Welfare Reform and Work Bill (First sitting)

Emily Thornberry Excerpts

Thursday 10th September 2015 Public Bill Committees

[Stephen Timms (East Ham) (Lab)]

Q 1 I welcome you all to our Committee.

This is probably a question for Marcus in the first instance. The Bill requires the Government to report on progress towards full employment. How do you think full employment should be defined? What is the right definition for this purpose?

Marcus Mason: I will give that a stab. We all know that full employment can be defined in different ways, with different levels of full employment in different countries. In that sense, we very much think that full employment is a moving target. Our latest economic forecast shows unemployment reaching around 5% by 2017 and flattening out to 5% in Q2 2018. As a result, we feel that a level of unemployment of around maybe 5% to 4.5% is probably the point where, if you went below that, you might start causing inflationary pressures. So that is the sense that we get from the forecast that our chief economist does at the British Chambers of Commerce.

[Emily Thornberry (Islington South and Finsbury) (Lab)]

Q 2 I think the important thing, though, is to look beyond the 4% or 5% unemployment as being full employment. Isn’t it important to look at how we define employment? The Office for National Statistics says that someone on a zero-hours contract, perhaps working no more than two or three hours a week, is in employment, but that is hardly a good situation for that individual to be in. If we have a reporting requirement that focuses solely on those sorts of numbers, using that broad definition, how can we really be helping ourselves? Are we not just putting forward an incentive for people to be in insecure and low-paid jobs?

Marcus Mason: Obviously you need the headline unemployment figure, because that is most sensitive to Government policy and has the most impact on inflationary pressures. Of course, you could imagine a situation where a Secretary of State reports using that headline unemployment figure, but other figures could go into that report as well.

[Emily Thornberry]

Q 3 But the point is that if we are not measuring unemployment further than that—I mean, should we not be measuring things such as whether people are getting the hours they want and how many of them have to rely on in-work benefits to live? Is that not a better way of measuring real full employment, as opposed to people working in a family business and not getting paid, working just an hour a week or working on a zero-hours contract? If we want real full employment, we want people to be able to live with dignity. The measures that the Government are introducing are not the sorts of measures that the public can rely on and, perhaps, can be defined as a lie.

[Hannah Bardell (Livingston) (SNP)]

Can I ask a supplementary to that? Following on from Emily, as has been made clear, with the baseline for recording being only one hour in the previous week, surely it would sensible to have something in the Bill specifically about quality and decent work, and have the Government define that in the Bill. Would that be sensible?

Marcus Mason: It would be sensible to think about the large number of people who are inactive, and how you account for them and incentivise them coming into the labour market. As you know, the unemployment figure does not take those people into account, so it makes sense to supplement the unemployment figure with an employment target. Who sets that target is crucial. Is it an independent voice—an independent body of experts—or is it just the Secretary of State? Ultimately, you would probably want a set of economists, perhaps the Office for Budget Responsibility, giving an annual indication of where they think full employment is given the economic circumstances at the time, which the Secretary of State can then report against.

[Emily Thornberry]

Q 4 I have one more question. One aim of this Bill is to lower the level of the household benefit cap. The Government are arguing that they should cut benefits in such a way as to provide an incentive for people to go into work, but they define work as being 16 hours a week. Surely we cannot have a definition of employment from the Government in the Bill saying that it is 16 hours a week, and yet measure employment as one hour a week. Do you see the inconsistency?

Marcus Mason: Yes; to be honest, there are lots of ways that you can probably refine these figures. There are lots of people who work fewer hours than the average working week, for lots of different reasons. They do not all fall in the category of people who want to work more, although I totally accept that underemployment is a big issue and increasing numbers of people would like to work more but are underemployed. It is important to pick that up in narrative reports, but once again, we think that the headline figures should focus on the unemployment rates and probably the employment rates as well.

[The Minister for Employment (Priti Patel)]

Q 5 I have a question for both Marcus and Rebecca. You have already touched on the point about people who are inactive, and incentivising work, which are important factors. What are your views on how the Government can work closely with employers, businesses and other organisations to drive employment and incentivise work, particularly with those who are the furthest away from the labour market?

Rebecca Plant: I do not think it is so much the hard-to-reach people. If you break up what I describe as the talent pipeline of people going into work, it is more about the middle, or what I call the lost generation of people; they are doing okay and have okay grades, but the question is what is going to happen to them. The NEET end of the market is really quite well catered for in terms of what they can do. A-level, natural routes into university and degree apprenticeships are fantastically catered for.

The million dollar question is how you get employers closer to the wealth of talent that exists. There are so many organisations and ways for employers to do it. For example, the National Apprenticeship Service is trying to bring employers online. For employers, you have to take a step back at times, because you do not actually know what route to take. In my opinion there needs to be a simplification of how employers engage with young people. Schools sometimes block that, because they are saying, “Hold on, I have too many people trying to talk to my young people.” As for parents, oh my goodness! But sometimes they still do not know the right route, so how do you get really clear, concise messages across to the people you are trying to attract? There is still a lot of work to do on that.

Marcus Mason: When thinking about those furthest away from the jobs market, one of the constant refrains we hear from our members is that they feel that the quality of the interaction with the jobcentre is often not there. Some jobcentres operate fantastic programmes and are very good at working with businesses, but in some cases our members feel that jobcentre staff can be driven by their internal metrics, and that can lead to some businesses being bombarded with applicants who are not relevant or who perhaps do not even want that particular job. Reforming jobcentres to make them more responsive to businesses needs is something that needs to be looked at.

