Iain Duncan Smith – 2014 Speech on Welfare Reform

Below is the text of the speech made by Iain Duncan Smith, the Secretary of State for Work and Pensions, at Business for Britain on 7th April 2014.

Introduction

Thank you for coming to Pimlico today, and my thanks both to Pimlico Plumbers and Business for Britain for their efforts in making this event happen.

It is a pleasure to be here…at the site of a real British success story.

What better setting to discuss the turnaround in our country’s fortunes, as the Chancellor set out last week.

The recession slashed 7.2% off our economy and cost 750,000 people their jobs.

Following the crash we heard gloomy forecasts of a million jobs disappearing from the private sector, mass unemployment, lost generations…

…yet they could not have proved more wrong.

Britain’s economic recovery is established and taking hold faster than forecast – and nowhere are the signs of this recovery clearer than in our labour market.

Logical process

Whilst others have questioned and puzzled over the record employment Britain is now seeing…

… as the Work and Pensions Secretary, I have long believed that the strength of our labour market would both drive Britain’s economic recovery, and increase as a result.

Let me explain.

The logic behind that belief is twofold – you will know most about the first step, and the second is my area of responsibility – but the two are linked.

First, this government created the conditions for growth, and gave businesses the freedom and confidence to create jobs… which is precisely what you have done.

Second, we drove a programme of welfare reform where every change was designed to get Britain back to work…

… giving people previously left to languish out of work, the skills and the incentive to take those jobs.

In doing so, welfare reform is, at its heart, about breaking the chains of dependency and supporting people to achieve their potential…

… giving them the freedom to secure a better future for themselves and their families.

Getting Britain working

In reforming a broken welfare system, I have had one overriding intention – to get Britain working again.

Now, the results are clear to see:

we have more people working in the private sector than ever before, up over 1.7 million since the election

we have record employment – more than half a million higher than its pre-recession peak

and – less known – we have falling numbers of people absent from the labour market… falling long-term unemployment… and, perhaps most importantly of all, falling numbers of workless households

It is easy to get lost in what feel like abstract numbers – so let me make clear what this means.

The increase in employment is equivalent to the cities of Manchester, Liverpool and Bolton now all in work.

It means individuals in jobs, really feeling the impact of the recovery.

Families able to feel secure about their futures…

…. breadwinners able to feel proud that they can support them…

… and children with that all-important role model to look up to, offering hope and self-worth, with aspirations for their own future transformed.

Human capital

At last year’s Budget, and so too this year, the Office for Budget Responsibility has revised its estimates for employment up and unemployment down.

Yet even still, the labour market has continued to outperform the forecasts.

In looking to explain this trend, there is much to be said of the labour market reforms that took place in the UK many decades ago – freeing up the labour market and ensuring flexibility, even to this day…

… and particularly in contrast to rigid and uncompetitive markets that continue to plague some of our neighbours in Europe.

Yet, I believe there is even more to this recovery than economics alone – which is why, to my mind, the latest labour market statistics are not a source of confusion – but make logical sense.

On entering office in 2010, I was not only determined to get Britain working, but more than that: I was determined that economic reform should be matched by social reform…

… taking action, not only to rebuild our finances, but also to restore our nation’s greatest asset – that is, the British people.

Legacy

Too often in the past, when Britain recovered from an economic crash, the poorest were left behind.

I was determined that would not happen here.

When I arrived in office, too many people had been left to languish in dependency…

… not only an unsustainable drain on productivity… but a tragic waste of human potential.

Under the last government, millions of people were stuck on out of work benefits – a million for a decade or more.

Unemployment had risen by half a million, and youth unemployment by nearly half.

1 in 5 households was workless, and the number where no one had ever worked doubled – from 184,000 to over 350,000 – rising even during the boom years.

Essentially, I found a persistent and sizeable group of people who were inactive – having dropped out of the labour force altogether – neither in work nor looking for work, even when jobs were available.

Migrant workers

With so many trapped on the sidelines, British business looked to migrant workers to fill the jobs which British people didn’t want or couldn’t get.

In just 5 years between 2005 and 2010, the number of British people in jobs fell by over 300,000, while the number of foreigners in British jobs soared by more than 650,000.

