Draft Speech : Towards Full Employment

Anne Mc Guire, Minister for Disabled People, DWP

SPEECH AT IPPR NORTH EVENT TOWARDS FULL EMPLOYMENT. (Anne Mc Guire delivered speech planned by Margaret Hodge due to illness) check on delivery

First of thank you for the kind invitation to Margaret Hodge to contribute to today’s discussions. I hope that as well as setting out our ambitions as a department and a government, it will also afford an opportunity to both myself and minister and our officials to learn from your own experiences and specifically from the findings of the report that is the focus of today’s event – Towards Full Employment: tackling economic inactivity. As a MP from Scotland, I know that our two areas share much common industrial history and many of the challenges facing individuals and communities and we have come to terms with the demise of the great basic industries such as mining, shipbuilding and iron and steel.

Can I say that the analysis highlighted in the report is already being assimilated into our thinking I have to admit that I have not read every word of it but my officials in the North East and DWP in London were very impressed by its quality and are already looking at the main themes highlighted. I also wish to assure you that we will also take full account of the thoughtful policy conclusions that you have set out.

The importance of a view from the North East has a relevance and importance that is both historical and current.

 Historical because of the resonance of the 1930s and the Jarrow March when mass unemployment blighted not only society but also the economy and lives of individuals. When people were marching for jobs and not for benefits.  Current because the North East will be one of the regions that has the most to gain if we achieve our long term aim of an 80% employment rate. To make the scourge of worklessness history. We are committed to gathering views from across the country, tomorrow David Blunkett, myself and other DWP Ministers will be in the North East and Newcastle to listen and learn.

I would like to take as the basis of my speech one of the key themes set out in your report. Economic efficiency combined with social justice.

 Economic efficiency to deliver the jobs and to provide the opportunities for employment.  Social justice to ensure that everyone has a fair chance of taking up the jobs and to deliver enough people to take up the jobs.

The two are inextricably linked. Without enough jobs there won’t be enough opportunities to deliver the social goal of full employment. Without enough people ready and able to take up the jobs the economic aim of high growth and low inflation may not be achieved. And without either, individuals and their families will be dependent on welfare rather than independent. with opportunities to contribute to the common wealth.

So we need to be both soft-hearted but hard-nosed about this. And to achieve an employment rate of equivalent to 80% I think we do need to be quite tough. At just under 75% we already have one of the highest employment rates in the world. Already higher than every single one of the 7 major industrialised countries. Already miles higher than our European competitors.

To raise the rate to 80% is an enormous challenge. If we achieve it, it is likely that we will have the highest rate in the world of those in employment, with the exception of Iceland. [I’m not quite sure what goes on in Iceland and what they are doing to break that barrier.]

And to achieve it, we must be committed to helping some of the most disadvantaged people in the country. We are talking here about:  1 million fewer people on Incapacity Benefits  300 thousand more lone parents in work  1 million older workers in work

And it will take a lengthy period of welfare reform, lets be under no illusion. As the report points out, we will need to continue to reform inactive benefits – not only Incapacity Benefits but also Lone Parent benefits. And, when we begin to equalise the state pension age from 2010 we will also need to reform the whole benefit system both for women and for men aged 60 to 65.

I am sure that there are some here who doubt our ability, and dare I say commitment, to achieve our aim. To those doubters I say do not under- estimate our determination to improve the lives of the people of this country.

I am prepared to stand on our record. It is not necessary to look into the crystal ball when you can read the book.

The Labour government has proved since 1997 to be a government of economic efficiency and stability. The UK is currently enjoying the longest period of uninterrupted growth in our history. In times past the UK would have been thrown off massively by the vagaries of the Far Eastern crisis, the hedge fund collapse, the bursting of the dot.com bubble. However, during that period the economy has been stable and coped better with the economic slowdown that affected the global economy from 2001.

So far we have managed to avoid boom and bust through sometimes tough but I think correct decisions. But we need to keep on working on it because recessions aren’t just about stockmarkets and statistics or about inflation and interest rates, recessions tear great holes in the lives of individuals and communities. A stable economy is necessary. In some senses it is the best labour market policy that we have. There are 2.3 million more people in work and around 6-7 million people move in and out of jobs each year. But it is not sufficient. It is also necessary to bring people close to this roundabout of jobs and provide the help that they need to get themselves onto the roundabout.

And we need to give the greatest help to the people who need it most. Between 1997 and 2001 the focus was on the claimant unemployment Jobseeker’s Allowance combined with the introduction of the New Deals for Young People and adults combined with robust economic growth and this all led to a major improvement – particularly amongst the long term unemployed – across the country and here in the North East.

But, even before 2001, there were signs of improvement amongst lone parents and those on incapacity benefits. For decades the numbers rose dramatically. In order to get the numbers down the first task was to stop them going up. Largely through a reduction in the numbers joining the benefits the numbers on lone parent benefits began to fall and nationally the rises in Incapacity Benefits slowed dramatically.

By 2001 having largely dealt with the long term unemployed and found out what works in welfare to work policy the focus shifted. Jobcentre Plus was established in 2001 to provide labour market help and advice to all people on benefits – including those on inactive benefits. This was made possible by the reduction in the costs of failure that we had tackled between 1992 and 2001.

