People enter the Jobcentre Plus office in Bath. Photograph: Getty Images.
Show Hide image

The coalition's "Help to Work" won't help the jobless

The DWP's own study found that forcing claimants to do community work or attend daily jobcentre meetings made almost no difference to employment levels. 

When George Osborne announced the government's new "Help to Work" programme, which launches today, at the Conservative conference last year, he declared: "We are saying there is no option of doing nothing for your benefits, no something-for-nothing any more." It was the language of retribution.

From now on, those claimants (sotto voce: "scroungers") who have been on the Work Programme for more than two years and have failed to find a job, will be required to either attend daily meetings with jobcentre advisers, carry out community work ( such as making meals for the elderly, clearing up litter, working for a local charity) for six months without pay, or undergo an "intensive regime of support" to address underlying problems such as drug addiction and illiteracy. Those who refuse will have their benefits docked for four weeks. 

Despite Osborne's "something-for-nothing" rhetoric, employment minister Esther McVey insisted on the Today programme this morning that the scheme was not about "punishment" but about "getting people into work and fulfilling their potential". Yet even if we take her rhetoric at face value, how helpful is Help to Work likely to be? Judging by the DWP's pilot (the results of which, as Jonathan Portes notes, it has avoided publicising), the answer is "not very".  

The department took 15,000 claimants and placed them in either the jobcentre programme, the community work scheme, or a control group. At the end of the pilot, it found that the same number in the control group (18 per cent) found employment as those doing workfare and that just 1 per cent more of those receiving jobcentre support did. In other words, Help to Work made almost no difference. Yet despite this, the government has proceeded to extend the £300m programme nationwide without any cost-benefit analysis. It is another triumph of politics over policy. 

Thirty voluntary sector organisations, including Oxfam and the Salvation Army, have rightly opted not to participate in the scheme and have responded by launching a new campaign to Keep Volunteering Voluntary. "Workfare schemes force unemployed people to carry out unpaid work or face benefit sanctions that can cause hardship and destitution," they warn. "We believe in keeping volunteering voluntary and will not participate in government workfare schemes."

Labour has responded by reminding voters of its Compulsory Jobs Guarantee scheme, which would offer every young person out of work for more than 12 months and every adult (aged over 25) out of work for more than two years a paid job, and its plan to offer training to those without basic maths, English and IT skills. As I've noted before, nearly one in ten people claiming Jobseeker's Allowance lack basic literacy skills, while more than one in ten lack basic numeracy skills (making them twice as likely as those in work to not have these skills). Half are unable to complete basic word processing and spreadsheet tasks and nearly half lack basic emails skills. Government research found that a third of people claiming Jobseeker's Allowance had claimed the benefit at least three times before and that nearly 20 per cent of those with repeat claims had problems with literacy or numeracy.

A combination of guaranteed paid work and basic skills training is the best way to address the human waste of long-term unemployment. But for an enlightened and evidence-based approach, don't look to Osborne and co. 

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation