Making work pay isn’t as simple as it sounds

The much awaited publication of the white paper, Universal Credit: Welfare That Works, sets out the future direction of welfare reform policy. The paper heralds the beginning of much publicised reforms such as simplification of the benefits system, tax reforms which seek to ensure work pays and the introduction of a mandatory work programme.

On one hand the white paper follows on from the Labour government’s reforms, providing a continued increase in ‘conditionality’ – the requirements placed on claimants in return for benefit payments – but raises the stakes by encouraging work through an increased threat of punishment for those not deemed to be making efforts to find work. More positive reforms are also included such as the welcome tax reforms to increase the financial benefits gained from entering employment.

The white paper outlines plans to introduce a universal credit, a welcome move which seeks to reduce the complexity of the previously cumbersome system. The universal credit takes the step of making work pay for a larger number of claimants.

The white paper suggests these moves will result in 350,000 children moving out of poverty by improving work incentives particularly for those working less than 16 hours per week – the current level at which working tax credit incentivises work. This will be achieved by introducing a benefit ‘taper rate’ than ensures 35p from every £1 is retained by the employee. However, some questions remain about the universal credit.

A major cost for many people returning to work is the cost of childcare. It is questionable whether the taper rate will cover such costs, especially in areas where the cost of living is particularly high. If the government is seriously going to tackle deep-rooted unemployment, particularly for lone parents, then further investment should be placed into the provision of affordable childcare.

The headline-grabbing centrepiece is the introduction of the Mandatory Work Activity Scheme. This represents a continuation, but also a significant increase, in the Labour government’s welfare reform principle of ‘rights and responsibilities’ – the right to support from the welfare system but with this support comes the responsibility to progress towards work.

A number of concerns are apparent from this proposal and it’s here that the white paper provides a step change in the strength and tone of the language used. Mandatory work activity is designed to ‘develop labour market discipline’ and demonstrate ‘compliance with the jobseekers regime’ which risks stigmatising those forced to attend.

A more constructive tone would have been welcomed with a language of practical employment support, skills developed and work experience surely being more appropriate. Potential links to the Big Society could have been developed by allowing motivated claimants to volunteer onto a more positively focused programme, potentially helping some claimants from slipping into the rut that unemployment often brings.

A more positively focused scheme could have utilised the vast array of skills and experience provided by claimants across the country, particularly in times of recession. Delivery details for the scheme are limited but the third sector could have been offered a leading role in delivering these more positive opportunities, therefore offering links to the Big Society dream.

Instead, participants of mandatory work schemes face stigmatisation, and potentially, further barriers to work if future employers realise they have been previously sent to demonstrate ‘labour market discipline’.

Further concerns are raised as compulsory attendance on the scheme is at the discretion of employment advisers, raising concerns about their relationship with the claimant. Our research into unemployment has found that most claimants are in need of individualised support which seeks to overcome personal barriers that prevent access to employment.

These relationships work best when they are underpinned by a strong level of trust. A trusting relationship where support can be gained to overcome the often multiple and complex challenges they face in entering employment, the transferable skills they have, and the support and training they require. Punitive measures which are demanded at the discretion of the adviser appear to undermine the development of a trusting and supportive nature.

Our research has also found that claimants face multiple and complex personal circumstances when they are out of work. Issues of housing, childcare, personal finance and access to opportunity are often fundamental. Such issues often contribute towards unemployment and restrict the ability to move back towards the labour market as wider life circumstances are of greater, and immediate, concern.

Advisers must use their discretion carefully, offering wider support than just job search, taking personal barriers to employment into consideration before mandatory work is required.

Otherwise, the new and more punitive measures will focus on the effect rather than the cause of unemployment. Effects that will be magnified as poverty increased as a result of withholding benefit payments. However, the extent to which advisers will be willing to make the difficult decision to withhold benefits for up to three years remains to be seen.

Meanwhile, claimants are also likely to leave the benefits system before mandatory work becomes a reality, similar to what currently happens before the New Deal Gateway. Referrals to the Mandatory Work Activity Scheme may, in relative terms, be small.

Matthew Jackson discovers alternative ways to tackle worklessness in Bristol