The roll out of the new Jobcentre Plus offices will be finished in the spring next year. In addition, there have been further developments of the New Deals for JSA claimants, Lone Parents and Disabled People and the success of the Pathways to Work pilots for people on Incapacity Benefits.

These changes are beginning to increase the outflow rates from benefits into work. They have been combined with a continued fall in the numbers joining benefits to yield improvements across the board. So, since 1997:-  Unemployment benefits have nearly halved with the biggest improvements amongst the long term unemployed:- o Youth long term claimant unemployment has been virtually eradicated o Total long term unemployed 122 thousand – less than a tenth of the peak of 1.3 millions in 1986  Lone parent benefits are down from around 1 million to just over ¾ million.  Incapacity Benefits now falling – down 29 thousand in the last year – and are now below 2001 levels when Jobcentre Plus was established.

I am sure I don’t need to say to groups such as this, It is important to remember that all of these statistics are people. That for each of them their unemployment or inactivity rate is 100%.

The focus on social justice as well as economic efficiency has meant that the improvements have been greater in the areas that have needed them most. Employment growth amongst lone parents, disabled and older people has been faster than the average.

Similarly, the North East is no longer the region with the lowest employment rate in Britain. And in the North East i the areas with the lowest rates have seen the greatest improvements.

And the improvement in employment has benefited the most disadvantaged in the North East – the people on benefits. The falls in unemployment and lone parent and incapacity benefits have been faster in the North East than elsewhere. In fact, whereas nationally the numbers on IB are now below 2001 levels in the North East they are down below 1997 levels.

Although the improvement has been greater in the North East than elsewhere still has real challenges to face. The starting point in the North East was lower and it is still lower. There are also more people on benefits – particularly Incapacity Benefits. That is why there is a focus on the North East. Gateshead and South Tyneside was one of the first seven Pathways to Work pilots.

That is why we need to lock in the stability of the economy. Our record is good but we need to make it excellent. Recessions do most labour market damage to the most disadvantaged groups and the most disadvantaged areas. The evidence of the last eight years is that stability combined with targeted help has a disproportionate benefit to those in the most disadvantaged areas.

And there is now general agreement about where we should target the help. The problem of worklessness is largely one of inactivity rather than unemployment - people are not looking for work so they cannot find it. And the problem within inactivity is the number of people on inactive benefits – lone parents and particularly Incapacity Benefits.

That is why we need to build up our welfare to work policies in the platform of modern, bright Jobcentre Plus offices where customers are treated with respect. People are looked upon as individuals and Job Centre Plus staff now feel they are working with individuals rather than in the past, policing benefits. The next stage of the process will be another tranche of Pathways pilots. In the North East these will be in Tees Valley, City of Sunderland and County Durham - linking up with the work done in the Northern Way in Easington.

Of course soon we will be taking the next major step on the journey. A Green Paper on Welfare Reform is to be published later this month and then there will be a period of consultation. I hope ippr and colleagues here will contribute on the recommendations and report on their views and suggestions for improvements. While I cannot, of course, set out any of the details but there are a couple of overarching themes that I can mention.

 First, one be proposing to use the benefit system itself to promote return to work activity. The exact details are not available but, will be in line with the rights and responsibilities agenda which are the essential core of our policies – the principle is that people will receive more money if they agree to undertake return to work activity.

 Second, we will build on the evidence of what works in welfare to work policies – particularly in the Pathways to Work pilots to see what the next major developments in this area will be.

How all of this affects the North East? The first thing I would say is that the 80% employment rate is a national long-term aim and there are no explicit regional aspirations. I know there has been criticism of that. The reason for this is that differences within regions are often greater than differences between regions. Chester-Le-Street, for example, already has an employment rate above the national average whereas Easington has one of the lowest employment rates in the country.

Tying an explicit target to each specific area would, we believe, be unhelpful For example, there are people from disadvantaged groups in Chester – Le Street who would benefit from the modernisation of the welfare state that we are driving through.

Rather the definition of full employment in the 21st Century is ‘Employment Opportunities for All’. The welfare to work agenda will make a big difference to this but it is not the only thing. We need to ensure:-

 That the numbers leaving school with no qualifications are minimised.  That the transition from school to further or higher education or work is as smooth as possible for everyone.  That groups in danger of social exclusion – ex-offenders, the homeless, refugees amongst them can be integrated into the world of work.

Finally, I think we should all be concerned that some of the great cities in our country – such as Newcastle, Sunderland, Middlesborough but also Birmingham, Glasgow, Manchester, Liverpool, London – can be the home of so many jobs but have so few residents in work. In particular, whether you think that the interaction between social housing and employment is important.

In summary, I have enjoyed my time in the North East today and learnt a lot. I will need to consider the conclusions of your report and of this seminar and urge you to reply to the consultation on the Green Paper.

There is much that we agree on but some areas where the emphasis is different. I hope that the dialogue at events like this will lead to advances in our knowledge and reductions in our differences.

I hope so. Because the journey towards full employment that we have embarked upon is a long one and we will face some tough issues on the way. But the goal is well worth achieving. And we have found a way that seems to work – economic efficiency combined with social justice.