Clearly there is a powerful argument to be made here about immigration – but actually, this an issue of supply and demand, as much as it is about borders.

That is why when British business found British people were unwilling or unable to work in the UK, they quickly looked elsewhere.

Taxpayers paid a financial cost for rising welfare payments, and society paid the cost as well – with too many of our own fellow citizens falling into dependency, hopelessness, and despair.

No one knows this better than employers – like yourselves – those wanting to expand but struggling to find workers to fill their vacancies… or whose staff turn down extra hours for fear of losing their benefits.

But even apart from being bad business, it was also damaging people’s lives…

… destroying the ethos of a whole section of our society, left behind in workless households where no one knew what it was to hold down a job.

In too many cases, it was a combination of the welfare system trapping people in dependency and removing the drive to go to work… and the open door immigration policy which meant they were so easily replaced by foreign workers coming in.

Social recovery

Surely common sense should tell us that Britain cannot run a modern flexible economy, if at the same time, so many of the people who service that economy are trapped in dependency on the state, unwilling or unable to play a productive part.

That is why I knew that welfare reform needed to play a vital part in Britain’s recovery: a stable economy matched by a strong society where people are ready and capable of work.

Unlike in the past, when economic recovery meant all too little for those furthest from the labour force…

… now, the evidence of a linked social and economic recovery is clear to see – in an improving jobs market where no one is being left behind.

This is the greatest marker of how successful our welfare reforms have been:

inactivity is at its lowest on record excluding those in education, down by nearly half a million since 2010… driven by falling numbers claiming inactive benefits – down by 350,000, and falling in every single local area of Britain

there are a lower proportion of workless households than at any time on record, down 450,000 since 2010

and we are now seeing promising signs that the trend of more migrant than British workers gaining jobs is being reversed…

… with the latest data showing that of the rise in employment over the past year, nearly 90% went to UK nationals

As the economy improves, this is where the real effect of our reforms is felt: British people reengaging with the workforce and regaining the opportunity to access the jobs being created…

… ensuring everyone who is able can play a part and realise their potential.

Life change

But for me, the drive and the energy has been about ensuring that behind each of these statistics, the recovery reaches those previously at the very bottom of the career ladder.

For, in every case, these statistics represent massive life change for individuals and families.

For the young person: once with bleak prospects, but now one of a growing proportion in employment or education… who has their foot on the first rung of the ladder, able to move onwards and upwards.

For the lone parent – more of whom are now in work than ever before – which we know is the best route to lift their family out of poverty… with children in workless families 3 times more likely to be poor.

For the long-term unemployed, and those for whom worklessness had become a way of life – too often written off in the past, but now receiving meaningful help to overcome the problems that hold them back.

Already, the number of people stuck on Jobseeker’s Allowance for a year or more is down by almost a fifth…

… and the Work Programme is succeeding, helping those further from the labour market into work.

Half a million people have started a job so far – including 22,000 people who might once have been left unseen on sickness benefits, cut off from any real support – and outcomes are ever improving.

Just think of the transformation for someone whose life was one of dependency on the state, but who now has hope for a life they are able to shape for themselves and their family.

Instead of being trapped in that vicious circle – be it crime, addiction, debt – now we are seeing individuals on a journey from dependency to independence…

… regaining control over their own lives and security for their futures.

Welfare reform

Britain will only be great again if all in our society – every disadvantaged group, every deprived community – are part of our nation’s prosperity.

Since coming into office, it has been this belief that has underpinned my programme of welfare reform, arguably the most significant in a generation.

Across all these changes… every day, every policy decision, every visit, every instruction… my purpose has been to get Britain working…

…. restoring the incentive for British people to get back to work and removing the barriers in their way…

… in doing so, transforming the lives of those locked out of the labour market for too long, so that we all benefit as one nation from Britain’s recovery.

Early intervention

Yet powerful as that may be, alone it will not be enough. We also need to go further back and intervene before families fall into dependency and disadvantage in the first place.

For that process of life change to be as effective as possible, it must start at the first opportunity – which is why I am getting involved earlier than ever before…

… working alongside my colleague Michael Gove, who is leading the vital changes in the education system… to prevent the next generation of young people from facing entrenched problems.

