William Mosseri-Marlio: Jobcentres set to play increasingly important role

SINCE the EU referendum, commentators have been struggling to make sense of the economic climate. Optimists point to stronger than expected growth in the run up to the vote, the announcement from pharmaceutical giant GlaxoSmithKline to invest £275m in the UK or the recent recovery of the FTSE 250 share index.
Welfare to work remains a key theme.Welfare to work remains a key theme.
Welfare to work remains a key theme.

To date, however, the good news has been outweighed by the bad. Confidence in the service sector has slumped to a seven-and-a-half year low, while construction has seen the steepest decline in activity since April 2009. Brexit is also threatening household finances, with the weakened pound likely to lead to higher food and energy bills.

A clearer picture of the economy’s health will not emerge until later this year, when the first estimates of growth for the post-referendum period are released. Even then, these figures are frequently changed later down the line – and often by a significant margin. In the face of such uncertainty, the role of Chancellor is equivalent to driving a car while looking only at the rear-view mirror.

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For the person tasked with this job, Philip Hammond, the UK’s public finances will be top priority. Even after six years of austerity, the Government is still spending £79bn a year more than it is raising through taxes. George Osborne, Mr Hammond’s predecessor, had set a course to eliminate borrowing by 2019-20. But the Osborne plan relied on solid and consistent growth over the next four years. The new Chancellor will set out his own route to a balanced budget in November.

In the event of a downturn, how much Hammond will have to divert from existing plans will in part depend on the labour market. Unemployment will increase borrowing by adding to the welfare bill and reducing tax receipts. Policymakers, therefore, will be hoping that the labour market performs as it did in the wake of the financial crisis. At the turn of the last decade, the proportion of workers claiming Jobseeker’s Allowance in Yorkshire peaked at 6.2 per cent. Recessions in the 1980s, by comparison, saw unemployment reach nearly 12 per cent.

A number of factors contributed to this resilience, including flexible employment laws that make it easy for firms to take on part-time workers. Less recognised are the efforts of Jobcentre Plus (JCP), the UK’s public employment service.

Despite the spike in demand triggered by the financial crisis, JCP was able to maintain services without significantly increasing costs. As a result, the last Parliament saw JCP win plaudits from the Government’s financial watchdog, as well as an independent review commissioned by the Department for Work and Pensions.

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It is, however, far from certain that JCP will be able to deliver a repeat performance. The introduction of Universal Credit, which will see six benefits and tax credits rolled into one payment, is revolutionising welfare. For the first time, workers who receive wage top ups will be required to seek support from a work coach if they aren’t earning enough. This change alone could increase the number of people using jobcentres by 325,000 a week. But the Government has also set an ambitious target of boosting the number of disabled people in work, a task that will require jobcentres to take on a more significant role in getting the hardest-to-help into employment.

Given these pressures, boosting jobcentre productivity must be a top priority for the new government. Fortunately, as a Reform report highlighted last week, the opportunities to boost performance are there.

First, changes to the way tax data is recorded will give analysts a much richer picture of what works in employment policy – a question that policymakers know little about. By matching the tax returns of former benefit claimants with the help they received, jobcentres will soon be able to identify the retraining programmes that succeed in getting people back into work. These insights will help jobcentre staff not only target resources on those that need most support; back-to-work programmes could also be tailored to reflect what has worked for similar individuals in the past.

Second, jobcentres will have the opportunity to play a far more proactive role in driving economic prosperity. Tools have already been developed to help policymakers understand where there are skills gaps in the local labour market. If jobcentres told schools and colleges that local firms desperately needed software engineers, teachers would be better placed to highlight the employment opportunities of studying computer science. Equally, students might be warned against pursuing careers where firms simply aren’t hiring.

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If Ministers are concerned about the economic climate, focusing their attention on jobcentres would be advisable. But improvements in productivity will amount to far more than softening the worst effects of an economic slowdown. Ultimately, smarter services will also help individuals achieve a crucial driver of personal wellbeing: a secure job.

William Mosseri-Marlio is a senior researcher at the think-tank Reform. Its report – ‘The future of public services: digital jobcentres’ – is available on www.reform.uk

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