Select Committee on Work and Pensions Minutes of Evidence


Supplementary memorandum submitted by the Shaw Trust (ES 14A)

1.  GOVERNMENT PRINCIPLE

  The government, through its New Deal, continues to set up programmes the purpose of which is to enable disabled people to find work in a secure setting, based on the principle of `work for those who can and support for those who can't work'.

2.  SHAW TRUST VIEW

  We applaud this principle but want to see it lived out in realistic investment in programmes to return or to enable disabled people to enter the labour market in meaningful and sustainable ways.

3.  DISABLED PEOPLE OUT OF WORK

3.1  Commonsense view

  If a disabled individual spends most of their time at home, or in daycare services or similar, then they may be the hub of a wheel of intervention—inward investment in supporting them can come from benefits, health services, social services (daycare, residential care), carers, (family, friends, support workers), other interventions.

  When a disabled person enters work the direction of investment is reversed: there is a significant reduction in benefits take-up, there is a positive contribution from tax and national insurance (rising as more disabled people access real and valued jobs), there is reduced call on health services (people in work are known to `be healthier'), social services resources are freed and can be redirected, carers can themselves return to work, and the disabled person has greater power as a consumer.

  In terms of the social inclusion agenda, the disabled individual more easily finds their place as an equal and valued citizen, grows in self-esteem and confidence and contributes positively to the life of their community in new and important ways. The disabled person becomes an investor in their own community and its life, increases consumption and directly affects the well-being of the whole community and economy.

  The value of work to all people is acknowledged—the value to disabled people, traditionally excluded from work, is incalculable.

The benefit to the exchequer is huge and probably also incalculable, if for different reasons.

3.2  According to the Office for National Statistics' Labour Force Survey, [7]UK, Autumn 2001 (bracketed figures for comparison Labour Force Survey, Summer 2001)
Number of people of working age 36,661,7327,088,268
(6,952,652)
Number of disabled people of
Working age (+2%)
Number of people economically active28,940,828 3,701,173
(3,575,213)
Number of disabled people
Economically active (+3.5%)
Number of people in employment

27,424,6003,392,927

(3,259,850)
Number of disabled people

In employment (+4%)
Number of people ILO
unemployed
1,516,228 308,246
(315,363)
Number of disabled people
ILO unemployed (-2.3%)
Number of people economically
inactive*

7,720,9043,387,095
(3,377,439)
Number of disabled people
economically inactive* (+0.3%)
*Of those economically inactive people:

Number of people receiving state benefits 4,731,1552,770,970

(2,777,941)
Number of disabled people

Receiving state benefits

(-0.25%)
Number of people receiving
unemployment-related benefits

113,13346,313

(41,579)
Number of disabled people

Receiving unemployment-related benefits (+11.4%)
Number of people receiving
Income Support

1,757,8791,102,547

(1,073,588)
Number of disabled people
receiving Income Support

(+2.7%)
Number of people receiving
sickness or disability benefits

2,210,6302,018,904

(2,021,146)
Number of disabled people
receiving sickness or disability benefits (-0.1%)


    —  The numbers of disabled people of working age who are economically active, and in employment, have gone up.

    —  The number of disabled people who are ILO unemployed has gone down but the number who are economically inactive has risen slightly.

    —  Whilst the global number of disabled people on all state benefits has dropped, the number on unemployment-related benefits has jumped, there are more drawing on IS, and the number receiving sickness or disability-related benefits is barely different.

3.3  Incapacity Benefit

  Taking Incapacity Benefit as an example of benefits received by disabled people, and using it because, by definition, those in receipt of IB will have worked: (this does not assume that people receiving other disability-related benefits cannot work)

    —  Around 1.5 million people received an Incapacity Benefit payment at any one time in 2000-01, at an average weekly rate of £81, to a total of £6.5 billion

    —  Claimant numbers have risen from 1.1 million in 1980 to 2.3 million

    —  Just under 7 per cent of the working age population claim IB (this varies up to 15 per cent in some local authority areas

    —  50 per cent of all claimants have been receiving IB for more than four years

    —  expenditure has risen from £5.3 billion to £6.5 billion (after reaching £9.7 billion in 1994-95) [8]

    —  Not all those receiving IB are still work-ready—many have moved into long-term unemployment status.

    —  IB claimant numbers, according to latest DWP figs cited below are 97,000 + 1,471,000 for both types = 1.568m.