I set up the Innovation Fund – a £30 million investment – which catalyses cutting-edge programmes to improve the employment prospects of our most disadvantaged young people… intervening as early as 14 to avoid wasted life chances.

Such has been our success in testing new schemes, that now we’re taking a pioneering approach into the jobcentres too…

… ending a situation where, for too long, jobcentres have been unable to support young people who fall out of school at too young an age.

For 16 and 17 year olds – locked out of both the classroom and the jobcentre – the wage scar caused by being out of work can damage their prospects for years to come.

Now, by opening the jobcentre door to these teenagers, and trialling what works best in helping them, we can do a huge amount to secure their futures.

Support into work

When it comes to my department’s employment programmes, I am using every tool at my disposal to get people into work.

But – equally deliberate – from start to finish, that is the purpose of welfare reform as well.

That is why:

I have fought so hard to create and introduce Universal Credit, now running in England, Scotland and Wales, and set to roll out further across the north west.

The old benefit system too often rewarded the decision to turn down work and for too many, the decision to move into work left them worse off. For too many, to take a job was not seen as the logical choice.

Universal Credit is the great reform that changes this: ensuring that at each and every hour, work always pays.

Already, as we roll it out, the behavioural effect of this reform is striking, with those on Universal Credit spending twice as long looking for work, better understanding their requirements, and working harder to meet them.

That is why:

We took the decision to invest in childcare in Universal Credit, so that families could take that job and earn their way out of poverty.

That is why:

We have capped benefits at average earnings and restricted housing benefit, so that families on benefits face the same choices about where they live and what they can afford as everyone else.

This is putting an end to the something for nothing culture that too often meant work wasn’t worthwhile – meaning welfare became a lifestyle choice.

And if these are the reforms which restore strong work incentives, together with raising the threshold so people now pay no tax on their first £10,000 of income…

… our conditionality system is designed to send a clear message that we expect every effort to be made to find and take work.

We have set clear requirements in return for state support, and are making sure that if someone fails to meet their responsibilities, they face the consequences…

… getting the balance right again in the welfare system, just as for those in work…

… and ensuring fairness for the taxpayers who fund it.

Conditionality and sanctions

Our reforms make this deal unequivocal.

We are requiring everyone to sign up to a Claimant Commitment as a condition of entitlement to benefit – it is deliberately set to mimic a contract of employment… setting out what individuals must do in return for state support.

From this month, we are going further still – the final nail in the coffin for the old ‘something for nothing’ culture.

A more stringent regime will require claimants to do all they can to get work-ready even before they sign on – taking the initiative and showing they are serious about finding work…

… as well as attending the jobcentre weekly, rather than fortnightly, if they need more intensive supervision.

This will be backed up by increased support – no one will be overlooked or left without help… but we are saying to everyone that there is no longer any opt-out from a tough jobseeking regime.

If individuals fail to meet their requirements without good reason, they must face the consequences… with a robust set of sanctions that mean for the most serious offences, they lose their benefit for 3 months for the first time, 6 months for the second and 3 years for the third.

Yes, it is challenging and there is still much more to do if we are to finish the job… but already, it is working… which is why I am baffled when commentators cannot understand the jobs figures.

In response to those who were puzzled by such a strong fall in unemployment, it was the Bank of England which said:

“a tightening in the eligibility requirements for some state benefits might also have led to an intensification of job search.”

In other words, it is this process – everything we have been doing, every reform we have implemented – which has been about getting Britain working.

Access to benefits

Yet in striking the right balance between give and take in Britain’s welfare system, there is still one final issue we must confront.

We have ended the something-for-nothing culture for those already living in Britain…

… and, equally, I believe it is only fair and reasonable to say to those coming into our country: if you haven’t made a contribution, you shouldn’t be able to claim benefits.

So we have also had to reform the way our benefits system works for those, arriving on our shores.

Here too the same principle of fairness must apply.

That is why for those migrants who do come here, we’re ensuing our benefit system is no longer an easy target for abuse…

… limiting access, to prevent migrants from taking unfair advantage of our system by accessing benefits as soon as they arrive.

