It did it before and it can do it again. Labour’s “new deal” employment programme was its 1997 flagship. Now those lessons, ignored and trashed in the Tory years, are being revived. While Labour was good at scrupulously monitoring the results of its social programmes, the Tories ruled by their gut instincts.
Faced with high unemployment and shocking numbers of youths who had been dumped and neglected, Labour’s new deal for young people worked. By 2002, it could rightly claim the virtual eradication of youth long-term unemployment.
I followed the programme in detail, sitting in on jobcentre interviews, chasing results. How was it done? A total change of attitude and approach, from punitive to encouraging. Employment staff were retrained and put on a higher grade, becoming personal advisers to help remove obstacles to working. They offered 18- to 24-year-olds four well-organised options: a further education course, work on environmental projects or in a voluntary organisation, or a subsidised job with employers given £60 a week to take them on. “No fifth option” was the backstop sanction. About 339,000 long-term unemployed young people found work by 2001. Deep distrust of the Department for Work and Pensions faded, as people discovered genuine help. There were other new deals for the over-50s, disabled people, and a particularly successful one for lone parents. Jobcentres were transformed from The Full Monty’s bolted-down plastic chairs and shouted interviews behind scratched Perspex to open, less threatening places.
But by 2009, in the aftermath of the bankers’ crash, nearly 1 million young people landed in jobcentres. Labour, determined not to see them become a lost generation, dashed to set up the future jobs fund. Employers were paid £6,500 to take an extra young person for six months, who were paid at least the minimum wage, creating 105,000 jobs. (A local panel, including unions, ensured the jobs were new, not substitutes.) I watched Jon, a depressed 19-year-old without qualifications who had despaired of work, amazed as his adviser in a Brighton jobcentre showed him all kinds of good jobs suddenly available. Cost-benefit analyses found people spent 70 fewer days on benefits and 43% were estimated to be in work after completing the programme – a high rate compared with other schemes, and well worth the high upfront cost. But the great George Osborne axe fell on this, as it did on so much else.
Liz Kendall, the work and pensions secretary, has for a long time talked up this approach: she knows the research well and, bludgeoning the Treasury with the evidence, has reportedly extracted as much as £1bn for supporting disabled people into work, as well as the 1 million “neets” (young people aged 18-24 not in education, employment or training). That is a significant sum to spend on support programmes, say employment experts. It should create high-quality schemes. Kendall always promised more personal help by easing work coaches’ caseloads. She talks of the need to de-risk taking a job, so disabled people can trust they have the option to try a job but return at once to benefits if it doesn’t work out. Employers need to be more flexible with varying states of illness. She talks of no longer wasting time by harassing those who will never work, while neglecting many who could and want to. But here’s the hitch: actual cash returns will take time to score on the Office for Budget Responsibility (OBR) and Treasury balance sheets.
The great question is: how big an axe will fall on disability benefits when she delivers her green paper next week? And, more importantly, how fast? Over time, if schemes work and if the economy perks up, then reducing the number of claims and their costs is possible. But cuts before that success will be brutal. What’s more, as economist Jonathan Portes points out, OBR reports show its forecast disability cuts never actually add up. For example, introducing Pip was supposed to be a cut, replacing the disability living allowance; OBR duly scored it, but Pip costs ballooned. Even in the time of truly vicious jobcentre persecution of claimants with sanctions, punishment didn’t work. Chivvying may urge some people into work, but research shows it has the contrary effect on those with mental ill-health.
Squeezing over here bursts out elsewhere, in a half-starved system. With basic unemployment pay at a sub-survivable £393.45 a month, anyone out of work for long is in a miserable state, and likely to describe their condition in medicalised terms. That’s not cheating; it’s a true expression when they apply for disability benefits that lift them above starvation. The country is sicker than it was, and sicker than its neighbours, physically and mentally, as the Institute for Fiscal Studies (IFS) reports this week, with nearly 1 million more people on disability benefits than pre-pandemic. It’s not imaginary, they say, as it matches the rise in “deaths of despair”, from drugs, drink and suicide.
Jobs are far harsher than they once were, Prof Ben Baumberg Geiger reports – physically and emotionally more stressful, with less personal control. Efficiency savings have killed off “light work” for frailer people. What Labour does may help: a better NHS, less monstrous gig-working conditions and a better spirit of care. But any savage axe to living standards of hard-up disabled people wouldn’t encourage that. Labour would face a hefty backlash. Nor will voters approve, with 53% saying these benefits are too mean or about right, and only 26% saying they are too high.
No wonder disability benefits costs terrify the Treasury, and they are due to rise by £35bn in four years time. But here are alternative facts, equally true, if you shake the statistics kaleidoscope another way.
The overall proportion of spending on benefits for working age adults and children is similar to 20 years ago, the Joseph Rowntree Foundation told me. And here’s another shake of the kaleidoscope from the IFS: the UK’s spending on working-age health-related benefits is comparable to that of other similar countries.
There are no easy billions to be had from the benefits budget, though much reform is needed within it. Look elsewhere: Starmer abolishing NHS England should render savings from this costly duplicate. Whitehall should shed extra staff acquired in Covid. But there are few painless options for large sums, as all the economic choices are terrible. But of all unpalatable ways for Labour to break its election promises, either by borrowing or by taxing more, the worst choice of all would be cuts and austerity, slicing deeper into public services.
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Polly Toynbee is a Guardian columnist
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