    —  Wales has the highest percentage of claimants as a proportion of working age population (11 per cent) and of eight local authority areas where more than 15 per cent of the working age population is claiming IB six are in Wales. Of those, five are clustered in the geographical area served by the new Disability Action Centre (Neath Port Talbot, Rhondda Cynon Taff, Merthyr Tydfil, Caerphilly, Blaenau Gwent).

    —  The mean time out of work for Shaw Trust during the PAS (pilot) clients was four years (208 weeks) with a few clients reporting being out of work for up to 10 (1.2 per cent) and even 20 years (5.2 per cent)[9].

3.4  According to Department for Work and Pensions[10], in 2001-2:
Numbers(DWP: Table 7)
Number of disabled people receiving Incapacity Ben 1 97,000
Number of disabled people receiving Incapacity Ben 2 1,471,000
IB 1 = short-term (lower-rate)
IB 2 = short-term (higher rate) & long-term
Expenditure(DWP: Table 2)
IB—short-term lower rate£309,000,000
IB—short-term higher rate£322,000,000
IB—long-term£5,449 million
IB—earnings-related£400,000,000


  Crudely, this means that 1,568,000 people are in receipt of £6.48 billion, on average £4132.65 per individual of IB alone.

  In the age group 25-49 the numbers of men claiming have jumped, in 2001 by 129 per cent (259k to 592k) from 1980, and in the age group 50-59 by 93 per cent (245k to 474k). Even in the age group 60-64 the increase is 58 per cent (212k to 334k).

  For women the figures are higher: 274 per cent (118k to 441k) in the 25-49 group, and 417 per cent (72k to 372k) for the 50-59 age group.

  In the same period the number of long claims over four years rose by 403 per cent (234k to 1,176k). Claims up to six months in duration dropped significantly (476k to 263k) but over six months to one year (86-186), one to two years (115-273), two to three years (85-220), three to four years (69-208) the claimant numbers rose significantly. But the rise in those claiming over four years is the biggest and that is the client group Shaw Trust works with most.

  Even the slight decline in IB expenditure between 1995-2000 is attributable to the restriction of IB to those of working age. Claimants can only claim short-term IB for up to one year after pensionable age (in contrast with Invalidity Benefit, which allowed claims up to five years). As a result the numbers of pensionable age claimants has plummeted since 1995, while numbers in younger age groups have continued to rise. [11]

3.5  Other benefit expenditure
Attendance allowance£3,122 m
Invalid Care Allowance£992m
Severe Disablement Allowance£944m
Income Support£4.363bn
Housing Support for people who are "long-term sick and disabled". £2.553bn
Disability Living Allowance£6,808 m


  Additionally, for example, it costs

    —  an average of £11,000 per daycare place for a person with learning difficulties.

  It is impossible to disaggregate these figures, at least because of double- or multiple-counting, as any one beneficiary may be eligible for a range of benefits. There is no calculation here yet for:

    —  Industrial Injuries benefit

    —  Job Seekers allowance

    —  other social services

    —  health care services

    —  or hidden costs of care, eg the tax-revenue benefit of carer/family returning to work

    —  the tax and National Insurance revenue benefit of returning disabled people back to work[12] and other "benefits", eg relief of prescription charges

  It is clear that where a disabled individual is in receipt of multiple benefits or reliefs, and where that individual is cared for, that the cost savings of returning that individual or getting them into work, can be so much higher than the example below. The following example is used as a minimum, and still the cost benefits are substantial.

4.   COMPARISON OF BENEFITS TO GOVERNMENT[13] OF THE PERSONAL ADVISER SERVICE PILOTS AND THE SUPPORTED PLACEMENT SCHEME.

  Research commissioned by Shaw Trust shows that the Personal Adviser Service, piloted by Shaw Trust in S Tyneside, and Newham in London, and the Supported Placement Scheme were cost beneficial to the government.

4.1  Cost savings from reduction in welfare benefit payment to PAS and SPS clients

  Before participation in the PAS, payment of welfare benefit to clients was estimated to be £2,588,933. Welfare benefits were reduced to £911,038, when clients entered the PAS, a saving of £1,677,895. Government costs of welfare benefits for the SPS sample were reduced from £2,844,109 to £2,019,870 when clients started the SPS resulting in a saving of £824,239. These savings can be seen as a benefit of the programmes from the government perspective.

