Benefits that work

Unemployment benefits act more like a trap than a ladder. While they do provide a safety net, they also constrain recipients’ options to improve their lives. The inflexibility of the benefits system is felt most strongly in low-income neighbourhoods. This is where unemployment is most concentrated but also where much needed work is left undone. The government spends billions of pounds in benefits on these areas, with limited positive impact. This report evaluates the Community Allowance, which proposes to channel benefits spending into the creation of jobs to help communities and support people to move into work.

Introduction
The Department for Work and Pensions spends nearly £3 billion on Jobseeker’s allowance and over £8 billion on Income Support every year. For many deprived areas spending on benefits payments and welfare to work programmes is the largest public investment they receive. In reality this investment may fail to get to the root of the problems that exist in these neighbourhoods.

The benefits system often compounds the challenge of tackling long-term unemployment. It is complex and riddled with perverse incentives. It does not fit well with the flexibility of today’s UK labour market, where many of the jobs involve part-time, temporary or irregular hours. Complying with the requirements of benefits can create a burden instead of supporting people to find employment.

Low income neighbourhoods have the most pressing need for activities to improve them. They also have the most workless adults. This report sets out an analysis of a new policy proposal – The Community Allowance – which aims to make a constructive link between public spending on benefits and work for the development of local neighbourhoods.

The Community Allowance would allow community organisations to employ people out of work to develop the areas they live in. There is nothing particularly new about work schemes. What makes the Community Allowance original is that it secures the benefits and an additional income for people. It allows them to concentrate their efforts on moving towards employment instead of meeting the requirements of their benefits. By working through community organisations, the Community Allowance would ensure that the work and the support it provides would be tailored to the needs of the long-term unemployed.

Employment policy lacks innovation
Unemployment has a range of negative effects for people and communities. For this reason full employment has often been a target of governments, though economic realities have led many to conclude that it is an unattainable goal. Most accept a ‘natural rate’ of unemployment, which can lead to a lack of ambition in policy making.

Although couched in different language, and shaded with greater obligation and conditionality, the reforms introduced under the current Labour government have not broken with the primary emphasis on supply-side solutions initiated under the Conservatives. Labour’s most recent reforms were made in the context of a decade of uninterrupted economic growth, which is unlikely to be repeated in the near future. The focus on the supply side is being echoed by emerging Conservative plans, which promise to significantly reduce incapacity benefits in order to make work more attractive. In a recession – characterised by rising unemployment among the low skilled, the young and the least educated – new ideas and approaches are required. Focusing primarily on the supply of labour will not work.

At the time of writing unemployment was still on the increase. Some economists expect it to peak at three million in 2010, despite some signs of an improvement in the underlying economic situation. The long-term effects of the recession on employment are subject to complex influences, and are not easy to determine. We can say, however, that structural unemployment can be traced to government inactivity during previous recessions. If we do not act decisively, the newly unemployed today may be the long-term unemployed of tomorrow. There is also a spatial dimension to this: most workless households are concentrated in low-income areas, where regeneration spending has failed to improve their relative economic position.

Our approach
The research presented in this report is based on principles of Social Return on Investment (SROI). This is a measurement approach that helps organisations to demonstrate and understand the social, environmental and economic value that they are creating. It is informed by real people’s experiences, and the things that make a difference to the lives of those directly involved and affected. The end result is an economic model that represents change in terms of social value, challenging decision-making that relies solely on economic or financial returns. As this study is about a scheme that has not yet been implemented, the analysis is based on predictions about its likely impact.

What people told us
We spoke to people on benefits and to community organisations which informed both the economic model that we built and the outcomes we measured. This qualitative information also informed our findings about people’s experiences on benefits, and the potential that the Community Allowance has to improve their lives.

