Work and Pensions Committee 

Oral evidence: Plan for Jobs and employment support, HC 971

Wednesday 26 October 2022

Ordered by the House of Commons to be published on 26 October 2022.

Watch the meeting 

Members present: Sir Stephen Timms (Chair); Siobhan Baillie; Nigel Mills; Selaine Saxby; Dr Ben Spencer; Chris Stephens; and Sir Desmond Swayne.

Questions 41 to 95

Witnesses

I: Jonathan Cribb, Associate Director, Institute for Fiscal Studies; and Louise Murphy, Economist, The Resolution Foundation.

II: Stephen Evans, Chief Executive, Learning and Work Institute; Ben Harrison, Director, The Work Foundation; Dr Eleanor Carter, Research Director, Government Outcomes Lab, Blavatnik School of Government, University of Oxford; and Tony Wilson, Institute Director, Institute for Employment Studies.

Written evidence from witnesses:

• Learning and Work Institute
• The Work Foundation
• Government Outcomes Lab, Blavatnik School of Government, University of Oxford

Examination of witnesses

Jonathan Cribb and Louise Murphy.

Q41            Chair: A warm welcome to everybody for this session of the Work and Pensions Select Committee in our inquiry on the Government’s Plan for Jobs and employment support. A warm welcome to our two witnesses joining us for this first panel. Can I ask each of you very briefly to tell us who you are?

Louise Murphy: Good morning. My name is Louise Murphy and I am an economist at The Resolution Foundation.

Jonathan Cribb: Hi, I am Jonathan Cribb. I am an associate director at the Institute for Fiscal Studies.

Q42            Chair: Welcome to you both. Can I put the first question to you? Economic inactivity has increased since before the pandemic. To what extent do you think this is a result of the various impacts of Covid? Can you tell us where around the country and among which groups of people inactivity has increased the most?

Louise Murphy: I have to say that is right. When we look at the impacts of Covid, when we look at changes in employment now compared to the start of 2020, this rise in economic inactivity is one of the biggest trends we have seen. Thinking first about who these people are, around three-quarters of those who are newly inactive since the start of 2020 are aged 50 and over. That is split, with roughly half those who are still dubbed as working age, in the 50 to 64 age bracket, and then half of those 60 to 65 and above.

Q43            Chair: Sorry—three-quarters of the total increase in inactivity is among the over-50s?

Louise Murphy: That is right, since the start of 2020. When we think about the reasons that people give for being economically inactive, for the older age group we are seeing people retire, choose not to work for retirement reasons. When we are thinking about those in the younger age groups, we are seeing a rise in economic inactivity due to long-term sickness and health problems.

Also among younger age groups we have seen a slight uptick in economic inactivity among those 18 to 24. We are seeing many of those young people become full-time students. If we are thinking of how worrying or not this is, that is the group we are probably least concerned about. It is quite a usual trend when we see economic downturns for more young people to shelter in education and become inactive students rather than being active in the labour market.

Q44            Chair: Anything striking on the geography of where inactivity is?

Louise Murphy: We do not think that geographic trends are very striking. That is certainly not the biggest trend or concern; it is not that there are big pockets. We are seeing quite a few areas of the UK with economic inactivity rising by around three percentage points since the start of the pandemic. That includes places like London and the south-east, but also the north-east and the north-west. It does not seem like there is a big north-south divide or a rich-poor divide. We are seeing some regions with a smaller uptick in inactivity. That includes Scotland and some parts of the Midlands. However, there does not seem to be a big trend based on deprivation, for example.

Jonathan Cribb: I basically agree with everything Louise said. To take the geographical point first as one of the reasons we are touching on, it is striking that this is broad-based. In particular, if we went back a year and there were less concerns about economic inactivity and more concerns about what was happening at the end of furlough, London looked a lot worse hit. Vacancies had not risen as much, more people were furloughed in London and the kind of industries we have, particularly in central London, were worse hit. Therefore there is something interesting going on that Covid directly hit London quite badly, but in terms of job opportunity and inactivity that has not been as concentrated.

I would add a couple of things. To the extent that this is, correctly, a big story about people aged 50-plus, in a number of elements we find this quite broad-based in terms of people flowing out of work and into inactivity to a greater extent than before retirement. It is happening across the public and private sector; it is happening across education groups; it is happening across the country. It is more likely to happen for the self-employed and for part-time workers. In a sense, those groups are already somewhat closer to retirement. In some senses you are closer to retirement if you are part-time than full-time, and the self-employed usually work fewer hours and have more control over their working patterns than someone who is an employee.

Two more points on this older workers thing. First is that we do see increased rates of economic inactivity for reasons of poor health among the 50-plus population. Our analysis suggests that what is happening in the main is that more people are leaving work for retirement and that more retired people who are already out of work are getting sicker and more unwell and labelling themselves as out of work for reasons of sickness. Therefore when you look at the labour force statistics that the ONS put out, you will see high increases in the rate of people out of work because of long-term sickness or disability. Our understanding is that that is not because people are leaving for sickness, but because of this change in the people who are already out of the labour force.

The last thing is that I think it is worth being more concerned about the 50 to 64 year-old group than the 65-plus. Most people 65-plus are above state pension age now, except for those who are actually 65 and therefore have a greater level of support from the state if they are out of work. We expect people to work for less long. The remaining career of a 55 year-old could be a long time. The remaining career for a 69 year-old is unlikely to be very long.

Q45            Chair: Those who are 55-plus, you are saying they have retired and after a bit of time in retirement they then applied for benefits on the grounds of not being well enough to work?

Jonathan Cribb: Not necessarily applied for benefits. The statistics that ONS put out, the national statistics, try to ask people a series of questions to ascertain what is the key reason that they are not working. That is purely self-reported and it is irrespective of the state benefits people are claiming. However, there is good evidence that the population as a whole is getting sicker. That is worrying, frankly. That does seem to be feeding through into more people saying that is the reason they are out of work, even though there is not that evidence that they have left work because of that. It is distinct.

Q46            Chair: You made the point in your evidence to us that people in that group have left work as a kind of lifestyle decision. Do you think some of them are going to find after a while that they have to go back to work for economic reasons? If so, how long before we start seeing them coming back?

Jonathan Cribb: Usually we would say no. Rates of un-retirement, people who return to the labour force after retirement, are extremely low, maybe 5% to 10% of those who retire ever do that. It is basically impossible to predict. We are currently in an inflation situation. The last time was in the 1980s and we have a different structure of the economy, health levels, wealth levels and pension levels. We do not have the evidence to know what is going to happen.

Q47            Selaine Saxby: Good morning. Since the pandemic, on the other side of it, we have seen a substantial increase in job vacancies with the number of vacancies this year reaching record highs, with the ONS suggesting it has peaked at 1.3 million. How have available job opportunities changed since the pandemic in terms of the sector—the quality of job offers and skill levels?

Louise Murphy: As you say, we are seeing record high job vacancies. When we look at the spread of that, by far and away the sector with both the largest number of vacancies and where there has been the biggest change since the start of the pandemic is in health and social care. We are now at a place where the big trend seems to be that there is a big split between public and private sector vacancies.

We are seeing in the most recent data that vacancies in the private sector are starting to drop off, whereas for the public sector in health and in education we are still seeing a high number of vacancies. When we think about that, the natural thing to then consider is pay. What we are seeing outside of the pandemic period is the largest difference between public and private sector pay, of around 4%.

That is an unsustainable gap when you think of how many vacancies there are in health and education. If pay is so much lower than the private sector, it is going to be very hard to attract people into those jobs. Around skills or qualification level, less of a trend there. We are seeing vacancies across different jobs within these industries. The real trend we are seeing is between the private and public sector.

Jonathan Cribb: I can build on that in a way. During the pandemic itself clearly the structure of vacancies was very different to what it was like before the pandemic. We can all imagine why: because of the upset to the economy that we de facto shut down. The interesting thing is that with the exception of some of these public sector industries, the structure of vacancies has basically returned roughly to pre-pandemic composition; there are just more of them. There are more in pretty much every sector. There are a couple of small industries—lorry drivers and things like that—but in the main it does not look like there is a huge rebalancing of the labour market that would mean people need to move between sectors.

Frankly, it is good news that the vacancy rates are beginning to come down. High vacancies and the inability for firms to fill them is inflationary. We would be expecting, as the Bank raises interest rates trying to bring inflation down, that vacancies will come down as well.

Q48            Selaine Saxby: Are there any geographical differences with regard to the spread of the vacancies?

Jonathan Cribb: I think it is more normalised. It certainly was true a year ago, as I touched on earlier, that London had a weaker recovery on that. However, I do not know of any particular things but I could check and write to the Committee. I can double-check that.

Q49            Selaine Saxby: I cannot speak for the rest of the Committee but I would be particularly interested. I am in north Devon. We are at virtually full employment and the vacancy rate we are seeing is not quite the same as you are mentioning so I would be fascinated, thank you.

What do you think is preventing employers from filling these vacancies?

Louise Murphy: A big thing is pay. To begin with, you have to think about that, especially in the public sector. That is the natural starting point. Before you think about things like flexibility, if the pay offer is so much lower than in other sectors that is always going to be a limitation. Then things like flexible working and home working will be having an impact.

ONS has done a survey of older workers who have left the labour market. They have been asked the sort of things that would be important to them if they were to return to work. The top thing is pay, but pretty close to that was flexible working and the ability to work from home. If we think about the types of people we are seeing who are inactive at the moment—older workers and also those with long-term health conditions—it is additionally important to think about employers being flexible and providing reasonable adjustments to make returning to work more attractive.

Jonathan Cribb: The key thing as an economist is: why is pay not going up to attract people into these vacancies? Part of it is public sector rigidity. Public sector employers do not have the same ability to change pay as the private sector has. In some geographical areas—I do not want to say “isolation”—you can have employers that are important for particular areas and more labour could be a long way away geographically.

The other thing is that clearly we have seen a shock to the supply side of the economy in terms of the labour market because of people leaving at older ages, because of more younger people staying in work for longer and because of less immigration into the country during Covid. Some of this is likely to be moving towards a new stable state in which employers are learning about what they have to offer in order to encourage people with the right set of skills or training people into the right set of skills. It is bit of a learning process for employers.

