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Our new report, Welfare to work devolution in England, which reviews the devolution of welfare to work policies in the UK and four other countries, highlights that devolution is not a cure-all – there is still a need for a national framework, central accountability and enhanced local capacity.
However, it concludes that greater local control could make welfare to work more effective and increase value for money, if it is underpinned by real incentives for local agencies to work together to get people into better quality jobs. This would in turn contribute to growth and poverty reduction.
New performance measures would help incentivise providers to work more closely with local partners, including local businesses, to achieve more stretching objectives for job retention and earnings progression. Job centres, work programme providers and local authorities would be encouraged to pool fragmented budgets and share data. A localist approach could more effectively tailor services to meet local needs. This would help to open up delivery contracts to a more diverse group of local providers who are best placed to work with those furthest from the labour market.
The report also highlights how stronger incentives exist in other countries for localities to keep unemployment low. In the United States and Netherlands, for example, local areas assume greater financial risk for service delivery, and are awarded a share of the central benefit expenditure saved by getting people into work.
Stronger incentives exist in other countries
for localities to keep unemployment low
Building on the principles of payment by results, any such ‘welfare earnback’ model would need careful design, implementation and management. However, it could deliver the incentive needed to genuinely integrate employment and skills provision with local jobs and growth strategies. Alongside reinvestment in enhanced employment services, savings could be channelled into supporting businesses to grow, raise productivity and ultimately pay higher wages.
The report recommends that a ‘differentiated and experimental approach’ should be a core component of future devolution deals, recognising that capacity will vary in different local areas, and viability will be influenced by the scale and nature of local labour markets. In these places, welfare to work provision should be aligned at the city regional level to create closer connections with local growth strategies.
Last week’s budget included the latest chapter in city devolution with a rather underwhelming deal agreed with the West Yorkshire combined authority. Further devolution of welfare to work could be part of a more ambitious city growth agenda.
There is a real opportunity to achieve better welfare to work services, sustainable employment opportunities and more inclusive growth, if support is given to build local capacity and if the right objectives and incentives are established.