• Being dependent on benefits has negative consequences for people’s confidence, self-esteem and quality of life.
• Small increases in income for people on benefits make a critical difference.
• Many people experience periods of stress and upheaval when benefit payments are disrupted.
• Lack of work experience is a significant barrier for people who are out of work. Even people who have lost their jobs relatively recently in this recession feel that being out of work has already put them in a disadvantaged position for securing future employment.
• For many people on benefits – particularly lone parents or those moving into part-time or temporary work – gaining a job may make them less financially secure.
• Complying with the benefits system creates significant stress for people on benefits. Many do not value the support they have had from Jobcentre Plus. They found their Jobcentre Plus advisers unable to adapt to their individual circumstances, or unable to support them in finding work experience or meaningful work. So much emphasis has been placed on control rather than support that many of the people interviewed spoke of mistrust and loss of motivation.
• People out of work have skills and assets that would be valuable to community organisations. They have personal connections in the area and can better understand the experience of other unemployed people.

What our research found

• For every pound invested in the Community Allowance £10.20 worth of social value is created. In other words, this is an initiative that has the potential to generate positive social, economic and environmental outcomes that are worth ten times the investment required to achieve them.
• Most of the value created through the investment is created for the local community through the work undertaken with the Community Allowance. The community as a stakeholder receives about half of the overall benefits.
• There are large differences in the value created through different types of work in the community. Work with children and community learning can be particularly beneficial for the people in the area.
• The average Community Allowance worker would create savings for the state of between £5,000 and £6,000 per year. The mean cost for one worker would be about £4,500, so the state would recover more than it is spending on the programme overall.

Conclusions
Welfare reform has focused on bringing more people into the labour market and emphasising the responsibilities of the claimants. This has meant more conditions and means-testing for those claiming benefits. In the current economic recession this approach is unlikely to succeed. Not only are there less jobs but vacancies that do exist are often poorly paid and temporary. Continuing to focus on how to prepare people for work, when the required jobs are not there, will only go half way.

The balance between support and responsibilities needs to be carefully considered. Emphasising responsibilities can reinforce often misconceived perceptions of people on benefits. It can make people waste their time in empty gestures to fulfil the conditions set to their benefits. It erodes the trust between people who are out of work and the institutions who are supposed to be protecting their rights. Squeezing benefits or increasing the burden of compliance to push people back into work can be counterproductive, and make the goal of employment unattainable for claimants.

In a fair society demands placed on individuals are matched by the responsibilities of government. The state should ensure that citizens have enough resources to meet their obligations. Benefit claimants should receive enough effective support to allow those that can to contribute through their work. The Community Allowance is a promising scheme to create jobs alongside personalised help and advice. It focuses efforts on building the skills and abilities of people who are out of work to empower individuals that take part. It has the potential to make the money spent on the benefits system work for people and their communities.

Summary of recommendations

Policy recommendations

• Invest in the Community Allowance pilots. Based on the SROI analysis reported here, we expect the Community Allowance to be effective in creating social value both for its participants and for the communities where it is implemented.
• Involve Community Organisations in solutions. Community Organisations have established trusted relationships with people on benefits. By focusing on the skills and assets of local people they are in a good position to support people back into work.
• Reduce the costs of compliance. The support provided at Jobcentre Plus needs to build people’s confidence, skills and self esteem and focus on outcomes over process.
• Make the scheme universal. The results of our SROI analysis found that the savings to the state were highest when individuals on JSA are taking part.
• Simplify the benefits system. For many people benefits hold them back from investing in personal development and entering the workforce. Increasing the level of earnings disregarded would take a step towards lifting people out of poverty. The extra income would make a huge difference to people living on or below the poverty line.

Implementation recommendations
Should the Community Allowance be taken up, the following recommendations will ensure that it maximises public benefit:

• Ensure that community work is effective. If the jobs in which the Community Allowance participants are employed do not live up to their potential, the benefits of the programme will be severely limited. This is also important for how participants feel about their work. If the work is seen as low value, or seen as a punishment, it will not work.
• Support Individuals. The period when participants move on from the scheme needs to be carefully managed for all participants with support and advice on what to do next.
• Measure the impact of scheme through appropriate data collection. To validate these findings an evaluative SROI would need to be carried out. A robust measurement system that measures distance travelled needs to be put in place from the outset.