4.2  Cost savings from reduction in payments for day care services

  Prior to entry into the PAS and SPS, the total cost of day care services for the samples was £135,850 and £1,113,970 respectively. It was assumed in the base case that after clients became participants in the two employment schemes, this cost would be reduced to £0. These cost savings, —£135,850 and—£1,113,970, are therefore benefits of the PAS and SPS programmes.

4.3  Cost-benefit analysis

  At all times the costs and benefits of the PAS and SPS are compared to the costs and benefits which would have occurred if these programmes did not exist i.e. if the client had remained on welfare benefits and attended non-work focused day care.


VariableIndividual Perspective Government PerspectiveSocietal Perspective
Costs: Personal Adviser Service
Programme Costs of the PAS £685,904.11£685,904.11
Tax paid by client£953.98 £953.98
Amount of welfare
benefit lost to client after
entry to PAS
£1,677,895.27 £1,677,895.27
Employees' National
Insurance contributions
£28,858.39£28,858.39
Net Cost of Participation
in the PAS
£1,860,243.57£685,904.12 £2,393,611.75
Benefits: Personal Adviser Service
Clients' Gross Earnings£812,351.40 £812,351.40
Tax paid by client£953.98 £953.98
Employees' National
Insurance contributions
£28,858.39£28,858.39
Employers' National
Insurance contributions
£34,341.48£34,341.48
Cost savings to
government as a result of
reduction in welfare
benefits paid to clients
£1,677,895.27 £1,677,895.27
Cost savings to
government from
reduction in use of day care services
£135,850.00£135,850.00
Net Benefit£812,351.40 £1,877,899.12£2,690,250.51
Benefit Cost Ratio0.47 2.741.12


Summary of Monetary Costs and Benefits of the Personal Adviser Service

  An incremental benefit cost ratio less than 1, such as this, indicates that, based on the monetary costs and benefits which have gone into the ratio, the new programme, the Personal Adviser Service is not as cost-effective to the individual as welfare benefit payments and non-work focused day care. This means that the net or incremental monetary costs of £1,860,243.57 incurred by the PAS participants outweigh the net or incremental monetary benefits of £812,351.40 enjoyed by the individual clients once in the PAS. In monetary terms therefore, a benefit cost ratio of 0.47 means that participating in the PAS has made the individual PAS client in this sample, worse off financially.

  The PAS proved to be cost-effective from the perspective of the government. Monetary benefits of the PAS, made up of revenue from tax and NI contributions and savings on programme costs amounting to £1,877,899.12, outweighed costs of the providing the service which came up to £685,904.12. The benefit cost ratio was almost three times greater than one at 2.74, indicating that in the pilot phase, the PAS was cost-effective from the government's perspective.

  As with the government perspective, the PAS also appears to be cost-effective from the broader societal perspective, yielding a benefit cost ratio of 1.12. Though only just greater than one, this ratio was more favourable than that of the individual perspective though not as clearly advantageous as the government perspective.

5.   BETTER OFF IN WORK COMPARISON

Client A—wheelchair user out of work for three years

Costs to keep out of work


BenefitsCost/week Cost/year
Incapacity Benefit (Long Term)70.95 3,689.40
Income Support59.50 3,094.00
Housing Benefit42.00 2,184.00
Council Tax Benefit9.98 519.06
DLA (High Rate Mobility & Care)95.55 4,968.60
Other Costs
Total Cost to Keep out of Work277.98 14,455.06
Support From Broker


    —  direct support costs (below)

Client Income
Income/weekIncome/year
Salary £110/week89.00 4,628.00
Inland Revenue (D.P.T.C / W.F.T.C)55.60 2,891.20
DLA 95.554,968.60
Total Income240.15 12,487.80
Costs to keep in work

BenefitsCost/week Cost/year
Inland Revenue (D.P.T.C / W.F.T.C.)55.60 2,891.20
DLA95.554,968.60
Housing Benefit34.90 1,814.80
Council Tax Benefit7.80 405.60
Other Costs
Direct Job Broker Intervention Costs
Direct Job Broker Support (9.22/hour)64.54 64.54
Travel Costs (45p/mile)51.30 51.30
Room Hire45.0045.00
Tel Calls (ongoing support)9.22 9.22
Job Start Grant50.00 50.00
Sustained Employment Grant50.00 50.00
Costs to Keep in Work463.91 10,350.26
Income Created In Work