Q50            Selaine Saxby: Is there anything you have picked up with regards to housing? The number one reason given in Devon and Cornwall for not being able to recruit is that we have no housing. I know that might be geographical and might be something to link back to the previous question, but is that something you are picking up? It is the number one issue given by employers locally.

Jonathan Cribb: I can’t say that I have seen national evidence on that, other than the fact that we are seeing, frankly, a shortage of rental properties relative to demand that is pushing up prices of new tenancies. There is some imbalance of supply and demand there that is at least consistent with the story you are telling. However, I cannot tell you there is lots of evidence that nationally that is the key issue.

Selaine Saxby: I would say it is probably regional rather than national.

Jonathan Cribb: Yes.

Q51            Selaine Saxby: Do you think employers have enough access to support and guidance to make these job offers attractive and targeted? Is there more that the DWP could be doing?

Jonathan Cribb: The trouble with offering employers support is to the extent that there is a real problem in the supply side, a benefit for one employer is a loss for another. At the macro level, if we gave support to all employers to hire better, it is not clear that any of them would find it any easier, frankly.

Louise Murphy: I agree with what Jonathan is saying. Part of it is probably a bit of a timing thing. Employers are adjusting to the situation we are in. Maybe some support would help with, that but also I think part of it is maybe that with time employers will get used to the situation we are in.

Q52            Siobhan Baillie: Apologies for lateness. Do you think there is an element that employers are not going to be able to meet the demands of the workforce now? I am all for flexible working, but there is a list of what a lot of people want and need because our lives are so complicated, childcare and all the different things. I believe you are right: employers have not caught up yet. Do you think they can? The working from home demands and all of that, how are we going to get there or can we get there?

Louise Murphy: That is a good point. Obviously it is so dependent on industry. Some jobs just cannot be done from home. Some jobs will need to be done in certain shifts; the timing of the job cannot change. I think you are right to say we should not be a bit lazy when talking about this, it is not that all employers can make every job flexible.

It is maybe thinking about where we do have vacancies, having that thought of what we can do to encourage an older worker, someone with children or someone with health conditions to feel like this is a job they can do. I would say it is probably more like a scale, like you are saying, rather than one or the other.

Jonathan Cribb: The way I see this is that we had a huge change in the way people work. Different employers are adjusting to this over time. It is definitely true that some sections of society—people with young children— are going to benefit massively from the ability to match their home lives and work lives in an easier way. Other groups are still going to want to be in the office or in their place of work to learn, to socialise and things like that.

To that extent, in a sense we are moving slowly towards a world of how employers are going to encourage the right set of people they want to work for them. There is almost like a shifting of who is going to be working in which areas because of different preferences and because of these things, because of the ability to work hybrid or work from home. There needs to be a new match between the different types of workers and employers.

Q53            Siobhan Baillie: The transition is the tricky bit?

Jonathan Cribb: That is fair—it is tricky.

Q54            Chair: Jonathan, I saw in your work that one of the reasons why over-50s have pulled out of work is that they do not like working at home: they want the socialisation of being in an office and if they lose that there is not much point in working.

Jonathan Cribb: There is at least some evidence that is the case. I think it is fair to say that younger people and potentially people closer to retirement age are more likely to want working in-person, whatever workplace that is. That is one of the reasons why it makes it difficult, particularly when you are an employer that does not just hire 21 year-olds and does not just hire 35 year-olds or whatever.

Q55            Chris Stephens: Louise, I will start with you. I have some questions about how effective the DWP’s employment support programmes are—I am thinking Kickstart, Restart and the Work and Health Programme—at helping those furthest from the labour market. How effective are these support programmes and could you also say how you would judge that effectiveness?

Louise Murphy: The first thing to say is that some of these employment support programmes that were introduced during the pandemic—Kickstart, for example—seemed like the right type of support at the time. At the start of the pandemic the widespread view was that we would have huge increases in youth unemployment and so it made sense that the DWP responded by introducing a programme where its main aim was to support young people at risk of long-term unemployment. The feeling is that is not the place we are at now. Youth unemployment is close to record lows. We have very few NEET young people.

I think there is a need for these employment support programmes to adapt specifically to support young people and older people who are economically inactive. One of the main barriers is that by design a lot of these employment support programmes are only offered to people in receipt of Universal Credit, and often only those who are job-seeking and in receipt of Universal Credit. That necessarily limits the pool of people it can support.

Thinking first of all about young people, a lot of young people will choose not to claim Universal Credit if, for example, they are living with parents and do not feel that financial need. Also Kickstart was aimed at those 16 to 24, but the vast majority of 16 and 17 year-olds do not qualify for Universal Credit, again limiting who it can support.

Also, we have been speaking recently about older people: if we are thinking about employment support that is facilitated by DWP through job coaches for those on Universal Credit, a lot of older people—if they have, for example, significant savings or a partner who is earning—again will not quality for Universal Credit so will not be in the pool.

Given the problem we have now, that it is not just unemployment that we are worried about, but economic inactivity, I think there is definitely room for looking at different employment support for those people.

Q56            Chris Stephens: Jonathan, in late June the DWP claimed its Way to Work campaign had met a target of moving 500,000 people into employment from Universal Credit, Intensive Work Search or Jobseeker’s Allowance. However, the Office for Statistics Regulation stated, quite scathingly, there is no clear explanation of how the Way to Work target was defined, how it was measured and the methods used to support the claim. What level of trust do you place on Government claims of that sort, that they have moved 500,000 people in six months into work?

Jonathan Cribb: Let me think about this. My understanding of that particular statistic is that the 500,000 was roughly what you would have expected anyway. Therefore it certainly does not prove that particular policy is being effective. It also does not prove the policy is being ineffective, let me say. Governments of all stripes tend to use evidence in a way that makes them look good.

Chris Stephens: Such a cynic, Jonathan!

Jonathan Cribb: This does not affect the overall thing of what Government say. You need to look at each claim carefully. While they are all going to be true, whether they are shedding light on the real underlying point is when you think about it on a case-by-case basis.

Q57            Chris Stephens: Using your own preferred methods then, Jonathan, how well do you believe the DWP’s employment support programmes are helping overcome barriers to employment? If there are some that are quite successful and others less so, what is the view on them?

Jonathan Cribb: It is probably fair to say—partly for the reasons Louise said—that while there is no gold standard evaluation of these Restart and Kickstart programmes, they have not been enormously successful. Partly that is because the problem they were set up to address has not been as bad as thought. That is great. What does that mean we should do? We should not continue with programmes just because they were set up. We should think: is this value for money; should we be spending this money at all; should we be spending it elsewhere?

The Restart programme in particular, I think you needed to be on UC for 12 months. The fact is that we do not have enough long-term unemployment on UC to get the number of people through these programmes. The problem for DWP is, in a sense, to the extent that economic inactivity is the problem in the labour market, Government do not engage with economically inactive people in the same way as they do with jobseekers or people on Employment and Support Allowance. That is fine in normal times.

If you are 55, have had a long career and have a good private pension, why do the Government need to interfere in your decision to retire? They don’t. That is an economically inactive person. If you are a mother or a father with young children and you decide the right thing for your family is to not work, you are economically inactive. Again, there is no reason for Government to come in and go, “You should go to work”. It is much harder for Government to engage with a set of people who, for good reasons, they are generally used to leaving alone. I do not think there are any straightforward easy ways for DWP to engage with economically inactive people.

Q58            Chris Stephens: How effect is support directed from Jobcentre Plus and work coaches?

Jonathan Cribb: My understanding is that they play a role in helping people into employment from things like JSA or equivalent, on UC. You can have the best work coach in the world, but if you are economically inactive and you are not engaging with Jobcentre Plus it is not going to do anything. That is not to say anything about the quality of work coaches or of the services provided, it is a different set of people.

Q59            Chris Stephens: The last question to you, Louise. The Way to Work campaign required broadening work search criteria after one month rather than the previous three months. Do you believe that to be a long-term effective solution, to require claimants to look beyond their preferred area or their previous occupation after such a short time?

Louise Murphy: I will build on what Jonathan said. We need to look at what the problem is that we have now. The problem definitely is not that we have a large group of long-term unemployed people who are receiving Universal Credit and not looking for work. If that was the problem, maybe we could have a discussion about it, but that is not where we are. If we are thinking that will have a big impact on encouraging people to flow out of economic inactivity into employment, no.

To follow on from what Jonathan said, it is important to frame how we think about this. There is a large group of these people who are economically inactive who, frankly, do not want a job and it would be wrong to think we should focus our energy on encouraging these people to work. A lot of the older people own their house outright, do not have debts or are in a good financial position. If there is this idea that with high inflation and interest rates rising these people will be forced to move into work, a whole lot of people probably will not. It is important to have that in mind.

A final thing on effective support, we should just learn from the previous evaluations. There have been so many different employment support programmes over the years, most of them with various evaluations written up, and we should learn from what has worked and what has not. For example, the Work Programme in the early 2000s, older workers did not benefit as much as younger workers. There is evidence that the support offered to them in these programmes was not tailored and did not suit them.

Q60            Chris Stephens: People in their 50s, for example, who may have been made redundant during Covid-19 and now find they cannot get into another job.

Louise Murphy: Exactly. We want to make sure the employment support reflects that reflection of today so we have the skills to work. We have seen that many of these employment support programmes are less effective for people with health conditions, particularly mental health problems. In the Work Programme in the 2000s, some much less positive results for people with mental health problems than those without.

Q61            Sir Desmond Swayne: I accept the main effort of DWP will be targeted at those searching for work. There must surely be an incentive to tackle very actively those who are economically active, but are not seeking work, on the grounds of the ballooning benefits bill and that we constantly have this controversy about whether we should import workers to fill all the vacancies.

Jonathan Cribb: I agree that the extent to which the state should worry about economic inactivity will differ between people who are economically inactive and essentially support themselves through private means, private pensions or the earnings of the spouse and the extent to which we should worry about it when they are supported by the state.

The reason for what I said earlier is because the growth in inactivity among older people is among retirees and the evidence is in particular they are relying on private pensions, private savings and the earnings of a spouse rather than the benefit system. I think that is less concerning for government and government finances. I do not disagree that we should always think about what is the appropriate balance between incentivising work and supporting people out of work.

