Welfare Reform and Work Bill

Baroness Drake Excerpts

Monday 14th December 2015 Lords Chamber

[Baroness Hollins]

My Lords, I will speak to Amendment 67, in support of my noble friend Lady Campbell. Given the Government’s ambitious commitment to halve the disability employment gap, it seems logical and common sense to require the Secretary of State to report on progress, but such a report would need to be broken down by disability or impairment. For example, the Spinal Injuries Association draws attention to a number of issues that prevent people with new spinal cord injuries returning to work. I shall mention just two of those. The first is the need to have the right care and support package in place that is flexible enough to enable a person to work. The second is the need for accessible transport to and from work.

The employment rate for people with learning disabilities, mental illness and autism remains stubbornly low, which highlights the very real structural and attitudinal barriers that exist for them. Worryingly, the Health & Social Care Information Centre reports that the percentage of people with learning disabilities in paid work has dropped from 7.1% to 6% in the past few years. To be frank, the current government employment schemes have failed people with learning disabilities. The National Development Team for Inclusion has done some thorough research into the cost-effectiveness of employment support for people with mental health problems and learning disabilities. It shows that much of the current public spending in this area is being wasted, as it goes on non-evidence-based models that are more expensive and have poorer outcomes than the approaches that do work. If scaled up, effective interventions could be expected to support up to three times as many people in retaining paid work. This would save considerable sums in traditional care services.

A major obstacle for people with learning disabilities to getting into work is the lack of aspiration, for themselves if they have grown up not having any expectation of working, and of their families, their supporters and the professionals who advise them. The two approaches found by the NDTi to be effective were individual placement support and supported employment. I declare an interest here as I have published a book for employers which tells the story of Gary Butler and his work at St George’s, University of London, where he is employed to teach medical students how to communicate with people with learning disabilities. It is interesting because it is a job which only those with learning disabilities can do. The normal image of work that is suitable for such people is traditionally along the lines of collecting trolleys at Sainsbury’s and so on, but there are jobs which are particularly suited to people’s own needs and interests. St George’s has been employing two people with learning disabilities as trainers for 23 years. It is something that I initiated after having seen a similar kind of scheme in Boston.

With the right support, people with learning disabilities and those with mental illness make valued employees who are more likely to stay in work with lower sickness rates than non-disabled people, and there is research evidence for this. I hope that the Minister will recognise the value of a detailed report so as to understand any remaining barriers to halving the disability employment gap and, as my noble friend said, to get behind the figures.

[Baroness Drake (Lab)]

My Lords, I rise to speak to Amendment 64A. On 25 November, the Chancellor stated that he was determined that the economic recovery would be,

“for all, felt in all parts of our nation”.—[Official Report, Commons, 25/11/15; col. 1358.]

Increasing employment is a key indicator of the benefits of economic recovery, but there is much debate about whether the increase has been at the cost of job quality, weak pay growth and productivity performance, and rising and deepening job insecurity for a significant number of workers. Understanding the reality and extent of these concerns is important to understanding progress to full employment. Level of employment is a necessary but not sufficient indicator of whether the recovery is benefiting all parts of the nation and providing opportunity for all, which the Chancellor aspires to.

The plethora of amendments to the Clause 1 obligation to report on progress to full employment reveals that many noble Lords share that concern, if for slightly different reasons. Amendment 64A requires the report to address additionally what is happening within the labour market, in particular but not exclusively in terms of changing employment practices and types of employment, as well as on self-employment, non-guaranteed hours of work, quantitative and qualitative underemployment—that is, people working fewer hours than they want, or at a lower level of skill than they are capable of—and younger workers.

The UK Commission for Employment and Skills reports that, since 2008, the UK labour market has been more efficient than some other economies in keeping people at work, but that there have been significant changes in the nature of that employment and that those at the margin are impacted especially harshly. Labour productivity is struggling to recover. This results from factors such as the decline in youth employment, rising underemployment, a falling number of jobs in middle-skill occupations and a shift to a lower-wage, lower-skill economy. There are concentrations of unemployment and evidence of quantitative and qualitative underemployment. The commission found that nearly half of establishments reported that they had employees with skills more advanced than their job required, which accounts for 16% of the workforce and 4.3 million workers—indeed, more than are considered to have a skills gap.

If the commission is correct, when it comes to considering how full employment is interpreted, the available supply of labour will be much bigger than those officially classified as unemployed. Economic growth has increased employment but not always of the type and with the hours that people seek. If the Government want to achieve opportunity for all and lower welfare, the higher minimum wage cannot be a direct replacement for welfare. Arithmetic tells us that the £4 billion rise in pay it will produce will not compensate many whose benefits will fall as a result of the £12 billion cuts. The minimum wage targets the hourly pay of low earners and we hope that it will deliver increased productivity. Welfare supports low-income families. A goal to benefit all families needs the progress report to cover types of employment and practices.