We have introduced a tougher test that stops individuals from getting jobseeking benefits until they have been living in the UK for at least 3 months…

… ending that entitlement after 6 months unless the person has genuine prospects of finding work.

Those prospects are severely hampered if someone can’t speak English – so, from this month, jobseekers who struggle to speak English will now be mandated to English language courses, and their benefits stopped if they don’t attend.

Banning new migrants from claiming Housing Benefit altogether, we have also clamped down on those trying to manipulate the tax credits system…

… for too long a source of income for those in bogus jobs or falsely declaring themselves self-employed.

Now, until those who come here start paying National Insurance contributions, individuals must prove to us that they are working in a real job.

And we want to go further still – the right to say to migrants that we require a much longer record of commitment before you get benefits…

… restoring the principle that nation states run their own national welfare arrangements…

… something the UK is not prepared to change.

Together, these new immigration and benefit checks will clamp down on those trying to exploit the system…

… ensuring that Britain’s growing economy and dynamic jobs market deliver for those who work hard and play by the rules.

As we reshape our economy, and revitalise the entrepreneurial spirit that our great nation has always shown, we cannot shut the door on the rest of the world.

But those who come here should know that we will not compromise when it comes to protecting the principles on which our welfare state is based.

We must do right by those born here, living here and working here, whose contributions fund the system. That is only fair.

Chancellor’s commitment

It was just last week that the Chancellor talked about a commitment to fight for full employment in Britain – as he put it, to have the highest employment rate in the G7.

And he is right.

We must no longer limit our ambition, nor avoid facing up to a challenge that would improve so many lives.

Indeed, it is my belief that this should be, perhaps, the most vital aim: with help and support, everyone contributing as far as they possibly can.

We’ve done a lot already, and will continue to make progress…

… our long-term economic plan ensuring we help businesses like yours to create new jobs and generate opportunities.

Yet we must go further still, following the recession, to seize a real opportunity: ensuring that our social settlement offers all in our society a fair chance of securing those jobs.

Progression in work

For too long, the prevailing attitude was that a bit more money paid out to those on the sidelines would make their lives a bit better.

Yet the reality is that whilst this approach might have pacified the problem in the short-term…

… the long-term consequence has been a state of even more entrenched dependency.

Given the chance, I believe people will want to make the most of their talents – but instead, what this did was trap them, with little opportunity to take control of their own lives.

Locked into dependency on the state, people’s talents were too often wasted…

… either in trying to get more money from the state…

… or in dodging the state, as individuals were pushed into the shadow economy or a dark world of petty crime.

Still now, some commentators fail to recognise the damage that worklessness and dependency can inflict on people’s life chances and aspirations…

… persisting with the same misguided thinking, through an argument that denigrates those who are taking the first steps into the labour market

The way our opponents would seem to have it, people are better off in dependency than taking a part time or entry level job.

It is hardly an argument many of those on Jobseeker’s Allowance would recognise, desperate to get a job and start earning their way in the world.

Nor does it reflect the dynamic nature of our labour market.

The way I see it, securing a job is the first step – the beginning of a process in which people are able to take control of their futures.

Make the first step too difficult or too high, and a person may never get there.

But help them to take that step, make that positive move, and the rest is in their hands.

Conclusion

Our purpose must be to release people from the trap and so that they can break free from dependency, participating equally as our economy improves.

That is the aim of the reforms we are pushing through.

It is hardly a small undertaking – for it requires a huge cultural change, both within government and for those caught in the system for so long.

And it is not easy, as attacks from all quarters seek to misrepresent what we are doing…

…. angling for a return to failed and expensive policies, when welfare was about how much money was paid out to people, rather than how their lives were improved.

Yet I believe this task is vital – and without it, we risk Britain slipping behind, as growing levels of dependency hinder our progress.

Whilst our critics persist in arguing that a minimum wage job is stepping into a hole…

… I believe, quite the contrary, that it can be the first step on the ladder to an independent life.

Our nation is only as great as the people in it.

That is why our ambition must be pitched so high:

All those who are able, adding to our prosperity…

… and playing a part in their communities.

People supporting their families…

… inspiring the next generation…

… being the best that they can be.