Q62            Sir Desmond Swayne: Of those who became economically inactive since the end of the pandemic, the biggest individual element—an additional 500,000—are those of working age who are claiming benefits but are under no obligation to seek work. In other words, effectively they have been signed off sick, a total of just shy of 3.5 million people. In the past that has always been musculoskeletal problems; now, 65% of it is mental health issues, anxiety and depression. Anxiety and depression are entirely treatable conditions and one-fifth of this cohort say they would like to work. We all know that work is good for your mental health, is it not? What should DWP do, and what can it do to try to get a very significant proportion of this cohort back into work?

Jonathan Cribb: Do you want to go first?

Louise Murphy: There are a few things on that. You are right. It is worth pointing out that some of these are longer-term trends so we can’t just say this is a Covid-19 shock among both older workers and younger people where we are seeing increases in inactivity due to health problems.

Q63            Chair: That was happening before the pandemic, was it?

Louise Murphy: Yes, and even among older people we probably saw more older people inactive due to health problems, but the overall trend was different because we saw with the rising state pension age, for example, overall the numbers of economically inactive older people fall from time to time up to the eve of the pandemic.

We are also seeing among young people, 18 to 24, since the mid-2000s an increase in the number out of work due to health problems. The number of young men inactive due to health problems has doubled since 2006. Mental health is definitely playing a part in that. We are also seeing the number of people in work with mental health problems increase, so it is not the case that there is this increase in people with mental health problems and they are all out of work on benefits. That is certainly not true.

We are seeing a big increase in those in work and that is affecting the disability employment statistics because we see more people in the population with mental health problems and of those with mental health problems more of them are working now than in the past. That is worth bearing in mind. It is not that as more people have mental health problems, more of them are out of work or receiving benefits.

On the point of these mental health conditions are treatable and work is good for your mental health, it is certainly a complicated picture. There is definitely evidence that working can support people’s mental health, but it must be good quality work. For young people, being in an insecure job is detrimental to your mental health, so we would not want to encourage people out of inactivity into poor quality work. That is unlikely to help things in the long run.

Jonathan Cribb: Fundamentally, the problem that government faces with these trends is I think there is a good section of society who would agree that people who cannot work for particular health reasons should be supported by government. Some conditions are just harder to verify, so the state faces a problem of how to provide the support to people who are definitely unable to work and struggling with the set of people that it is hard to identify. I don’t have an answer for you on that. It is how doctors or government as a whole can identify who the most ill people are who are unable to work. It is not an easy question.

Despite big increases in the fraction of people reporting mental health problems and the way they are reporting them is they are longstanding—that means it has been going on for at least 12 months or they expect it to go on for at least 12 months and it affects their day-to-day life, how they are living their life—that fraction because of mental health problems is going up, but at least we are also seeing an increase in the employment rate of these people. It would be frankly disastrous to employ if we were seeing these big increases in mental health and there were still very low rates of employment among those people.

Sir Desmond Swayne: There is a lesson there in the sense that at least half the Members of Parliament are bonkers and still capable of working effectively. I will leave it at that.

Jonathan Cribb: I will not make a comment on that.

Q64            Nigel Mills: Can I switch to self-employment? We saw a big drop in people describing themselves as self-employed during the pandemic. What is the solution here? Should we try to encourage more people back into self-employment or is it not the right time for that now?

Louise Murphy: I am happy to start. The first thing to say when we talk about self-employment is there has been a lot going on in recent years. The picture is quite complicated. First, we saw a lot of people changing how they describe themselves in the last few years. Some of that will be people doing the same job, but they used to classify themselves as self-employed and now as an employee. Some of that we saw at the start of the pandemic if people were payrolling themselves and there was a change around the time of the furlough scheme, they maybe then perceived themselves differently. People just called themselves self-employed but now if they are on payroll they might see themselves as an employee.

The other thing that has happened is the IR35 tax change rules, which will have an impact on people doing the same job, but now being classified as an employee rather than self-employed. Just a word of caution: although when you look at the statistics there has been a big change, not all of that is a meaningful change in working behaviour, but at the same time, we are seeing some slight changes.

When we look at flows from work into inactivity, we see slightly higher flows from self-employment into inactivity than employment into inactivity. It is not huge and I don’t want to overplay it. The quarterly flows from self-employment are around 3.5% into inactivity compared to 2.5% to 3% for employees. It is worth thinking about, but our feeling is let’s not overplay this. It is not that we have seen some huge shift in what is happening for the self-employed.

Jonathan Cribb: On top of those things, we saw fewer people join self-employment during the pandemic, so that is not a definitional change. There is not cast-iron evidence of what is going on there, but the support for self-employed people during the pandemic was extremely generous to those who got it, but it was patchy because of the number of people who did not get it. To the extent you are sitting there in May 2020 and we did not know that Pfizer and AstraZeneca were going to save us, the risk of going into self-employment and the support you get was clearly lower than that provided for employees.

Longer term I would not be overwhelmingly concerned about slightly lower levels of self-employment compared to employees. There are lots of productive self-employed people, particularly some professionals, skilled trades and things like that, but there is a very long tail of people doing fairly low paid, low productivity self-employment. That is why, for example, the Government has a minimum income floor in Universal Credit. That is one of the reasons, so the Government does not subsidise extremely low paid self-employment as a form of activity.

Q65            Nigel Mills: At a time when employers are struggling to find people, are you saying there is no reason for the Government to incentivise new self-employment? We used to have an allowance that stopped earlier this year. We are saying we would be better trying to encourage people to take employment vacancies while they are there rather than starting up a new business if they end up earning relatively low earnings. Is that a sensible policy choice?

Jonathan Cribb: Ideally, unless they have a good reason to think they know about how we should structure businesses, I do not think government should necessarily be in the business of encouraging people one way or another. We do encourage people to be self-employed because the tax system means that for a given amount of output you create as a worker, you are taxed considerably less as self-employed. We currently have, because of employers’ National Insurance and differential rates of insurance, self-employed National Insurance. We are encouraging people into self-employment implicitly. If you are worried about that, maybe there is more of a case for the Government to try to pull with one arm and push with other arm to try to get more people back into employment.

Q66            Nigel Mills: The Chancellor tried to change that a few years ago and it did not go down so well, but we did have explicit encouragement for self-employment. We had the New Enterprise Allowance and did not apply the minimum income floor for a year.

The question I was asking is at a time when you have high levels of vacancies and employers struggling to find people, perhaps those things are not a good incentive if people will not end up in decent high earning self-employment. You are better off pushing them to be employed. If you apply the minimum income floor straight away, it is very hard to start a new business if you have no other income, isn’t it?

Jonathan Cribb: Yes. There is a very good case for a minimum income floor. I think there is also a strong case for a minimum income floor that does not come in straight away.

Q67            Chair: Louise, you mentioned IR35. HMRC has been trying to stop people doing what it described as false self-employment for many years. Have these latest changes finally solved it as far as HMRC is concerned?

Louise Murphy: It is hard to give a definitive answer. There is so much going on in the data that I would not claim to be able to say yes or no. We saw in the months before the IR35 change more people reclassifying from self-employment into employment, which suggests before that change there was some behavioural change because they wanted to avoid that.

Q68            Chris Stephens: Louise, I will ask you this question first. Much of the DWP’s employment support offer is delivered centrally, so what are the advantages or any disadvantages of devolving responsibility for these support programmes to local areas? I am thinking not just of the devolved nations but to local government.

Louise Murphy: We have talked about this transition phase and employers working out how to find the type of employees that can do the jobs they are advertising. I think if we were to devolve some employment support more locally, there would be employment support advisers who would have knowledge of the local labour market and they would know the skills or training that local employers value. That would seem to be beneficial, just that knowledge of who the big employers are and what the local situation is.

Secondly, there are some examples that seem to be working quite well. An example would be Youth Hubs, which is all a little bit quiet and still being rolled out, but at least in principle that seems quite promising, this idea of having a local youth hub where charities and DWP employment support advisers can work together to support young people. Reflecting on what we have said about widening access to people who do not see themselves as wanting to engage with a DWP work coach, if it can be maybe a little more holistic on a local level with some charities and local authority support, that could be beneficial.

Q69            Chris Stephens: The Local Government Association suggest that greater local leadership in employment skills could create significant economic, fiscal and social benefits through tailoring support to local needs. What is stopping that change from happening?

Jonathan Cribb: I will be honest: I am not sure. I would defer to Louise, as you know more about this than me. We are straying from my area of expertise. I would not want to give evidence.

Q70            Chris Stephens: Do you have a view, Jonathan, or does your organisation have a view to what extent it should support services to be devolved in England and Wales?

Jonathan Cribb: I do not think my organisation corporately would have a view. We have seen some gains. There is some evidence that devolving particular parts of government to local areas and local decision-makers can be effective. There is a case for it. I do not have a strong answer for you, to be fair.

Q71            Chris Stephens: Louise, you will be aware that the Local Government Association is talking about devolution to local authorities, primarily in England. You will be aware of some of the examples in Scotland of Social Security Scotland now managing benefits, the Adult Disability Payment replacing PIP and the Scottish Child Payment. Is there is a compelling reason why there should be no other transfer in relation to employment support programmes to Scotland?

Louise Murphy: It is not something we have done a huge amount of work on. We would want to make sure this is done in a robust way, evaluating what has worked well. With employment support, some of the frustration is there have been so many different programmes throughout the years and there is a feeling we have not always learned from what has worked well in the past. That would be important.

Another thought on this is I think devolution and localisation is a part of it, but there is also a need to focus on widening entry points to support. For example, something quite positive is we are seeing a rollout of employment support within IAPT, the NHS psychological support services. People who are getting support for common mental health disorders like anxiety and depression can then be referred to an employment adviser who can work with them and basically appreciate that their ability to find or retain a job goes hand in hand with managing their mental health problem. More can be done in that area. Not everyone will feel like their route to finding work is claiming Universal Credit, meeting with a job coach and following that standard process. There may be other routes into support that work better for people.