Salary £5,720
Per weekPer Annum
Inland Revenue (Tax)0.00 0.00
National Insurance0.00 0.00
Inland Revenue (Tax) & National Insurance 21.001,092.00
Totals21.001,092.00
Final Cost To Keep In Work442.91 9,258.26
The Saving1st year £5,196.80
Thereafter £5,466.86
Client B: intractable back pain, out of work five years

Costs to keep out of work

Benefits
Cost/weekCost/year
Incapacity Benefit 70.95 3,689.40
DLA 95.554,968.60
Other Costs
Total Cost to Keep out of Work166.50 8,658.00
Support from Broker

Direct and indirect costs as client A

Client Income
Income/weekIncome/year
Salary £21,000 pa259.62 13,500.00
D.L.A.95.554,968.60
Total Income355.17 18,468.60
Costs to keep in work
Benefits
Cost / weekCost / year
DLA 95.554,968.60
"Access to Work"28.85 1,500.00


Direct Job Broker Intervention Costs
Direct Job Broker Support (9.22/hour)55.32 55.32
Travel Costs (45p/mile)90.00 90.00
Room Hire30.0030.00
Tel Calls (ongoing support)36.88 36.88
Job Start Grant50.00 50.00
Sustained Employment Grant50.00 50.00
Costs to Keep in Work436.60 6,780.80
Income Created In Work

Salary £21,000 pa
Per weekPer Annum
Inland Revenue (Tax)0.00 0.00
National Insurance0.00 0.00
Tax & Nat. Ins.144.23 7,500.00
Totals144.23 7,500.00


Final Cost To Keep In Work
292.37¸719.20


The Saving
First year £9,377.20
Thereafter £11,189.40
These are savings in real cases.

If client A stays in work for 10 years the saving is £54,398.54

If client B stays in work for 10 years the saving is £110,081.80

Just between these two randomly chosen clients there is an average saving of £82,240.17 over a 10 year period, £41,120 per client.

If 300 people find sustainable work through Shaw Trust's operation of the Job Broking scheme (a fairly conservative outcome) this would represent savings of:

£12,336,000 over 10 years


  This figure speaks for itself. It is a possible outcome in the current economic environment within which Shaw Trust has to operate. This saving is only an estimate from one scheme (Job Broking).

Given greater investment in the first instance from government we believe we could do much, much more.

6.   DEADWEIGHT AND OFFSET

  6.1  Very often, the government and other agencies argue, in these sorts of schemes there is a great deal of "dead-weight"—ie you end up paying many people to do things that they would have done anyway—or other negative consequences which reduce or negate the overall benefits.

  This is an invidious argument when applied to our client group.

  Shaw Trust is intervening with disabled people who are on average out of work for four to five years+. The "deadweight" argument miscues entirely in this case, and is not applicable—it makes no sense to say that people in this group would have found work anyway when so clearly they have failed to do so.

  There are difficulties in applying this method of assessment of the costs of keeping disabled people out of work, for there are many assumptions hidden in different approaches and it is not always clear which costs are being included in different assessments. Our intention here is to show that even where the minimum costs can be assumed, the savings are substantial and make investment in programmes enabling disabled people to work highly cost effective from the government's point of view.

  This, as yet, says nothing about the government's own avowed agenda for the social inclusion of disabled people.

  The government has shown its commitment to including disabled people in mainstream society and promoting the rights of every disabled citizen by strengthening disability discrimination legislation and creating the Disability Rights Commission, for example.

But for the specific group of people who are languishing in daycare services, at an average cost of £11,000 pa, it is insulting to claim that they are "deadweight". Clearly the rate of "deadweight" of those who stop using daycare services to enter work is nil.

  It is equally insulting to be described as "deadweight" for those who are chronically unemployed and who have been taught to believe that they are unemployable by doctors, health and social care workers, even by their own (if often well-meaning) family members.

  According to Mitchell et al 2001, there is no real consensus on the extent of deadweight in the schemes examined (the Personal Adviser Service and the Supported Placement Scheme). It is, the report argues, even conceivable that there might be no deadweight in populations of long-term unemployed people.

Amongst the group of disabled people who have been out of work and receiving benefits for four years, even amongst those out of work for less time than this, there is no deadweight.

  6.2  Another rather curious argument is often used: it is pointed out that where disabled people are successful in finding and keeping work, that any savings must be offset against the cost of keeping a non-disabled person, who might otherwise have taken that particular job, out of work.

