Our fortnightly series continues.
In the early 2000s, a radical welfare-to-work policy was developed by Kent County Council under the leadership of Sandy Bruce-Lockhart. Called the Kent Supporting Independence Programme (KSIP) it didn’t quite call for the full devolution of welfare policy — but came very close to it.
The idea was that all welfare-related spending in Kent should be locally monitored and analysed. On the basis of this information, the delivery of public services within the county would be co-ordinated to pinpoint and overcome the causes of dependency in each individual. Furthermore, the goal was strike a deal with central government: some or all of the welfare savings generated through local efforts would be retained within the county and reinvested in the Programme.
Sir Sandy’s vision was ahead of its time: a project to reduce the demand for government in an era when Tony Blair and Gordon Brown were busily expanding the state. It was also several years before the revival of localism. New Labour was interested in welfare reform — but only on a tight leash from the centre.
Thus the Supporting Independence Programme was never allowed to prove itself. And yet, now that we’re hitting the limits of the conventional welfare reform, it’s time for a rethink.
The Great British jobs boom
Despite the importance of family and civil society, nothing has a more quantifiable impact on reducing demand for government than jobs. The more that people work and earn, the less they depend on the state.
But isn’t full employment something we’ve achieved already?
In the wake of Global Financial Crash of 2008, the “jobs-led recovery” pulled us out of the Great Recession. Indeed, employment levels didn’t just recover to the pre-crash levels, they exceeded them. As noted in a 2019 report from the Resolution Foundation, there were three million more people in work (compared to the pre-crash high) and the employment rate was up three per cent.
Furthermore, this happened against a background of austerity, shrinking public sector payrolls, sluggish growth, high immigration and regional inequality. Furthermore, despite the dire predictions, Brexit did not interrupt the jobs miracle — let alone cause mass unemployment.
All of this looks like a vindication of Conservative welfare-to-work policy. It’s also a vindication of making structural changes to the status quo. Conservative-led governments didn’t just bear down down on welfare dependency, they also introduced the National Living Wage and doubled tax allowances. Economic incentives were shifted decisively in favour of work and produced the desired results.
So is that it then? Can we declare the jobs problem solved and end this chapter right here? No, because there’s more to jobs than the unemployment rate.
The productivity problem
Though the UK has made great progress on job creation, wage growth has lagged behind. That, primarily, is a function of our persistently poor record on productivity.
Though this is sometimes described as the “productivity puzzle” it isn’t that mysterious. British workers would be more productive if more of them could move to where the most productive businesses are. However, that would require us to build more houses in the right places. Alternatively, the most productive business could move to where the workers are. However, that would require major investments in transport links and other vital connections.
This takes us into the realm of industrial policy, which is beyond the scope of this series. For now, we’ll just note that having made the structural changes that enabled the employment boom, we need to make the structural changes required for a productivity boom.
The inactivity problem
As well as the low wage problem, Britain has an economic inactivity problem. As the dust settles on the Covid years, it’s become clear there are too many workless people who don’t count as unemployed because they’re out of the jobs market altogether.
The Office of Budget Responsibility has raised the alarm — reporting that the the share of people either in work or looking for work fell from 79.8 per cent in early 2020 to 78.3 per cent in mid 2022 — with only a partial recovery since.
This lower rate of economic activity is enough to make a major difference to our public finances. The OBR puts the annual cost at an addition £6.8 billion in welfare payments and an £8.9 billion hit to tax receipts — an illustration of just how important jobs are to reducing demand for government.
It would seem natural to blame this setback on the pandemic. However, apart the US, there’s been no rise in economic inactivity in the other G7 countries. So what happened in Britain?
The most important reason given for why more people are not seeking work is “long-term sickness”, which includes disability and mental health issues. Again, Covid looks like the most obvious explanation. However the OBR points to a trend starting years before the pandemic: “self-reported disability prevalence for working-age adults” rose from “15 per cent in 2010 to 23 per cent in 2023.”
There are several causes at work here — including the fact that the working age population is on average older than it used to be. However, the factor that really stands out is what the OBR describes as a “deterioration in both clinically measured and self reported mental health”. Again this is a long-term trend and not just a feature of the pandemic and lockdown. Worsening mental health among young people and the astonishingly high proportion of adults on anti-depressants does not bode well for the future.
Change is possible
Britain doesn’t just face a productivity crisis, but also a crisis of wellbeing — one with very tangible consequences that can be measured in terms of chronic worklessness and the multi-billion cost to our public finances.
This is not something that government can ignore. However, we do need a new direction. Having shifted the economic incentives in favour of work, we now need to address the complex social problems that stop people leading productive, independent lives.
The first thing to realise is that social change doesn’t only go in one direction — i.e. to ever greater levels of dysfunction. Since the millennium, crime levels have fallen, as have teenage pregnancy rates and cigarette smoking is on a trend towards extinction.
The right interventions can make a difference.
Lessons from the Troubled Families programme
In the wake of the 2011 riots, the Government set up the Troubled Families programme. Which was all about coordinating the public sector at a local level with the primary aim of preventing youth crime, anti-social behavior, truancy and unemployment.
This is broadly is the right approach, but Troubled Families and its successor programmes have been hampered by Whitehall’s controlling tendencies. In particular, delivery by local government has been subjected to an elaborately bureaucratic process of payment by results.
Improvements have been made over the years, and government funding does seem to be producing positive returns. Yet the programme remains narrow in focus and thus restricted in scale. As the National Evaluation notes, the overall impact has been “modest in absolute numerical terms”.
Given the fiscal emergency that lies ahead of us and the worrying decline in economic activity, an entirely higher order of ambition is required.
Most importantly, we need to help everyone held back by avoidable barriers to employment. The prevention of youth offending should remain a key objective, but as part of a wider effort to promote responsibility and self-reliance in all age groups.
In this respect, the Kent Supporting Independence Programme provides a much more attractive model than the centralised approach that has dominated so far.
The advantages are as follows:
The intense coordination required for joined-up public service delivery is much more easily achieved locally — where frontline staff in different public services can talk to one another. Trying to do it from Whitehall requires high-level bureaucratic structures — or even the creation of super-departments. Better to keep things local.
Involving civil society
Most charities and social enterprises are small — and, by definition, all community groups are. Yet many of them have the local networks and innovative approaches that could make all the difference. They need to be kept closely involved and that is much easier for small organisations when key decisions are made locally, not in remote government departments.
The UK — and especially England is one of the most centralised countries in the western world. In the first half of the last decade, long overdue progress was made on decentralising power back to local communities. However, the momentum has since been lost. A new focus on supporting independence would be a chance to re-energise localism.
There’s also an opportunity here to reboot the battered finances of local government. A fair share of the dividends from getting people back to work, plus the rewards of enabling housing development, would be transformative.
Finally, it is vital that policy makers innovate. It is in the nature of central government to standardise not to try multiple approaches to see what works best. However, localising the responsibility to support independence (without detailed prescriptions from the centre) means that the effectiveness of different local programmes can be compared. We can learn from the failures and replicate the successes — which given the scale and complexity of the challenge, is the only way forward.
Of course, it’s not just dependent individuals who create demand for government. Like all bureaucracies, government creates demand for itself. Tomorrow, we turn to this most self-generating of problems.