Q72            Chair: Thank you very much. One final point from me, Jonathan. We talked earlier about people who have chosen to retire earlier than might have been the case, presumably living on their pensions. I asked you whether some of those people might choose in a year or two to come back to work for economic reasons and you said we just do not know. It would be a concern for this Committee if those people will run out of pension savings at some point later in their lives. Do we have any evidence about what situation those people are in?

Jonathan Cribb: You are right, it is a concern. In a sense, the world in which we find ourselves with our pension system, where we have increasingly defined contribution pensions, we have pension freedoms, you can do pretty much what you want at 55 or beyond, that can be seen to facilitate this change. If we were in France, you have all your wealth in your state pension. It is an earnings-related pension. It is important when you take it because you are penalised for working at the same time, whereas you can have your state pension and work here. That flexibility can be seen to facilitate this.

In terms of people running down their wealth too fast, that has been the concern. In general, people are as concerned with people not running down their wealth fast enough as with running down their wealth too fast. There are people who end up leaving inheritances they do not mean to and could have had a much better life in their early 60s if they had not been so cautious with their private pension. That is a concern as well.

There is also the fact that the value of the state pension, having gone up a lot in recent years, provides a much better baseline for people to rely upon if they do run out of private wealth. We should monitor it. I don’t think we are particularly much more concerned about running out of wealth than we were a couple of years ago.

Chair: Thank you both very much indeed for the very helpful answers you have given us. That concludes the questions we want to put to you. We will ask you to step down and the second panel will come to join us. Thank you both.

Examination of witnesses

Stephen Evans, Ben Harrison, Dr Eleanor Carter and Tony Wilson.

Q73            Chair: We welcome all of you. Thank you for being with us. I will do as I did with the first panel and ask each of you to tell us who you are in a sentence before we start.

Tony Wilson: I am Tony Wilson. I am the Director of the Institute for Employment Studies. We are a research centre that does research on everything to do with employment, HR, education and skills.

Stephen Evans: Good morning. I am Stephen Evans. I am the Chief Executive of the Learning and Work Institute.

Dr Carter: Good morning. I am a research fellow at the Blavatnik School of Government at the University of Oxford and I am Research Director for the Government Outcomes Lab. We are a research centre that focuses on cross-sector partnerships. We have done a lot of research on the use of outcomes-based commissioning, things like payment by results and social impact bonds.

Ben Harrison: I am Ben Harrison. I am Director at the Work Foundation. We are a policy unit based at Lancaster University.

Q74            Chair: Thank you. You were all present for the discussion with the earlier panel. I will ask you about one point we asked them. The number of people claiming benefits for employment now is at a historic low, but there has been a sharp rise in the number claiming benefits for incapacity. That number seems to have been rising before the pandemic, but has leapt up since the pandemic began. What do you think is happening here? What are the implications of this for employment support and what should the DWP be doing?

Tony Wilson: There are a few reasons. It is quite a complicated picture. First, it is important to distinguish between people who are described as being in a no work related activity group and people who have a limited capability for work related activity. There is a no work requirements group. A no work requirements group can include, for example, children who are disabled and who previously would have claimed disability tax credit and other tax credits. There would be other things they might have claimed, whereas a limited capability for work or work related activity group more closely maps on to the previous ESA and IB regimes.

Both groups have grown, but the no work related activity group has grown by more and that probably reflects migration to Universal Credit from legacy benefits largely. Some of this is compositional changes that we need to understand because DWP do not publish enough data to understand what is going on. We need to understand what is driving that, but that has ballooned. That has shot up, but I think probably a lot of that is around these changes in definitions.

Q75            Chair: When you say that group has ballooned, that is the no work requirements group?

Tony Wilson: That is the no work requirements group. This could be because of your children’s status; you might have previously been entitled to tax credits. You could be a non-working partner of somebody who is in work and because they come on to Universal Credit you are then assessed, whereas previously you would not have claimed ESA but now you are being assessed and being told there is no work related requirements on you if you have a health condition or a disability, for example. It is a very complicated picture.

The LCW and LCWRA groups, the limited capability for work and work related activity groups, have gone up compared with pre-pandemic and compared with before that too. That group is even greater because there is a group called the employment support in health assessment phase, which previously was on ESA but is now in the searching for work of UC. It is probably about 100,000 or more people who are waiting for Work Capability Assessments but are counted in searching for work and should really be in this other group, so the group would be even bigger. I don’t have these figures to hand. I think that both groups have grown by a couple of hundred thousand. Again, some of this will be because of Universal Credit; people will be coming into Universal Credit who previously might have been outside it.

The other factor is that there are some issues with the contracted out assessment processes for assessing entitlements to benefit. I think that DWP need to publish more so you can understand what is driving that. Some of it may be underlying deteriorations in people’s health. Health has got worse. That is partly reflecting age in society, partly reflecting Desmond’s points earlier about mental health, and some of that may be feeding through into the stats.

What we have seen happen in the pandemic that I am most concerned about is I suspect a lot of people are in work with long-term health conditions, who are managing in work, who have just had the bad luck to have been among the people who lost jobs during the pandemic or became disconnected from their jobs. One in five people has a work-limiting disability or health condition. Once you are out of work and you have a health condition; it is blooming hard to get back in. If you are in work with a health condition or you develop a health condition at work, you are likely to get the adaptations that you may need, not always, but you may do. I think what is driving this in part is people who were unlucky enough to have left the labour force with a long-term health condition cannot go back to their old job and cannot get a new job. As the previous panel was saying, they get virtually no employment support in that group and I think that is contributing to the rise as well.

Stephen Evans: Tony was not kidding when he said it was complicated and the nature of the benefit system now. Definitely some of the challenges Tony put there are correct within the benefit system. I will add a couple of things.

One is about the general growth in the prevalence of health problems in general, as we have an ageing society, and that spiked up more during the pandemic as well. There was a recent ONS survey of over-50s who had left the labour market that found that one in five in that group said they were on an NHS waiting list, so that may be affecting people’s ability to get back to work.

Our research recently estimated that only one in 10 out of work disabled people or out of work over-50s were getting some form of employment support each year from the DWP compared to one in three young people, for example. You are three times more likely to get employment support if you are an out of work young person than if you an out of work older person or with a technical disability. I think that lack of support then stops more people flowing back into work. The prevalence of illness, sickness and disability increased during the pandemic and I think the NHS waiting lists play into that as well. Then you have the fact that most employment support is not targeted on those groups, so they don’t get the support to get back into work if they have fallen out of work.

Dr Carter: I want to build on the points that Tony and Stephen have already made, thinking about what it might look like to better support people who are experiencing mental health conditions into work.

We might want to take inspiration from the evidence around services like individual placement and support, which provides good quality job matching, thinking more creatively about suitable in-work adaptation and support with well-resourced job coaches who have the capability and the time to connect better with employers so that they can think far more creatively about job carving and retention. It is not just building confidence on the part of people with health conditions, but also ensuring that employers are well placed to make their workplace really work.

Ben Harrison: Similar to Eleanor, I will build on what Tony and Stephen have already said and certainly endorse—I think Tony mentioned it—how hard it is if one falls out of work with a health condition to be able to get back in, particularly given we know that we do not have a day one right to flexible working. That kicks in after a longer period and could be a very important barrier. Clearly if you are in that sort of situation you present as quite a complicated and difficult case for a work coach and potentially you will require quite a lot of intensive time and support specific to the condition that you might be managing and equally a very clear and live understanding of the employment market in your local area. We know that work coaches are under a huge amount of pressure and your engagement with a work coach can come down to a weekly 10-minute meeting.

If one accepts that people in this situation face big barriers to getting back into work, we need to think about what kind of support we are prepared to put in place around them. Equally, how might DWP work with other parts of government? Clearly, lots of this sits without the discrete brief of DWP and gets into health, BEIS and employment regulations and so on.

Q76            Chair: Stephen, on your point about older people getting employment support much less frequently than younger people, are there opportunities that the DWP might take to provide support for older people or is it that younger people are more involved with the DWP for benefit reasons or something?

Stephen Evans: I think that it is a bit of both. Most DWP employment support programmes are focused on those who are unemployed—you have to be searching for work now. That necessarily means more young people get referred to them because young people are disproportionately represented in that group, but there is a real opportunity to do better than that by extending support and, as Ben and Eleanor were saying, looking at different forms of support.

For example, we know that the jobs measures are likely to be about £2 billion underspent in total and it would be great to reinvest at least some of that into widening support for those who are in the more inactive groups who are interested in work or may be out of work but not on benefits at all.

The real issue is the focus of so much employment support on those who are on benefits and out of work in a specific group rather than saying, “We want employment support for anyone who wants to work”. I would argue that we can broaden it out, but we need to look at the types of support we offer as well.

Q77            Selaine Saxby: Good morning. What do you think is preventing employers from filling the vacancies that they have currently?

Tony Wilson: At the moment it is the lack of candidates and the lack of the right skills for the jobs. We have just done some polling on this with employers, with YouGov, which we are publishing next month. That shows pretty clearly that the most common labour market challenges raised by employers is, first, dealing with the cost of living crisis and how they support their staff, but then second, third and fourth was how to keep staff, how to find the right candidates and how to address skill shortages.

There simply are not enough candidates at the moment, but there is a large potential pool of people we could be engaging with and better supporting, as Stephen said. I think that half the challenge is that we don’t engage effectively with employers. We don’t have an employment ministry. Employers fall between about five different stools, between different Departments that don’t join up and talk to employers about recruitment, engagement, effective work practices, job design, job carving, for example, about induction, training and so on. We need to act like we have an employment ministry, even though we do not, and try to speak more coherently and with more of a single voice with employers.

Jobcentre Plus do not have a particularly strong reputation with employers either and it is the same polling. We are to launch a commission on the future employment support with the Financial Fairness Trust, which will be launching next month. YouGov asked employers about their perceptions of Jobcentre Plus and only about one in eight employers agreed that it was providing the right sorts of candidates with the right sorts of skills, but that rose to nearly two-thirds of employers who had actually used Jobcentre Plus.

Findings were very positive for those employers who had engaged with and been supported through Jobcentre Plus, but the problem is that fewer than one in five said that they had used Jobcentre Plus at all. The vast majority of employers are not engaging with Jobcentre Plus and so they are not accessing that support. Where they do, employers seem to be broadly receptive to it, but we are not systematic enough in how we do that. Other countries do this much better than we do.