  This is a suspect argument because:

    —  It assumes that the non-disabled person could take the job (ie had the same skills, qualifications)

    —  It assumes that the non-disabled person would want the job ( many jobs offered to disabled people, who take them despite their low value, low wage, are not considered worth taking by their non-disabled peers)

    —  It assumes that disabled people and non-disabled people are chasing the same jobs, sharing the same motivations for work

    —  It ignores the endemic institutionalised discrimination that disabled people face.

  This last is comparable complaining that adjustments made for disabled people give an unfair advantage! Adjustments do not advantage disabled people, rather they attempt to redress an unjust disadvantage, and to argue otherwise is to betray a failure to acknowledge the depth of discrimination practiced against disabled people.

    —  Neither is there any comparison of like-for-like in the "offset" argument because disabled people are still, and have been for so long, discriminated against hugely in their attempts to secure work.

    —  The utilitarian argument is a morally bankrupt one, and cannot deal with real people's lives.

  For so long disabled people have been imbued with a learned helplessness that has resolved into a culture of dependency. Many disabled people were told that they could not work and that even if they could they could not compete with their non-disabled peers in an open labour market.

    —  The "offset" argument reinforces the same stereotype of disabled people in relation to work and says nothing about the fact, for example, that disabled people take less time off work due to sickness than their non-disabled colleagues. [14]

  Even so, in one Jobcentreplus area in South Wales there are approximately 1100 people on Job Seekers Allowance and 13,000 people on Incapacity Benefit.

7.  EFFECTIVENESS OF INTERVENTION

  7.1   The government argues that no-one knows what works in relation to returning/ getting disabled people into work. We reply, "We know".

    —  The Newham Personal Adviser pilot placed 355 people in work over a two year period.

    —  From 1999-2001, 857 people re/entered the labour market through the pilot in Tyneside.

  The Personal Adviser pilots were shown by researchers to be cost effective. Certainly, Job Broking must be.

  7.2  We are arguing for the value of interventions to encourage/support the employment of disabled people (otherwise they would be working already)—which will have some call on the public purse.

  The simple fact is, the benefits to the public purse outweigh the cost—so it is a win-win situation. The budget yesterday (17-04-02) put spending plans in place for long-term investment (20 years) in the National Health Service.

  Long-term investment in disabled people is required now to create a legacy of social inclusion, as well as to make huge savings.

  7.3  The cost-effectiveness of various programmes is usually only measured in hard outcomes but the Personal Adviser Service was found to be cost-effective from the government and societal points of view. The non-vocational (soft outcomes) like self-esteem, health-related quality of life, and satisfaction with the services, suggest greater benefits due to individual "value added", which are not included in the benefit cost ratio.

  The measurement of softer outcomes is an issue for the longer-term development of disabled people towards work-readiness. Work at the Disability Action Centre shows on an individual level how entry to the labour market can be facilitated by `soft programmes' (educational, for example) even for disabled people who have been out of work for very many years.

Dr Kevin Fitzpatrick

National Policy & Research Manager

May 2002


7   Labour Force Survey: The LFS is the largest regular household survey in the UK. In any three month period, a nationally representative sample of approximately 120,000 people aged 16 or over in around 61,000 households are interviewed. Interviews are carried out continuously throughout the year and results are published monthly or quarterly. The LFS uses concepts and definitions agreed by the ILO. Back

8   Incapacity Benefit: Statistical Overview (August 2001), House of Commons Library (via D). Back

9   Mitchell, D et al (Nottingham Univ) An Analysis of the Costs and Benefits of the NDDP Personal Adviser Service and Supported Placement Scheme Clients of Shaw Trust, 2. Back

10   http://www.dwp.gov.uk/asd/index.htm. Back

11   IB analysis, op cit. Back

12   Mitchell, et al op cit. This report argues 'The principal monetary benefits of the SPS and PAS to government accrue from tax and NI contributions. The contribution of taxes is not as significant as is often thought due to the fact that most of this client group is exempt from taxation either as a result of low earnings levels or disability allowances (tax credits) . . . there is usually some rebate at the end of the tax year. The other monetary benefit to the government comes from the potential cost savings that arise from reduced welfare benefits once in work . . . the difference in outlay on welfare benefit before and after enrolment onto the employment schemes . . . represent a cost saving for the government which would not have occurred if the client had continued to participate in non-work focused day care exclusively while receiving welfare benefits. Back

13   ibid. Back

14   Zadek, S & Scott-Parker, S Unlocking the Evidence: The New Disability Business Case (EFD, 2001) p. Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 13 June 2002