Jim Murphy – 2007 Speech on Welfare Reform

Below is the text of the speech made by Jim Murphy, the then Minister for Employment and Welfare Reform, to the Work Foundation on 12th February 2007.

One of the key challenges that Government faces, is to keep up with the pace of change – in society; in technology; and in the economy.

Nowhere is meeting that challenge more important than within welfare. For the Welfare State has the potential both to mitigate some of the difficulties that change brings, and to exploit many of the opportunities change provides.

And as the world around us changes, so do aspirations and expectations. It is our job in Government, to not only match, but anticipate those aspirations and expectations – and to exceed those where ever we can.

Tony Crosland, a Cabinet Minister under Wilson and Callaghan, encapsulated perfectly why this is a never-ending task. He said, back in 1975, “What one generation sees as a luxury, the next sees as a necessity.” The timeline from luxury to necessity is now not a generation but a decade. A decade ago – a mobile phone was the preserve of the prosperous. Now, 96% of 15-24 year olds have one.

So, what do I see as our major challenge for the next decade? It is to use today’s trends, to predict the world of tomorrow. And crucially, to act now on what we know to ensure that the welfare state is fully equipped to meet the aspirations of all in the years to come.

To do this, we must take a step back to explore what lies ahead for us over the next ten years. The Pathways to the Future process which the Prime Minister and Chancellor announced in the autumn, is central to this. As part of this process, we have asked David Freud to lead a wide-ranging review of our welfare to work strategy. This seminar is the second of a series that I hope will contribute to this, to generate new thinking, and to make us really focus on the long-term view.

In looking ahead to the future decade, I think it’s helpful to look back at the last. This is both to learn from our successes, recognise where we have further to go, and what we must do to complete the job we set out to do.

There has been great progress in the last decade. As the research paper published today highlights, there are 2.5 million more jobs today than there were ten years ago, and employment is up in every region and country of the UK – with the biggest increases in the neighbourhoods and cities which started in the worst position. The employment rate for the most disadvantaged groups has risen faster than for anyone else – 300,000 more lone parents, 900,000 more disabled people, 1 million more people from ethnic minorities and 1.5 million more people aged over 50 are in work than a decade ago.

There are many reasons behind this. Economic prosperity is certainly one. Embracing globalisation, rather than insulating ourselves from it, is another key aspect. But also, the reforms to the welfare system have been crucial. For years the concept of ‘welfare’ was emblematic of collective pessimism. Now it is being turned around into something which can foster hope, aspiration, and truly transform people’s lives.

But despite this there is much further to go to reach our stated aim of an 80% employment rate. There are still pockets of deprivation which have not been reached, and despite our reforms, a core group of people at the bottom of the ladder still find it incredibly difficult to break free from the generational cycle of poverty.

To tackle these remaining issues, we must not see them in isolation. We have to look at them in the context of the wider challenges ahead.

So, looking forward to the next decade, we must look at those as yet unachieved policy ambitions. We must understand the direction that the world around us is taking. And we must use this to shape a welfare state which will break down the remaining bastions of inequality.

The only certainty is that no-one can know everything that will happen to us over the next decade. We can see that, by looking at where we thought we would be ten years ago.

So, what did people think would happen to the labour market in 1997?

Ten years ago, many people thought that the North-South divide would persist, perhaps even get worse – and that London would lead the way in employment. Yet Scotland now has employment rates higher than the national average, and employment problems are concentrated in cities – particularly London.

In 1997, many believed that temporary jobs would grow exponentially, and that the majority of us would work for low wages. But 10 years on, the UK has one of the lowest proportions of temporary work in the world, whilst average earnings have grown every year by around 2% in real terms.

And ten years ago, the biggest group of foreign workers were – and it was thought by some were always to be – Irish. But now, there are many more French and German people in the UK than Irish. And a decade ago, the majority of Poles living here were those who came after the Second World War.

So we know that we must be careful as to what assumptions we make about the future.

However, despite this, there are some things which we do know. There are certain trends which, if they continue as they have been, will mean we are to see significant changes over the next decade.

In 1950, there were ten people working for every pensioner; today there just under four. In ten years time, on current trends this will reduce to three, and by 2050 there will be just two.

By 2017, China and India will have nearly doubled their share of the world’s income and their economies are likely to be bigger than the UK, French and German economies combined.

And over the next decade, ethnic minorities will account for half the increase in the working age population. Indeed, in London over the next 20 years, ethnic minorities could account for around three quarters of the growth in the potential workforce.

These few statistics I think show us that we can expect a labour market in 2017 which looks completely different to that of today. And we need to act now, to ensure that the welfare state is equipped to deal with the changes that the next decade will bring.