It is worth saying too that if you look at some of the programme provision, there is a massive panoply of providers all trying to speak to the same employers. One of the things that we have been working on with the Restart scheme, the Restart providers, is how you have a more coherent approach across the programme so that providers can share contact details and engage more at a national level with national employers. I think that this has to be the future: how you have a more coherent pan programme, pan Jobcentre Plus and other provision approach to how we reach, engage and support employers.

Stephen Evans: I will add a couple of things to what Tony said. From our research, employers get fed up and a bit bemused by being phoned up by so many different people trying to get quite similar things with work experience, work placement, sector-based work academy, T-Level industry placement, traineeships and apprenticeships; the list goes on. There is a co-ordination point about how we engage with employers.

Tony is also correct that as it stands we do not have enough people looking for all those jobs and that is partly because only one in 10 out of work disabled people or over-50s get employment support to look for a job. There is a big pool there, but we are not doing what we can to get them looking for those jobs.

It is worth saying that employers are hiring at record levels. I think that 1.9 million people either started work or changed jobs in the second quarter of 2022. There are lots of people changing jobs or starting work all the time; we need even more. Partly I think that is because we froze the labour market image of the economy for a year or so during the pandemic and now we have unfrozen it and people are shifting around and employers are trying to shift around as well.

That links to the last point from me, which is that with some of the structural shifts we have seen and are seeing in the economy, the types of jobs are a bit different and the skills needed are different. Even if you lost your job in the pandemic and you want a job, is the job you want available; do you have the skills for it; is the retraining support available? We need to do much better on the retraining support for now and the dislocation we have seen during the pandemic, but also for the long term. We are seeing an ageing population and lots of economic change, so we will need to update our skills more often anyway.

Dr Carter: I echo those remarks. Employment support as employer support may be the reconfiguration we need.

Ben Harrison: I will pick up particularly on the point that Stephen made about retraining and reskilling. We know that in this country compared to other OECD nations we do not have the same kind of culture around adult skills and learning. The infrastructure at the local and regional level is patchy in the connections between higher education colleges, employers and employees.

Research we have done has found pretty clearly that those who would probably most benefit from reskilling and retraining to be able to then become candidates for some of the vacancies we have unfortunately are the least likely to get them. If you have been away from the skills and training system for a number of years, the chances that you will then go and engage with that system to up your skills or have the confidence to do that diminish. I absolutely endorse the points that have been made, but there are elements that are broader and touch upon business engagement skills and so on.

Q78            Selaine Saxby: I think that you have already answered my next question: do employers have sufficient access to support and guidance to ensure their job offers are attractive? You also touched on the fact that we do not have a ministry responsible. Is the DWP the right place for it or is there somewhere better that we could be putting this?

Tony Wilson: Certainly I think the DWP is the right place. If we are trying to engage employers at a national level on helping the people who want jobs to find the jobs that want people, that is the role of our employment services. I think that DWP can and should take a lead on that and it does.

There is more that we can do. There is a range of other ways we can engage employers and I think that we are slightly at sixes and sevens on the right way to do that. Over the years we have been through Local Enterprise Partnerships, Growth Hubs, the role of local government and national Government in different Departments. Local government is increasingly taking a lead on some of this. There are some good initiatives happening in combined authorities and in individual local authorities too. The LGA published work on supporting good work and fair work through local government and there are some good practices. They are trying to convene and draw together partners locally to have a more coherent, better, locally based approach with employers.

There are national things and sectoral things we could do as well, some of which harks back a decade or more, as Stephen probably remembers better than me—things like the old National Employment Panel and the sector-specific activities that we used to do. There is more we can definitely do that is sectoral and local and do both of those at the same time. That may not be led by DWP, but we need to have a single voice, a common voice across government on that.

Q79            Sir Desmond Swayne: Of the successful elements of employment support for the different groups of the economically inactive young people who are NEET, elderly people or the disabled, is there a common thread that runs through them all or are they entirely discrete in the elements of success?

Stephen Evans: There are some common elements and then some differences. The common elements are things like having a personal adviser or work coach, whatever you want to call them, who works on a personal level with the individual.

You can’t have a one size fits all thing. You have to tailor it to people’s individual circumstances, have regular contact with the work coach or professional and make sure that there is a clear plan. You might not know what you want to do, so you might need a bit of careers advice. You might know what you want to do, but you are not sure how to look for vacancies, so you might need some help with that. You might need to improve your skills to get the job you want; you might need help with childcare. It is an individualised plan that your work coach and you agree together.

I think those are common themes, but also making sure that all that support and any training is closely aligned to actual jobs that are locally available rather than relatively generic, which requires employers to be involved in saying what those jobs are and what the skills are and making sure that the training meets those needs. There are lots of examples of schemes where employers are involved in designing some of the training and then they guarantee interviews at the end of it, for example.

There are some common elements like that, but then there are some differences. For example, this is not universally true, but you might have younger people who might be less likely to have work experience, so some work experience might be helpful. You may have older people who have worked for 20, 30 years, have lots of transferable skills but need to switch across to a different sector, for example.

There are probably some differences between groups and I will specifically mention people with disabilities and long-term sickness, where I don’t think we quite know what works best yet. The Government have been doing various trials—Eleanor mentioned some of these—about trying to get health and work services to work more closely together and provide different forms of health support and also making sure the health service recognises that work is a good health outcome as long as it is good quality work and depending on the individual circumstances.

There are those common elements but then some differences and definitely an area around disability where we know some stuff, but there is more that we don’t know and we need to learn that.

Q80            Nigel Mills: What do you think is happening with self-employment in the market now and what role could that play in bringing people who are currently inactive back into activity?

Tony Wilson: I heard you talking about this in the earlier panel and what might have been driving the decline in self-employment. Maybe if I focus on self-employment as a potential outcome for people who are out of work or indeed people who might be in work. Self-employment tends to be pretty popular with a lot of people who are out of work and want to work. That will often be because they have had pretty poor experiences of employee jobs, the sorts of reasons that we have touched on already. We have always tended to have a decent self-employment offer that is more specialised and more specific to what you might need to move into self-employment. The New Enterprise Allowance, which obviously ended nearly a year ago now, we are still waiting to hear what the replacement will be.

We have done research but we have not published it. We did research on this a couple of years back where we interviewed a lot of people in self-employment and reviewed a lot of evidence around what works in self-employment. I think the very important point is focusing on the individual and the individual’s goals from self-employment and trying to moderate those and steer those through mentoring and more professional business advice, but then recognising too the specific needs of people who are becoming self-employed or indeed may be self-employed and need help to raise their earnings, which is another area I think the Department might focus on.

A lot of that comes down to proper business support about how to run your own business. These are traditionally sole traders, commensurately. They are not kind of IR35 types, which you talked about earlier. It is often people who are trying to set up and run their own business. They will not have access to finance, which is often a significant issue, and they will not necessarily know enough about marketing—in particular social marketing, which drives a lot of revenue now for smaller and sole traders. They want support from people who have been there and done that and know self-employment.

We know the sorts of things that might work in a package and I think the New Enterprise Allowance had that pretty well and there were good qualitative findings around that. There has been no impact assessment, but there are good qualitative findings around that kind of support that we can potentially build on. People who are on out of work benefits and go into self-employment may do that because they have caring responsibilities—particularly they may be single parents with young kids or because they have health conditions, who also need to be able align with the other support people might need to be able to work the hours that they want or need and grow their business. Self-employment is incredibly stressful and can be very long hours, so trying to do that when you have some other things that can limit the time you can work is quite challenging.

There is quite a lot we can do. It is a real shame that we don’t have a specialist programme because generalist work coaches will not be able to deliver this, so there needs to be onward referral to more specialist provision. A lot of Restart providers are very focused on, “How do we develop our own self-employment office within Restart and this sort of evidence around what works?” There is tons of potential, but I would like to see more of a national push on how we can support it.

Ben Harrison: Very briefly, this is to a degree a little bit speculative. Thinking about the conversation we have had about inactivity and the kinds of people who are now economically inactive, the 50-plus group who are still of working age, I suppose one can imagine that if you are in that group and you decide you want to go back into work but you want to do so flexibly around other life commitments, say you were in a relatively senior position, you are skilled, self-employment could become a route. You could imagine some of those individuals thinking that consulting or something like that could be quite good but they may need support to do it because it may be a different kind of work than they have done previously. There may be some way of connecting this to that inactivity challenge.

Tony has touched on already that it can be very stressful kind of work and some people will be in a much better place to be able to weather things like income volatility and some of the financial risk that goes alongside self-employment.

Stephen Evans: I have nothing further to add. I agree with Tony and Ben.

Q81            Nigel Mills: The blunt question is at a time when we have employers struggling to find people, am I better off supporting somebody into slow burning self-employment that might get them a pretty low income in a few years or trying to sort them out to get back into the employment market that is probably better for the economy and better for the individual in their employment? How do you balance all those?

Tony Wilson: It is a very important point. Self-employment is inherently incredibly insecure. It is also generally very low paid and many people don’t escape Universal Credit. When the minimum income floor thing kicks in, they lose out significantly, so this is a real challenge.

It comes back to a fundamental point for me: do we think it is the role of employment services and work coaches to tell people the job they should do? To an earlier point, what works in employment services? Is it to sit with an individual, hear what their goals and aspirations are, empower them and try to work with them to achieve that? Of course moderate it as you go and try to steer people to things that may be better for them, but there is the old parable of the talents analogy. People will make mistakes. Is it for us to say, “You shouldn’t do self-employment because there are these employee jobs”? Personally I don’t feel that it is.

Importantly, many of the people we interviewed who were self-employed—we interviewed about 50 people—none of them wanted to be employees. Even the ones who were in low-paid self-employment wanted to be self-employed. I do not think pushing people who do not want to be employees into employee jobs is what employers want or what the economy needs either, but it is a hard balance.

Q82            Chair: Tony, you made the point that the New Enterprise Allowance has stopped and I think you said we are waiting for a replacement. Do we know that the DWP will provide a replacement or are we just waiting to hear what the Department is planning in that area?