As for the entry-level side of the equation, youth unemployment is still three times higher than average unemployment. In a narrative report that the Secretary of State would make, that might be something to highlight—how are we closing the gap between the two? The Government can encourage businesses and schools to start working together much more proactively on that. Of course, the careers company might go some way in doing that, but ultimately there needs to be much more incentive from the school side to reach out to businesses, and to promote apprenticeships and not just vocational pathways.

Similarly, we accept that businesses can do more. In one of our recent surveys we asked what they thought was the most important thing for a young person going into work; 80% of businesses said work experience, but fewer than 50% offer it. We are quite happy to challenge business as well in this space. We accept that both on the education side and on the business side, more can be done to provide pupils with work experience and the right skills for them to progress into the workplace.

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[Kate Green]

Q 25 Can you say something about the way in which the Government should or should not track different kinds of family structure, different kinds of family background, and whether you see this legislation as facilitating that?

Neera Sharma: We believe that the Government should look at the situation of different families. For example, we know that children in certain black and minority ethnic families are much more likely to grow up in poverty. So some of the proposals in the Bill, such as limiting tax credits to two children, will impact harshly on larger families, many of whom are likely to be BME families.

[Emily Thornberry]

Q 26 I represent a constituency that is part of a London borough which has the sixth highest child poverty figures in the whole country, and we have already been hit very hard by the benefit cap, with many families having to move out of Islington to outer London, so children are having to commute for many hours to go to school. Can you tell us what it means for children to be uprooted from their local communities at an early age, and how their education can be affected, either by changing schools or by having to travel 20 or 30 miles to get to school each morning? How might that impact on child poverty and their life chances?

Neera Sharma: We know that children who grow up in poor families do less well in terms of their education. Uprooting those children from the communities and the support they need, as you have said, has an impact on their life chances. We are concerned that families will have less income as a result of the cap, but we are also very concerned about the mechanisms for reviewing that cap, because the Bill allows the Government to review that cap without having to report to Parliament. It is really important that there is full scrutiny and that the Government do report to Parliament, and that they ask the Social Security Advisory Committee to undertake an annual review of the cap that is reported to Parliament before any decisions are made about increasing, or decreasing—as it probably will be—the cap.

[Hannah Bardell]

Q 27 Following on from that, the Child Poverty Commission warned in 2014 that there was no realistic hope of meeting the targets that were already set, and that was before the cuts that were proposed in this Bill. Is there not a grave risk that, if we remove those targets, we will have no way of understanding the real impact of the cuts, at a stage when we are not meeting the targets previously set?

Neera Sharma: Yes, I agree. I think that is why it is vital to keep the provisions of the Child Poverty Act as they are, because they do set targets for Government. They set measures, but they also enable a strategy to be produced that can look at how we can tackle child poverty and children’s life chances over a longer period.

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[Helen Whately]

Not immediately.

[Emily Thornberry]

Q 32 On the 30 hours a week that we know the Government are going to be offering, is there a guarantee that they will pay for the 30 hours a week that people may want? In some areas, the cost of childcare is much higher—in my borough, for example, it is 30% higher than the London average. Will there be a shortfall between the amount the Government are prepared to pay for the childcare and the amount it will actually cost?

Neera Sharma: That is very likely. The Pre-school Learning Alliance has said that, on average, the cost of childcare is £4.53 an hour; the Government contributes, on average, £3.88. When the childcare offer is doubled, nurseries could operate at a loss of £661 per child per year, so there are going to be quite significant issues for providers.

[Emily Thornberry]

Q 33 My next question is: if you are an unskilled lone parent with a three-year-old and you are trying to find work, are you likely to be able to get work available during the day, or are you more likely to get the sort of work that might be early morning cleaning, bar work or zero-hours contracts where you are expected to be available? How does that fit in with setting up a new form of childcare?

Emma Stewart: At the moment in London, the majority—over half—of part-time jobs pay below the London living wage. A high proportion of them are precarious employment-related—zero hours or shift patterns. The challenge is multiple. There is sometimes no guarantee of regular work and regular shifts. It is very difficult to organise childcare if you are working in a supermarket and you do 9 am to 12 pm for three days and then 10 am to something else for the other two days. Retail works in such a way that shift patterns are often rotated on a monthly basis, so it is very hard to align childcare with certain sectors. We know that within health and social care, there are significant issues in relation to that type of work.

The conversation about part-time work needs to focus on permanent part-time work. There are huge wins for business to consider, in terms of how it can build efficiencies in the way that jobs are done and redesigned to facilitate better retention rates and better talent attraction rates. Even within lower-paid sectors, we know that social care is facing a huge nightmare with retention issues at the moment because women are not able to sustain the kinds of shift pattern that they are having to work and it is very, very difficult to find childcare arrangements. We also know that women in retail often share childcare with their partners and families, because it is just not possible to find the right kind of childcare.

Thirty hours a week in principle is fantastic, but when and how it is made available and how it is aligned to current employment patterns is critical. A classic example is summer holidays. We know from some recent research that about one in 10 parents leave their jobs in the summer because they cannot find childcare.

[Peter Heaton-Jones]

Q 34 Can I pick up on the issue of the proportion of childcare costs that are covered? It is currently about 70%, but under the new arrangements it will probably be about 85%—is that right?

Emma Stewart: Yes, that is correct.