficulty in sustaining employment.

Through Jobcentre Plus and our wider welfare to work strategy – we have invested heavily in helping people find work. But it’s clear that our future success will hinge not simply on getting people into work – it will depend on supporting them to stay there. In today’s labour market, the typical worker changes jobs seven times during a working life. We need to make sure that our welfare delivery system doesn’t pull up the drawbridge of support too quickly. Too often we think the job is done as soon as someone has entered the labour market. But helping individuals to acquire the skills, confidence and ambition to progress through the workplace has to be a core ambition of a dynamic welfare system. This is the new challenge. Getting people into work is only the start. Keeping them in work and helping them to progress though the labour market must be our objective as a Government that believes in promoting social mobility and ending poverty.

Achieving this, I believe, requires a new approach to skills. One that seeks a much closer alignment between skills and employment needs. That’s based on a simpler, clearer and more coherent system of delivery – that meets the needs of both businesses and individuals.

Emerging evidence around the impact of adult learning on employment chances suggests that the most effective provision is a package of support involving work experience or labour market contact – that is individually tailored and geared towards local opportunities.

As we are reforming delivery in health and education, with a clearer more explicit link between funding and the patient or pupil, I believe we need to empower individuals and employers to take responsibility for driving demand in the system and shaping their skills needs. Skills provision must be focused on our economic mission. A demand led system of learning which provides employers with the skills their employees need. That enables employers to be competitive a world market and individuals to get jobs and stay in jobs – meeting individual need at the right point in time.

As we consider the future of skills and employment support in the UK, I believe that it must be based on two characteristics.

First, future provision must involve a more integrated employment and skills gateway for customers. Focussed on the needs of the individual and equipped to broker the right opportunities to help people get into and progress through the labour market.

Second, the creation of a more responsive and integrated system of skills and employment support must be based on a more dynamic market in the provision of skills. We cannot expect business in our economy to compete effectively in ever-more intense domestic, European and global markets, if the market for skills provision is not dynamic and competitive. And it is clear from Sandy Leitch’s first report, that with only 2% of discretionary employer skills spending going to FE colleges, the Government was right to publish its recent White Paper on raising skills in Further Education – which set out the role of further education, its economic mission and the need to be much more responsive to both employers and individuals.

But all of this hinges on the alignment between skills and employment needs. On the way Government understands employer needs and the dynamics of a competitive economy. And the way employers invest in their people.

We know that workplace learning increases average job tenure with a consistent and significant impact on earnings and productivity – and more so than adult learning or Government provided training programmes.

Too often in the past, HR has been left to exist in a separate bubble. It’s been about processes; organising terms and conditions; supporting integration or restructuring programmes. The message coming from these awards tonight is clear. Business must burst that old HR bubble – and fully integrate investment in people at the heart of its corporate objectives.

In-work training is heavily skewed towards those who already have qualifications. Government has to ensure that workers have a minimum level of competency. We need to build on demand-led programmes like our Adult Learning Option pilot which offers benefit recipients access to training courses focused on local labour market needs. And the Train to Gain service which supports employers in identifying the skills needs of their businesses, matching this with available provision and contributing to the costs of training to help many previously unqualified workers to develop and progress into more sustainable, productive employment.

Like all developed countries in today’s ever more global market place, the UK faces a skills challenge. But crucially, I believe, it’s also an employment challenge. One that our flexible and dynamic labour market is well placed to meet.

If Government can shape skills support so it is focused on business and employment needs; And if our businesses can build on the best practice that we will see showcased tonight; Then I believe we can look forward with confidence to a Britain of ever greater prosperity. Where British business can not only compete but thrive in the world marketplace. And where we can combine a strong economy with a fair society, and in the process, help British companies not only meet the challenge of globalisation, but prosper from it.