Tony Wilson: No. Pre-pandemic or possibly early pandemic—I think it was just before the pandemic—there was pre-market engagement with the provider market about the development of a replacement scheme, which I understand was likely to be focused on how we help people in low income self-employment to increase their earnings in a classic kind of Universal Credit way. I think that probably it would have ended up being how we push people towards employee jobs, how we get people to search for different jobs rather than how we get them to grow their businesses, because many of these may not ultimately be high-earning businesses. That stopped in the pandemic.

I do not know what is happening now and I cannot offer any insight on any other discussions either. It seems to have stopped. It will be interesting to see the new Secretary of State’s views on this. Previous Ministers, going back two or three Ministers, were keen on self-employment and the self-employment option but I think that it is probably in the “nice to have” bucket when you look at some of the broader challenges, in particular what we do about economic inactivity and the £2 billion underspend on previous programmes and so on.

Q83            Chair: Are we expecting an evaluation of the New Enterprise Allowance?

Tony Wilson: I doubt it. I think it would be very hard to do an impact evaluation. There was a qualitative evaluation published nearly a decade ago and an impact evaluation would be pretty hard because you would need to be able to find a counterfactual of people who wanted to be self-employed and did not access the New Enterprise Allowance. I suspect it is probably in the “too difficult” box.

Q84            Dr Ben Spencer: I have a few questions on work coaches and the work they do. You will have heard the evidence the first panel gave about the potential of work coaches working with people who are economically inactive and not actively seeking work. Do you share their views that that is beyond the scope of what they should be doing or do you think there is a role for them with that group?

Stephen Evans: I think that the first question is how we engage people who are economically inactive, currently unemployed and looking for work. A lot of them are not on benefits and those who are not asked to look for work.

Question one is how do we engage people? The jobcentre can’t force them to come in if they are not on benefits, for example, even if we thought that was the most productive thing to do. Based on our experience and evidence, the best way to engage people is through organisations they are already in touch with and that they trust. That might be a local authority, a housing association, the GP surgery or a different community group. There are lots of examples of those sorts of organisations engaging people who are in that economically inactive group and getting a good response because they are trusted. That is point one.

The second point is that once you have got them engaged and interested and they might be interested in looking for a job, what do you do? How do you support them? There will always be a place for Jobcentre Plus within that. They have significantly expanded the number of work coaches through the pandemic and unemployment did not increase by as much as expected, so that would be a good use of the time of some of the work coaches. There are also lots of examples of housing associations, community groups, charities and local authorities delivering the sorts of features of employment support I described earlier for those groups.

We need a collective effort to expand employment support to more groups than get it today, so beyond the one in 10 that get it today. That should be a mixed economy of Jobcentre Plus but also housing associations, charities, local authorities and others who are doing it now, but could do it more if we supported them to do so.

Dr Carter: I think that there are major weaknesses in the current Jobcentre employment support offer and clearly there are large numbers of people who are not accessing this at the moment. My colleague, Adam Whitworth, has done some academic research on this and identifies capacity, conditionality and connectivity as the three Cs that are the impediment to this working well at the moment.

The caseloads for front-line work coaches are too high. We can’t berate job coaches who have caseloads of over 100 for not delivering personalised employment support. On conditionality, this is out of kilter with quite a lot of international best practice. The current conditionality regime is associated with physical and mental health harms, so you need to check that. On connectivity—I think this is picking up on Stephen’s point—work coaches in Jobcentre are often quite isolated from important flanking services locally, so we need to think about health, housing, debt advice and other ways of accessing and connecting people to better wraparound support.

Tony Wilson: I am going to make the case for Jobcentre Plus, the conditional case. Jobcentre Plus advisers can definitely do this and deliver these services because they have over the years. The new deal for lone parents was led by specialist Jobcentre Plus advisers working with lone parents and was hugely beneficial in helping lone parents to move into work.

The new deal with disabled people was again with specialist Jobcentre Plus advisers. The new deal 50-plus action teams for jobs is Jobcentre Plus advisers taking off their badges and going into communities, into disadvantaged areas and working out of the back of vans or community sites helping people back to work.

At the moment we have built a bureaucratic compliance regime that is largely around job search monitoring with small volumes, highly technology-enabled to manage those very large caseloads, and largely checking compliance and whether people are meeting their conditions of benefit receipt. That will be a massive pivot to then deliver this support for economically inactive groups, many of whom aren’t in touch.

The first part, as Stephen says, has to be reaching people where they are, so we have to stop mixing up the symptoms, that somebody is on a benefit with, “Well, therefore we must reach them through the benefit system”. Our employment service includes Jobcentre Plus and a wide range of other voluntary, community and privately funded provision and a lot of other public services too.

A great initiative the Government recently announced was more investment in employment advisers alongside talking therapy; it is £130 million. That will be spent on just employing staff in the NHS to deliver employment support. Many of those will be on benefit, but that is a tried and trusted effective way. Same with IPS, many of them are NHS staff, some of them are VCS, voluntary community organisations and so on.

To enable a more coherent mixed economy model, we need very effective local governance and partnerships, where Jobcentre Plus sees its role as being around the table as the champion advocate for good work and helping people find work, alongside a whole range of other services and then talking about how we raise aspiration, reduce inequalities and improve economic growth, like what is happening in Scotland with Local Employability Partnerships and in Northern Ireland with Labour Market Partnerships. It happens a lot internationally. Jobcentre Plus partnerships isn’t just about referral at the front-line; it has to be about being empowered to be around the table working locally. That is where some of that devolution may make a difference too.

A final point is just on Restart. The Government committed £2.9 billion to Restart. Their current published estimate is they will spend £1.7 billion, so £1.2 billion of Restart is underspent. If we want to do something quickly, at the stroke of a pen we could simply change the eligibility rules of Restart and say that we can start to refer people in who are over 50, have a health condition and who want to work, not on a conditionality compliance basis, but who want to work, and then they can access support. We could do that without contracting for a new programme. We could do that in the space of a couple of months with a potential £1 billion there we could spend and we could move very quickly on that, but at the moment we seem to be stuck in a bit of a logjam about being able to make progress quickly on addressing these issues.

Ben Harrison: Just quickly, to perhaps illustrate one of the points Tony has just made, we have just completed a content study with recipients of Universal Credit who are looking to improve their skills and engage in the skills and training system and what their experience of working with a work coach has been like in that endeavour. It just speaks to Tony’s reflection now about the compliance nature of that relationship and the transactional nature of it, where a lot of the experiences we heard back from those in-depth interviews saw them kind of clash with the system and not find that the work coach was able to be either knowledgeable enough about what was out there in terms of skills programmes, even joined up with programmes that are being led by the DfE and other parts of government, or putting recipients into a position where they were sat at the back of a training class filling in job application forms to avoid sanction and therefore not really paying attention.

I think some of those examples just speak to that: that we need to get to the heart of it. If work coaches are going to play a role in this, it is thinking about what the ends are here and making sure that we are not trying to shoehorn into an inappropriate compliance dynamic.

Q85            Dr Ben Spencer: That has been very helpful and very comprehensive. My only other question is should work coaches be involved in supporting retention and progression at work?

Stephen Evans: My answer is quite similar to the points about inactivity. There is a role there, particularly where someone is on Jobcentre Plus’s book and the work coach has helped them to get a job. Presumably by that stage they know each other, they have a relationship, so keeping in touch for in-work support makes sense.

I know that DWP is trying to have more of a focus on helping people to progress from low pay. My slight worry is the same one I gave earlier, which is that if you are an employer, is Jobcentre Plus the place where you would expect to get advice about how to develop the skills of your employee, how to improve your productivity as a business and how to then pay your employee more? Probably not. Similarly, if you are an individual—this goes back to Tony’s point about people’s perceptions of Jobcentre Plus—do they have a positive, constructive relationship and they are going to want to keep in touch with them for years and talk about developing their skills and progressing and things like that? Probably not.

We can try to reorientate the whole system, but it feels to me better that we look at what we have elsewhere. That might be further education colleges, it might be apprenticeship providers, the same people I mentioned earlier, and have those sorts of progression networks locally. This is also part of a bigger point that we need to improve the number of better paid, high productivity jobs full stop rather than move people around the snakes and ladders board. We need more ladders and fewer snakes, I suppose, to overextend my analogy slightly. Again, that is part of the point about the link-up with growth strategies, industrial strategies and all of those approaches coming with BEIS at the UK Government level. I am not sure Jobcentre Plus is the place where all of that can and should happen. I think it needs that broader locally based and also nationally driven strategy.

Ben Harrison: Yes, I would agree with everything Stephen just said. I would add that while of course a need for support to progress within work is there, if that translates in a DWP context to more punitive in-work conditionality, I think I and colleagues at the foundation would have concerns about that because we know from engaging with workers in that situation who are in receipt of Universal Credit but only work a certain number of hours, there are a lot of reasons why people are in that sort of situation, whether that is because of childcare and other caring responsibilities or the nature of the work they do or the fact that they are managing a health condition. Using too blunt a set of instruments in this space is not only not likely to achieve very much, it may also have pretty negative impacts on an individual’s wellbeing and work prospects.

Q86            Chair: Can I just pick up that last point? Dr Carter, you talked about conditionality and you made the point that it is much more aggressive here than is the case in other countries. I was struck by your point too that, “the evidence is clear around its limited (indeed negative long term) employment effects. Including its significant economic as well as physical and mental health harms to benefit claimants” especially for the most vulnerable and disadvantaged. I presume if the Department was here, it would strongly disagree with that view. Where is this clear evidence of the damage that is being caused by this and how bad is it?

Dr Carter: We can see from a range of academic research that there are negative repercussions from an unclear sanctioning experience. Where jobseekers are unaware of what is coming and then find that they are experiencing very severe reductions in their income levels, that understandably leads to severe deprivation and health consequences stemming from that.

Colleagues Pete Dwyer and Sharon Wright in particular have done a lot of research on the negative implications of this experience and it just stands in such stark contrast to other countries who don’t have the same level of threshold for dropping people’s income in such a punitive way. It just does not exist to the same degree elsewhere.

