Jobless risk destitution getting back to work

Nicholas Timmins studies the radical welfare package unveiled by Labour

Labour would allow Britain's unemployed to risk destitution to get themselves back to work under a wide-ranging welfare-to-work package which the party disclosed yesterday.

The proposals - the first outcome of Labour "thinking the unthinkable" over welfare - include creating a "One-Stop Shop" bringing together the benefit, employment and careers services in one place, creating individual career plans for job seekers, relaxing, on a discretionary case-by-case basis, rules which stop the unemployed volunteering or taking part-time courses for more than 16 hours a week, and launching pilot schemes aimed at making it easier to get back into work.

The most radical idea, however, is to introduce local discretion which would allow claimants and case managers to take all the money available for six months from income support and government training schemes and spend it in the way they best judge will help get the claimant back to work.

In return for less income, claimants could spend more on education and training, or job search. They could pay the money over to an employer in return for a job, or even set up a small business. If the business failed, individuals would be left on their own until they requalified for benefit.

Chris Smith, Labour's social security spokesman, said such arrangements would be voluntary and might most widely be used to subsidise jobs, rather than risk self-employment. "But if they want that opportunity, they have to take the risk."

The marked shift to local discretion mirrors ideas the Conservatives are exploring, But it led to criticism from Labour's left and benefit groups such as the Child Poverty Action Group that officials would be given more power over claimants in a system based less on rights.

Labour's package includes allowing individuals to borrow, interest free, against future earnings to buy clothes or tools to help them find work; rolling up the pounds 5 a week claimants can earn before benefit is cut to allow occasional single jobs worth pounds 30 or pounds 40 every six or eight weeks; letting those who take temporary or risky jobs go back to their previous rate of benefit if the job fails within six months; and providing them with their own pounds 1,000 "back-to- work" bonus from earnings while unemployed.

The personalised active service - modelled on Australia's Jet scheme and a Californian initiative called Gain - involved "a completely new relationship" between claimants and the system, Mr Smith said. It aimed to help people off benefit rather than treating them as "passive recipients of Giros". He said within three years the changes would produce "substantial savings" for the taxpayer and that "we will have failed as a government" if they did not lead to fewer people on benefit.

Labour's fiscal caution is such, however, that the pounds 200m the personalised service and its extra staff will cost, together with the pilots, is dependent on Labour making equivalent savings from the pounds 1bn it reckons can be taken out of benefit fraud.

In addition, it promises only to "review", not abolish, the Jobseeker's Allowance which halves entitlement to non-means tested unemployment benefit from 12 months to 6. Ruth Lister, Professor of Social Policy at Loughborough and a member of Labour's Social Justice Commission which recommended rebuilding insurance-based benefits, said that was "even worse than feared".

While the document attacks the evils of means-testing, she said, "it does nothing to match that rhetoric with a restoration of the insurance benefits which actually reduce means-testing". Suggestions to disregard some of a spouse's income from part-time work so that they are not forced to stop work when a partner becomes unemployed would extend means-testing, not reduce it, she said.

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