For the rest of my time left, I will just focus on one area where we need to adapt if we are to prosper- that of skills.

As the Leitch report has highlighted, this is an area which we face serious challenges on already. Historically, the UK has faced a skills deficit for a significant period of time, but despite recent improvements we still lag behind major of our major competitors in the OECD. That is why the Government is currently considering how to best achieve the ambitions that Leitch set out in his report.

Just looking at those with very low skills levels, if we look at where the shortages are, we see a clear pattern. Over three quarters of people with no qualifications fall into at least one of the groups which are specifically targeted in our department’s Public Service Agreement targets – disabled people, lone parents, people over 50 and those from an ethnic minority.

Given that the correlation with skills deficits and my department’s customer groups is so striking, we have a duty to act to target the resources we have in improving the basic skills of the most disadvantaged.

The welfare reforms currently going through parliament address this agenda for disabled people, through providing opportunities through Pathways support. John Hutton just a few weeks ago raised a discussion about how lone parents can get better access to the labour market. And the Welfare Reform Green paper outlined the further measures we are taking to boost support for older workers.

However, the employment rate for one group is still unacceptably low – that of ethnic minorities.

We cannot tolerate a labour market where by, despite progress, a young British Asian woman starting out in work today, will have to wait until her retirement before she sees people of ethnic minorities have the same employment rate as their contemporaries.

We cannot tolerate a society where well over half of Pakistani and Bangladeshi children in Great Britain live in poverty.

And we cannot tolerate a labour market where people of ethnic minorities on average earn a third less than their counterparts across Great Britain as a whole.

This is a social injustice in our society which is not only bad for individuals, families and their communities, but is a barrier against social cohesion and is bad for Britain. On top of that, as ethnic minorities grow to constitute a much greater proportion in the working age population in the decade to come, it is absolutely critical that everyone is able to access the labour market and can prosper within it.

Of course the causes of this disadvantage are complex, but fifteen per cent of unemployed ethnic minorities themselves cite language difficulties as a barrier to work. Potentially, that’s 40,000 people being denied the opportunity to work because they do not have the language skills to get a job.

At the moment, Jobcentre Plus spends around four and a half million pounds per year on translation services. Of course, we there will always be a need for interpretation provision; but surely, wherever possible, we should also focus on language skills to get people into work?

We must utilise the resources we have to redress the balance: to put the emphasis not just on translating language to claim a benefit; but to teaching language to get a job. Not just for the sake of employment rates; but for the benefit of the individual, their community and society as a whole.

There has been a new prioritisation of learners for whom lack of language skills is a barrier to getting a job or to improving life chances. Free English provision is and will continue to be available to those in receipt of Jobseekers Allowance and other income related benefits, targeting support for our most disadvantaged client groups.

We already have a new programme in development that will offer places for 15,000 places for customers to undertake basic skills and employability training – including language skills – with the Learning and Skills Council. In addition, we have committed £14 million for training allowance provision for our customers who take up those courses.

Currently, not nearly enough of this provision is being taken up, and we must put it to better use. We need to raise our game in matching those with poor language skills to the training they need in order not just to work, but to progress in work and gain sustainable employment.

As a first step in this, I have asked Jobcentre Plus to put a much greater emphasis on helping people to address their language barriers. From April this year, in England, there will be new guidance on making sure we help people with very poor language skills start to tackle the problem, as part of the Jobseekers Agreement. We will also discuss these plans with the devolved administrations.

Our customers might, for example, look for local English language classes or other opportunities to practise English language skills. Where-ever possible, we would like them to participate in a work focused language course, where they exist. People will be able and expected to look for work while they undertake any training, and importantly, in many cases there will also be the provision to carry on with the training course after they have got a job.

We also need to take a longer-term look at the services provided through the welfare state, community initiatives and adult learning provision to see how language difficulties can be more effectively addressed. That is why I have asked the National Employment Panel to identify knowledge and good practice on tackling language barriers in the labour market, and to look at the related challenges which lie ahead for the UK on this issue for the next 20 years. This will include looking at analysis from the National Research and Development Centre and the National Institute for Adult Continuing Education, alongside looking at best international experience.

This is but one way forward in which we need to better manage the challenges ahead for the next decade. This isn’t about a change of direction. It’s about continuing along our journey.

It was a journey which began with the creation of the Labour Party. After all the Labour movement was founded on a right to work and an aspiration for full employment.

But the concept of full employment for Beveridge, was that of able bodied men. For us, this aspiration of full employment in a global economy means much more than that. We are committed to a more ambitious approach. Opportunities for all – lone parents, people with disabilities and health conditions, older workers, and ethnic minorities all able to fulfil their right to work.

In the past, too many people have been written off in the labour market. Our challenge for the next decade is to put right that historic wrong.