Tony Wilson: I am happy to add to that. We have pretty much one of the strictest conditionality regimes in the developed world. The OECD published an index measure that looks at this. We do have a very strict regime. It is worth saying that of course some element of reciprocity or rights and responsibilities has existed in the benefit system since its inception. Unemployment benefits in the UK and internationally for 100 years have that—that if you want to claim benefit while you look for work, there is an expectation you will look for work and you won’t turn down appropriate jobs. What we have there though is a compliance and monitoring regime that is somewhat out of hand and the sanctions regime, which is incredibly punitive.

Given the wealth of evidence that has emerged around the negative impact of sanctions, I suspect a lot of people in government, including Ministers, who will probably be your previous Ministers, would have been quite happy to repeal and reform that, but there isn’t going to be the legislative space to do that in the near future. We sanction people when things have gone wrong. We should be sanctioning when things have gone wrong and using conditionality in an appropriate way to try to ensure compliance with applying for jobs and being available for work and so on, but I just can’t believe that the system has gone wrong to the extent that about one in 12 people are currently under sanction.

It is the highest rates of sanction we have ever had. It is a phenomenally large number of people who currently have had their benefits reduced for not doing what they were meant to do and I just can’t believe that either we, the state, or the public employment service or the individuals have this so spectacularly wrong on so many occasions that so many people are under sanction. Something isn’t right. I think sanctions have become an end in themselves rather than the thing that happens when stuff goes wrong.

Chair: I wonder if I could ask both of you just to drop us a note with the evidence around the damage that the conditionality regime is doing at the moment. It would be quite interesting to see that. Chris Stephens.

Q87            Chris Stephens: Tony, if I can start with yourself. You mentioned the devolved nations in an earlier answer, so a similar question that I asked the first panel. Much of the DWP’s offer is delivered centrally, so what are the advantages or disadvantages of devolving that responsibility either to the devolved nations or looking at it from an England and Wales perspective to local government? Stephen, I will be asking you the next question; I know you have done great work on this.

Tony Wilson: Yes, we have both worked with the English Local Government Association over the years on its local work and contributed to and help develop reports on this. There is a massive evidence base around how we can make devolution work.

Many countries have in effect a fully devolved system, but then they have clear national rules around some of the underlying things that have to be in place within that devolved system around things like conditionality, for example, the prompt payments of benefits and the availability of employment support, but in practice it is then the money, the detailed policy and the delivery sits with municipalities or it sits with states or it sits with cities, wherever it be, so we can definitely do it.

Here we tend to talk about a more limited form of devolution, where it is kind of, “We will give with one hand, but we will keep the rest”. Even in Scotland, where this has gone further than anywhere—with the exception of Northern Ireland, but further than anywhere in Great Britain—you have responsibilities over some aspects of employment spending, but the rest remains centralised. I think there is potentially an argument we could devolve more to the nations. It is already fully devolved in Northern Ireland, by the way, so anyone who thinks we can’t devolve fully, we really can because it happens already. But we could devolve more on the employment programme spend and then within combined authorities within England, there is potential to devolve that too. There could be real potential benefits of that around commissioning, around alignment, like what is happening with the Local Employability Partnerships in Scotland, the ability to align with Skills Development Scotland funding for skills, to economic development in other areas that are already devolved.

What I would say though is what is even more important than where the money and the power sits is whether we have effective local governance and partnerships that can just make services work better locally. Jobcentre Plus has always been centralised and it has worked much better locally in the past than I think it does now, because it has had more resource, there has been more cover to do that, there has been more of a focus on working in partnership in local areas and advisers have more autonomy and discretion. You don’t necessarily need to fully devolve policy and funding to still have operational decentralisation, in effect, and have very effective local partnerships where you can join up that employment support with other provision.

I mention that because some of it gets tied down in, “Can we devolve the benefits system; can we devolve Jobcentre Plus?” I don’t think we necessarily have to, but some things we could usefully devolve to get those benefits of partnership, but just having more decentralisation, more ability to work effectively locally and a proper focus on this would be hugely beneficial.

Q88            Chris Stephens: Thanks. That brings me nicely to Stephen. Your organisation has done some fascinating research on this and the analysis you have done for the Local Government Association suggests that doing it locally does help employment skills and gives significant economic, fiscal and social benefits through tailoring support to local need. Can you explain what makes localising such activity more effective?

Stephen Evans: That was a particular report within England. I think similar arguments apply across the UK, as Tony was saying. I guess it is not that devolving more things within England or anywhere within the UK is definitely going to improve outcomes or value for money; it is that it has potential to. I think the potential comes from better joining up of services. I was talking earlier about the need to join up work and health services. Health is devolved in Scotland and Wales, so perhaps more devolution has more chance of making some of that join up. Also skills devolved across Scotland and Wales, where 60% of the adult education budget in England is devolved now to different mayors across England. Could they better join up that skill support with the work support as well?

It doesn’t necessarily follow that is going to happen, so what we argued—and I think the Local Government Association argued as well for England—was that there should be outcome agreements, essentially. This happens in Canada and in other countries as well, where the UK Government in this instance would give a single pot of funding to mayoral authorities within England to cover some of the employment and skill support in other areas that were related and those local areas would say, “This is how we are going to join it up and deliver better outcomes and this how many people are going to get a job from these groups or that group” or whatever it happens to be, or an apprenticeship, and then you can judge it to see whether those outcomes have been delivered or not. If they haven’t, you can have a look and say, “What do we need to do about it?” and if they have, “Great. Can we devolve even more?” I think that is where we were coming from.

The ultimate purpose here is to improve outcomes for people and value for the taxpayer. I think is real scope to do that because so many of our services are very centralised and within England have almost been devolved in silos, ironically, and constrained by lots of rules over this, that and the other, for some good reasons and some bad reasons. It is to try to unlock that power of joining up and more local connection, but underpinning that with an outcome agreement so we know as taxpayers what we are getting for that money.

Q89            Chris Stephens: Thank you. Eleanor, does your organisation have a view on what DWP employment support services should be devolved?

Dr Carter: We need to think carefully about commissioning capacity and that just changing the scale at which we commission services is not an automatic fix to some of the problems that we are seeing in employment support. We need to consider the limitations of the very large prime provider contract package areas that have dominated employment support provision over the last decade. The evidence is still developing here, but there are disadvantages and advantages of both centralised and more devolved commissioning and delivery. Clearly if you are commissioning at scale, you have simplicity and streamlined transaction costs.

I think we also need to acknowledge that DWP has some important expertise here around programme design and commissioning, around a first-rate analytical community and the use of management data, including HMRC data, which is important to think about where might that then sit if we are exploring more devolved arrangements. But these massive prime contracts often lack a local connection to both employers and to wider support services, so Stephen’s point around that local connectivity is very important. This kind of orchestration has just not been purchased by DWP, it has never been purchased by DWP through the prime arrangements, so we need to think creatively about whether that can function better in a more devolved arrangement.

In order to bring about this wraparound support, though, that probably comes with a cost, a greater administrative complexity from interacting with all of these different local support services. We need to think about resourcing that well in order to get this wraparound function that we know that we need, particularly for people who are balancing health concerns. There might be benefit to devolving services particularly for people who are experiencing health conditions or who are facing other more complex barriers to the labour market. We might also want to consider the use of co-commissioning arrangements either between different central Government Departments, DWP and health being the obvious ones, but also at a local level thinking about braiding together funding pots between central and local.

Q90            Chris Stephens: Ben, different things are happening in different parts of the UK. There is different devolution; there are different powers. In Scotland, obviously some benefits have transferred. Is there a case then that the DWP employment packages that are being delivered centrally should remain central or should be devolved in part? What is the view of your organisation?

Ben Harrison: This isn’t an area that the Work Foundation has done a lot of work on, but my personal background is in 10 years of devolution policy at a range of organisations. What I would absolutely agree with is if you were to set about designing the ideal local government map for England and the UK, you would not design what we have. You may design something very, very different and you certainly would not fund and resource it in the way that it has been funded and resourced over the best part of a decade now.

There are capacity challenges there, as colleagues have said, and we have a very uneven and patchwork nature of devolution within England in particular, where particular urban areas that have combined authorities and have had devolution deals will be relatively better capable of grappling with some of this than perhaps other parts of the country. Not always, but there is a decent chance of that.

I would say though that even those mayoral combined authorities, including London, are significantly underpowered and under-resourced compared to their international comparators, so we still have relatively low levels of devolution across England. Having said all of that, I absolutely agree though that there are potential gains to be made from aligning employment support with things like housing, debt advice, health strategy and skills. You can see that there are potential gains to be made there.

I think Tony’s point around the distinction between devolution and decentralisation is a potentially interesting one, around how one might make progress in the short run in the absence of a more comprehensive devolution settlement within England that might unify local government structures, which clearly is going to be politically hugely challenging and I wouldn’t see coming forward any time soon. I think that patchwork is here to stay. You might be in a position where you can devolve to some parts of the country, but then have a more general decentralising of service provision in other areas.

Q91            Siobhan Baillie: In 2018 the previous Committee talked about the European Social Fund providing 500 million going towards disadvantaged communities. I am interested to know how the replacement of the fund, which is the Shared Prosperity Fund, has changed the landscape and whether there has been any success in helping more rural areas with the devolved nature of that funding. Tony is smiling, so—

Tony Wilson: No, I am happy to go first. Well, it hasn’t changed anything because we are still waiting for the money to be spent. On those three elements of it, one around employment skills support, that is not even going to come onstream until 2024, I think. Then on business support, that will come on sooner and on local economic development community investment, that should be sooner too, but the real business in this space is going to be that employment and skills element.

Just to be clear, organisations right now are laying people off because the European Social Fund is running out and they have nothing to replace it with. It is absolutely bonkers that, at the time that is wound down, quite significant investment and support for people who are primarily economically inactive, primarily a long way from work, many of them in the benefit system but being reached through other means, we are winding that down and we don’t have a replacement in place at exactly the time when we need more.

Stephen and I have been working together with some housing organisations around social housing and employment in particular, where this stands out as one of the single biggest challenges they are facing, housing associations, with enormous potential capacity here to be engaging with and supporting people who are significantly disadvantaged, but the absence of funding streams like this just makes it very hard to do that. We just need to try to bring that forward. We need to get on with starting to spend and commission that money. Interestingly, that money is going to be pretty heavily centralised because it won’t be for local areas to determine exactly what is spent. It will be a combination of local prioritisation and national approval of those bids.

