Publication Social security 25 July, 2016

Stepping up, breaking barriers. Transforming employment outcomes for disabled people.

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This paper is the third in a series on reforming the sickness and disability-related out-of work benefits system. A priority for successive governments, reform to date has been inadequate and progress woeful, as the minimal shift in caseload numbers illustrates – in 2014-15 there were just over 2.5 million working age claimants of incapacity-related benefits, a decade earlier there were almost 2.8 million.

The Reform series aims to provide a blueprint for delivering the radical change needed to transform the outcomes of those parked on out-of-work benefits. Working welfare: a radically new approach to sickness and disability benefits laid out a new benefit model. It argued that a single rate for out-of-work benefits is a necessary precursor to breaking the link between work capability and benefit eligibility. It is also key to delivering a more personalised conditionality and support system – one that moves away from categorisation based on benefit type to one that reflects an individual claimant’s distance from the labour market.

Where Working welfare addressed the design of the benefit system – itself a huge barrier to work for many people on Employment and Support Allowance – this paper addresses the employment support services that should sit alongside a reformed system. It also explores the role of employers in ensuring that people with a disability or health condition are given every opportunity to move into, and stay in, work. Each area of reform is vital if the Government is to make progress towards its ambition to halve the disability employment gap; addressing just one issue will not be sufficient.

Despite the implementation of successive programmes designed to help claimants with a disability or health condition make the transition from welfare into employment, the evidence-base of what works is limited. Individual Placement and Support programmes have the strongest evidence-base, but for a limited cohort. Early intervention, co-location of services, personalisation and the quality of employment advisers all, however, seem to matter. These are characteristics that future programmes must build on, but innovation and robust evaluation are essential to find out what works for whom.

Devolution is seen as the way forward in delivering integrated public services, including in employment support. The concept is a good one – local agencies are better placed to bring multiple services together around users – but as yet there is little evidence that locally commissioned and managed welfare-to-work programmes are actually delivering improved job outcomes. Much more needs to be done to pilot local models and build capabilities. The Department for Work and Pensions (DWP) should provide funding to help enable local pilots, which should be run alongside a nationally delivered programme. In the longer-term, government should explore the possibility of devolving both welfare-to-work and benefit budgets to local areas via block grants. This would resolve the tension between devolving a key lever in managing the benefit bill (employment programmes), whilst retaining the cost of programme failure (higher benefit spend).

Outsourced welfare-to-work programmes have proven to be an effective model. They allow diversity of provision through supply chains of specialist providers, can flex to accommodate different referral volumes and can ensure financial risk is shifted from the taxpayer to the provider. The design of the programme is, however, key to maximising the benefit of outsourced provision. The payment structure must incentivise the outcomes government seeks, whilst remaining commercially viable for providers. Small attachment fees should be reintroduced and an accelerator model adopted. The funding envelope must reflect the complex and often multiple barriers many claimants face – and the benefits to the Exchequer of moving a long-term benefit claimant into sustainable employment. As such, the Government should return to the AME/DEL switch introduced for the Work Programme.

Innovation is key: the black box should be retained, but a more radical approach is needed. A ‘skunkworks’ model, akin to that used in the private sector, should be implemented. This would enable government and the sector as a whole to try new things and develop an evidence-base of what works. Taken together, these proposals would drive better performance, which means better outcomes for the people that really matter.

Over the last decade, the focus of welfare policy has been employment support provision, but this is only half the story. Ensuring that suitable jobs are available for when claimants complete the programme and that employers are willing to recruit disabled workers is essential. Despite a strong business case, many employers remain unsure about the risks and costs associated with recruiting disabled workers. Government policy should aim to lower these barriers through supported stepping stone jobs, apprenticeships and changes to Access to Work. These reforms are particularly important for small and medium-sized businesses, who hold significant potential in addressing the disability employment gap. Finally, giving the Disability Confident Campaign teeth would put businesses at the forefront of best practice to create more inclusive and accessible workplaces.

Work, it is well evidenced, plays a fundamental role in people’s health and wellbeing. It is unacceptable that so many people remain excluded from these benefits – trapped in a welfare system that discourages people from showing what they can do, that fails to provide a personalised system of support and that does not have the right balance of incentives for welfare-to-work providers and employers. This paper, combined with the recommendations in Working welfare, provides concrete proposals for the Government to address this.