The rise in self-employment—83% of net gains in employment between 2007 and 2014, rising to 4.5 million and 15% of workers—was accompanied by a 22% fall in self-employed average median income. The Resolution Foundation found that more than half of full-time, self-employed people are low paid, compared to around one in five employees. My noble friend Lady Donaghy gave an excellent articulation of the problem and any repetition from me would merely detract from that clarity. To restate, increasing the minimum wage is a solution largely confined to those directly employed. The minimum wage does not apply to low earning, self-employed people. Whether self-employment falls with recovery is uncertain, but policies focused on increasing high-wage employment need to deliver for the self-employed too.

The labour market has witnessed the rise of other precarious forms of employment, such as a sustained increase in the use of fixed-period contracts, casual employment, short-term arrangements and non-guaranteed hours. Recent ONS updates on the use of non-guaranteed hours contracts—zero hours for short—reveal around 1.5 million such contracts where work was carried out in the survey period, which is an increase of 6%. But in addition to the 1.5 million, there were 1.9 million contracts where no work was carried out, which is up from 1.3 million. This is not a small business phenomenon, as nearly half of businesses with employment of 250 or more make use of non-guaranteed hours contracts, compared with 10% of businesses with less than 20.

The key observation is that the increased use of non-guaranteed hours contracts over a period of stronger employment recovery suggests that they are becoming a permanent feature. The Resolution Foundation comments that,

“it is clear that this form of working is not fading away as our employment recovery gains ground … some people value the flexibility offered by ZHCs, for many they bring deep insecurity … for those affected—particularly in low-paying sectors … the danger is that job insecurity is becoming deeper”.

The Clause 1 report needs to inform us whether such contracts are becoming a standard form of employment in low-paid sectors, such as hospitality, care and retail, and how the Government will respond.

--- Later in debate ---

The noble Baroness, Lady Drake, proposed Amendment 64A, which would require the report to include information on the self-employed, which I have already discussed, NEETs and underemployed groups. In discussing some of the trends, she made the point that self-employment makes up most of the total employment growth since 2007—that is a slightly statistical quirk, since it happened because the number of employees fell sharply in the recession, as it always does. All the losses in employee numbers have since been regained and figures are up by 1.5 million since 2010.

[Baroness Drake]

The Minister is taking us through a series of reasons why he cannot give the granularity in the report that people seek. Given that the Chancellor said that it was his aspiration to have a higher-wage, low-welfare economy that benefits all, unless Parliament has some granularity in the metrics for assessing that progress, it sounds as though the Chancellor is setting his own aspiration and his own marking system. Everyone agrees that there has been a material change in the nature of employment over the last 10 years, which influences what people can earn and how they can participate in the labour force. If one aspires to a low-welfare economy that benefits all, we need to understand these trends and what is happening to people with disabilities, the self-employed, carers, people on zero-hours contracts and so on. The Minister seems to be listing why that cannot be provided.

[Lord Freud]

As the noble Baroness knows perfectly well, so I do not have to tell her, a lot of these issues are quite contentious and there is a lot of analysis going on, some of which takes many years to complete and to come to fruition. Our problem is that this commitment runs through the rest of this Government to 2020, and putting in some of the management information requirements that these amendments in practice look for is expensive and risks delaying universal credit, because we are on a tight timetable. I know noble Lords have a primary interest in seeing us move with as much speed as we safely can. We would probably not be provided with adequate information anyway, given the length of time it takes to get it into shape, to take us out to the 2020 deadline. I hope that has cleanly summarised why we are not objecting with horror to the prospect. We looked at it very deeply, but we have to use the information that is available and the extra information we are gathering to get this report to work.

[Baroness Drake]

I am not trying to put an argument for deferring universal credit, and I understand some of the difficulties, but at the very least the Government should be able to commit to giving us an interim report on the progress they are making on these issues, so we can begin to understand the likely developments and how successful the Chancellor’s aspirations are.

[Lord Freud]

The whole point of our clause is that we will set out our proposals on how we intend to report on employment. Clearly, a lot of the thoughts expressed here and the specific requests and reasoning are pretty valuable to us as we develop how best we can do a good report on what is happening to our progress to full employment.

Our latest figures on NEETs are rather encouraging and show that around 14% of 16 to 24 year-olds are NEETs, which is the lowest figure on record. It is a constantly changing group, and many people leave the labour market for short periods between jobs, so it does not tell us, of itself, where we stand in relation to full employment. Zero hours—which I almost thought I would not talk about, because we always have a little snip at each other about it—is only 2% of the market and we have outlawed exclusivity clauses in those contracts. Over the past year, part-time work has been driven entirely by people choosing to work part-time, which might not have been the case in the depth of the recession. Again, it is a constantly changing group.

On some of the concerns expressed by the noble Baroness, Lady Drake, I sometimes feel I am living in a parallel universe. Employment growth has been dominated by full-time and permanent employment. It has risen in all regions since 2010. Underemployment is on the turn and going the right way. Wages are now growing quite a lot faster than inflation and temporary work in the UK is among the lowest, so the trends are a lot more encouraging than they have been.

Given these arguments, and given that statistics on these issues are already widely available, I do not believe that specifying them in the report is necessary. However, I understand that full employment is not just about a particular percentage of working-age adults in work, and, as I have said, we will give further consideration to how this annual report can best reflect the diversity of labour. I apologise for the length of my response. I urge noble Lords not to press their amendments.