Stephen Evans: I will just add a couple of things to what Tony said. There are definitely a whole number of flaws with the European Social Fund and the levels of paperwork and the short-term nature of a lot of the projects, even though the programme was seven years long at the time for structural funds, and too often isolated, not joined up with other mainstream provision. There is a whole set of things that we can do better through the UK Shared Prosperity Fund. I am not sure we have necessarily overcome all of those problems in the Government’s approach to the UK SPF. Partly this is distribution of funding evenly across England and across the UK, where they didn’t want to take money away from areas that had ESF before, which means necessarily you can’t redistribute it elsewhere, and not least because there was less overall.

There are definitely a lot of improvements that could be made on ESF. This is very important stuff because we were talking before about people who are economically inactive, older people, people with sickness and disability. Those are the groups that ESF projects went and got and engaged through housing associations and councils and others, as we were saying before.

We have two very weird things going on at the minute. One is that we have this bizarre one-year gap where even though the UK Shared Prosperity Fund technically now exists as a thing, the employment and skills element cannot start until 2024-25. I have not heard any government explanation for why that is. As a result, as Tony said, there are projects now that are starting to hand out redundancy notices to employment advisers that help over-50s and sick and disabled people into work and then in a year’s time when the commissioning starts again, they will all be trying to recruit them and hoping they haven’t gone to do something else again. This is just a bit bonkers.

Then the second thing is the quantum of money and the fact it has not started yet. There is no evidence, because nothing has happened. There are a bunch of investment plans in government and hopefully they will get approved soon. There are obviously a new set of Ministers that will want to look at all of these things. I worry about the gap; I worry about the quantum. We have learnt some things that we improved from ESF, but I think there is more that we could do. This is a genuine benefit of Brexit that we can take.

Q92            Siobhan Baillie: Notwithstanding the gap, which seems to make sense, and that we would worry about organisations that have those skills that can go out are winding up, but is this not duplicating everything that we have been talking about could run through DWP, Jobcentre Plus? Should we be pooling the money into those funds and making it work or are you saying that European-funded organisations are the only people that could reach the groups that are hard to reach?

Stephen Evans: That is a very important point. I would not put it all through Jobcentre Plus for the reasons I gave earlier. It is not in contact with some of these groups of people, it is not necessarily always best placed to help them, but we do need a much more coherent system.

A lot of the organisations getting European Social Fund are the same as the ones delivering DWP employment programmes and it feels to me there are some economies of scale in putting those things together. They are different forms of support, sometimes they are different target groups, so I don’t think you can just have one size fits all, but I think there are definitely some economies of scale.

How you get that is partly a national plan and then local plans for who is out of work in this area, who is in touch with them and who is going to take responsibility for going to get them. You can do that at national level with some defined responsibilities and then at local level by people who know the things on the ground. There are definitely efficiency savings to be made there and we can help more people with the same amount of money if we take a more coherent approach.

Q93            Sir Desmond Swayne: IES published some case studies of young people in European jurisdictions for successful outcomes. What can we learn from the way they are doing things?

Tony Wilson: That research was published this month and there are a ton of very interesting findings about how different countries are taking this forward.

One point I would draw out, which builds on the previous points, is what we do see in a lot of other countries is public employment services or the employment ministry playing a much more active role in being the voice, the champion, the advocate of decent work and quality work in local partnerships and helping to then engage and support and facilitate that kind of integration, alignment and partnership working locally. In a sense, things will always be funded through different channels, there will always be different initiatives, there will always be different grants and so on that we are trying to align, but having very effective local governance—we focus quite a lot on governance in that paper—that helps to bring together the right local partners, identify local priorities and align those with national priorities and then have employment services that are expert in helping to join that up, can really make a difference.

In particular, some of this was in Sweden, it was the Dua model of supporting refugee integration, kind of local grant-based funding. Yes, another funding stream to fund something, but it was built on developing those effective local partnerships and the right people around the table and then having targeted integrated support that aligned and followed the individual.

There are similar examples in Denmark and similar examples in Missions Locales in France. These often have these common themes around this partnership and co-operative approach across areas. That is what stood out from our findings, then we had a list of the top 10 things—which many people who work in employment services would take for granted, but we could do better on—around engaging people quickly, around effective outreach and engagement, around how we deliver personalised support and so on.

Dr Carter: On the international evidence, I think it is helpful to remind ourselves of where the UK is a bit of an outlier, building on those case studies. We are incredibly highly centralised. The UK is at odds with most international practice in its continuing use of quite punitive conditionality arrangements.

The other thing that is interesting when you compare notes with European or Australian academics, they comment on the way that the UK leans very hard towards concerns of efficiency and cost constraints in its value for money assessments of employment support programmes, so there is an unusually low regard for effectiveness and equity. This of course will have very real implications for the nature of support on the front-line.

Q94            Chair: We heard earlier of a growing incidence of mental health problems among young people affecting employment outcomes. How big an issue is that at the moment?

Stephen Evans: We did some research on this recently with the Prince’s Trust and HSBC, working with young people and also doing some analysis. I expected it to come up as young people citing it as a major issue, but I was very surprised quite how high it came up. Some young people were saying this has been exacerbated by experiences during the pandemic, for example. Then also I think there is a general greater willingness for people to talk about mental health full stop, which is a good thing. That doesn’t always mean that people then need mental health support before they can think about going into work.

Oftentimes young people in work would say, “I kind of struggle sometimes with my mental health” but it is definitely a factor that all employment support needs to take account of and where it is more severe and needs specific treatment, doing some of that join up with local health services, as Eleanor was referring to earlier, some of those individual placement and support services that we know definitely work.

Q95            Chair: Thank you. We have covered a lot of ground, very helpfully, and thank you for the evidence you have given us. Finally, are there any other points that you would want to make about how employment support in the UK ought to look in the next two or three years, given the situation that we are in, any points we haven’t covered already? Let me ask each of you. Tony.

Tony Wilson: I would love it if in the next five years we had an approach to employment support where we could say genuinely and confidently that anybody who wanted help to find a new job and potentially to progress in work was able to access that support through an employment service and that employment service would be local to them, it would be online as well as in person, and it may be delivered by Jobcentre Plus, it may be delivered by others.

Secondly, as importantly, that for employers we could say confidently, “We can help you fill your jobs, and we can help you not just fill your jobs but also think about how you can design jobs better, how you can improve your recruitment practices, how you can support people better in work”.

We have come a long way from having that thinking of the role of the employment service being to help people who want a job to find the jobs that want people. It is understandable why that has happened over the last decade or so because of the wider economic conditions. I think now though more than ever going back to the basics of what employment services are for is probably the defining challenge, but also an opportunity for DWP over the remainder of this Parliament and then the next one too.

Stephen Evans: I would make the case for optimism and ambition. At the moment the labour market risks holding our economy back because employers are struggling to find all the people that they need, but we can do better. We published a report a few weeks ago arguing that we should aim for an 80% employment rate, which countries like the Netherlands have, and that this could boost the economy by £23 billion a year.

The way we do that is through extending employment support to people who are out of work, but either not on active benefits or not on benefits at all. The experience from previous reforms over the decades is that this can make a difference. Not everyone is going to want a job or be able to work, but more people than currently do can.

This is a supply side reform to boost growth. Sometimes it is about more money, but it is also about how we use the existing money in the system, so some of the underspends we have, but also some of the duplication we have and how we can minimise that. You cannot do this just either centrally or through initiatives focused on those who are on benefits.

I heard the discussion earlier about Way to Work, which was focused on people who are short-term unemployed and can we encourage them back to work more quickly. Most people who are out of work get back to work very quickly. It is the ones who don’t that we need to worry more about and they are the ones we are not focusing enough effort and support on at the moment.

There is no evidence that Way to Work made a difference. In my view, it is the wrong answer to the wrong question. The right answer is how we extend employment support to those who are out of work, particularly the over-50s, particularly people with sickness and disability. We can do this, the resource is there and the willingness is there, but it is not just about DWP, it is about a much more joined up and localised approach.

Dr Carter: I would like to build on that and comment particularly on employment support. I think there are three levels or layers to think about here. At the front-line I think we need staff that have the time and training to adopt an asset-based approach and to tailor their support to people’s ambitions. I think there is an important co-ordination piece. We keep talking about these wraparound services in local areas bringing together health, housing, debt advice and other interventions. To stitch that together is work and we need to think about how we have resourced that and who is best-placed to perform that co-ordination function.

Then at the level of the Department, we might need to revamp some of the way we think about commissioning employment support, particularly at the intersection of health and employment. This is probably less about designing a single programme and more about co-commissioning for employment outcomes alongside other services, so speaking to a lot of what Stephen was saying about IAPT. This is a health service, but we need to think about how employment outcomes are braided on to that.

Ben Harrison: The challenge of coming last is that my colleagues have all said a lot of what I would say. To perhaps emphasise a couple of points within that, the point around: are we asking the right questions, are we thinking about designing an employment support service that is fit for purpose for the challenges that we know we have now versus some of the ways in which we might have thought about Universal Credit benefits and so on? Some of the rhetoric that has characterised this debate, even in relatively recent times, is not particularly helpful in that regard.

You see that come through into elements of policy like Way to Work, where however one thinks about it, there is a sort of assumption underpinning that that any job is better than no job and it doesn’t really matter what it is. The important thing is to get people back into work as soon as possible, never mind whether that is an appropriate job or whether it is an insecure job or is likely to lead to sustained and better employment outcomes. That is clearly not where we are today, given what we see within the labour market, as colleagues have very ably said. It is that point around are we asking the right questions.

We have all through this session talked about some of the ingredients of how we might address the questions as they are today, and that is around shifting away from a regime that is all about compliance, a mixed economy in terms of providers, a more localised approach, a more joined-up approach crucially across government. In reality, some of the levers required to deal with challenges are within DWP’s gift, but a lot of them sit in other Government Departments, so breaking some of those central government silos, whether that is through taskforces or other means will be very important.

Chair: We have asked for a couple of follow-up points from you already. If there is anything you want to add to what you have said, we would be very eager to hear from you all. Thank you for a very interesting session and thanks for being willing to give us evidence. That concludes our questions to you.