NEWS FOCUS in this edition

Gordon's Report
A Tonic for Employers, and
Some strangely magnetic balls

It was initially our intention to focus this issue both on the Pre-Budget Report – and on the future for the Regional Agenda following the 'NO' vote in the North East, but let's face facts, devolution is a political issue hotter than Satan's underpants after a particularly feisty curry. So instead you'll find us concentrating on both the Chancellor's Report and, in particular, the Incapacity Benefits issues.

The Pre – Budget Report

Apart from a rather successful attempt to whip the political carpet from under Alan Milburn, and to set out the ground on which Gordon believes the election should be fought, what relevance does the Pre – Budget Report have for skills and employment in the South West?

Rather a lot as it turns out, in five key areas: -

A focus on people on incapacity benefits (mainly via Pathways to Work)
Childcare, maternity and paternity reform
The national rollout of Employer Training Pilots
Enhanced Effectiveness of Regional Skills Partnerships (RSPs)
A new panel on national skills forecasting

Incapacity Benefit

Tackling Incapacity Benefit is now officially the new black… it is playing a key role in more and more national and regional planning and indeed will be - one of the main foci of our own regional EQUAL Project. That’s why we’ve chosen Incapacity Benefits as our topic for the SLIM – Comments section (below), looking at who they effect, where they are concentrated and how big an issue they really are for the region with the fastest ageing population. Interestingly this focus on addressing those not currently within the labour market was a key part of the Framework for Regional Employment and Skills Action (FRESA) work we’ve been engaged with here and that will now be passing to SWESA.

Incapacity Benefits (IB) will be addressed through probably one of the most positive announcements in the Chancellor's report - a substantial extension of the Pathways to Work Pilot scheme, which helps IB claimants return to work. (Bizarrely, I was in a meeting recently with DfES, where they opposed the concepts of 'pilots' – odd when you think they currently have more pilots than Heathrow airport, but I digress.) This will mean investing £220 million in extending the scheme to a third of the country. Those to most directly benefit will be from the 30 local authority districts with the highest levels of economic inactivity.

The scheme offers people on incapacity benefit a £40 per week return to work credit and enhanced rehabilitation services. The early results appear to have been very positive: in the areas where Pathways is running - the number of people getting jobs has doubled and there has been an 8 to 10% increase in the rate of people 'coming off' incapacity benefits.

The Chancellor also announced extra funds for the New Deal for disabled people. The permitted work rule – which allows IB claimants to undertake some work for up to 26 weeks, with a possible extension to a further 26 weeks – will be extended to cover 52 weeks for everyone, with an even longer extension for people with the most severe conditions.

A Learning Allowance will be launched that will allow benefit claimants to participate in full-time training. This will allow benefit claimants in pilot areas, with the agreement of their personal adviser, to take up full-time training towards a first level 2 qualification. Support will include a £10 per week benefit supplement to cover the additional costs of learning and will be dependent on the participant meeting the conditions of a Learning Agreement agreed with their personal adviser. For jobseekers who do not have a Learning Agreement in place, the benefit rules will be strengthened to ensure that any learning is genuinely part-time and does not prevent jobsearch activity.

Childcare, maternity and paternity reform

The newly announced Ten Year Strategy for Childcare is intended to help promote employment as well as playing a part in ending child poverty and promoting women's independence and equality. From next April the limits of the childcare element of the Working Tax Credit will be raised to £175 for one child and £300 for more than one, up from £135 and £200, and the maximum proportion of costs covered by the credit will rise from 70% to 80% from April 2006.

This should mean that parents in areas with high childcare costs (notably London) will see a significantly greater improvement in their incomes if they move into employment.

The 'threshold' in Working Tax Credit – the amount claimants can earn before their entitlement is reduced – is to be raised by £3 per week, in line with inflation. It may make sense in future to link this to earnings somehow – that way claimants won’t see their net incomes whittled away over time.

The Pre-Budget Report also announced important enhancements of the Government's anti-poverty policies, including a new strategy for childcare, a substantial enhancement of maternity rights, improvements in the tax credits and proposals for extra investment in the Child Trust Fund.

The ten-year childcare strategy (Choice for Parents, the Best Start for Children) published alongside the Pre-Budget Report comes with defined targets:

2,500 Children's Centres by 2008 and 3,500 by 2010
Affordable, flexible, high quality childcare for all families with children under 14
A right to 15 hours (plus an eventual goal of 20 hours) a week of high quality care for 38 weeks a year for all 3 and 4 year olds by 2010
Out-of-school childcare from 8am - 6pm each weekday for all 3 to 14 year olds by 2010
The child element of the Child Tax Credit will increase by £65 a year

There is also a focus on the currently poorly paid childcare sector and reference to creating a "highly skilled childcare and early years workforce that is among the best in the world". This will be promoted by a Transformation Fund, worth £125m a year, and consultation by the Children’s Workforce Development Council on "a new qualification and career structure".

Much of the post announcement reporting has focussed upon the enhancements to maternity benefits. The Government will aim to increase the period of paid maternity leave to twelve months by the end of the next Parliament and, as an interim measure, it will go up from 26 weeks to 39 in April 2007. The delay is due earlier pledges to employers and employers groups promising to limit changes to these areas for a set period of time.

The Chancellor also announced that the Government will consult employers, unions and other organisations about extending the right to request flexible working arrangements to parents of older children and carers of sick and disabled relatives.

The Chancellor also indicated that he is already considering improvements to the Child Trust Fund. From April 2005 children born since September 2002 will have a Child Trust Fund with an initial public investment of £250, with a further £250 for children from low-income families. The Government intends to consult on doubling these amounts.

He also confirmed last month’s announcement of the implementation of Jobcentre Plus’s Building on New Deal proposals which allows for individualisation of provision and empowerment of local Jobcentre Plus offices beginning in Autumn next year in 11 'Prototype' areas (I said they had gone off 'Pilots'!), these will include a 'Prototype' in Cornwall.

New Housing Benefit reforms were announced - aimed at enhancing job mobility.

National Employer Training Programme

The national roll out of the Employer Training Pilots (ETPs) was, though to a degree somewhat predictable, absolutely welcome. A number of evaluations have proven their worth, but rolling them out nationally will be a real challenge – let’s be frank we don’t exactly take the most logical and systematic approaches to business support, and I wonder how well they will succeed should they not have the cash incentives attached.

The new Employer Training Programme is designed to give employers the opportunity to access free and flexibly delivered training for their low skilled employees. The ETPs, launched in September 2002, provide a package of support to encourage employers to train their low-skilled employees. This includes free or heavily subsidised training, information and advice for employers and learners, paid time for training for employees and, in most pilot areas, support for employers to meet the costs of giving staff paid time to train. The partnership approach tested in the pilots has proved very successful and the pilots now cover over one third of the country, with over 15,000 employers and over 100,000 employees participating. Most employees involved in the pilots left school at or before age 16 and half have no qualifications at all. 70% of all firms participating have less than 50 employees.

Building on their success the Government will roll out a National Employer Training Programme from 2006-07 that will cover the whole country by 2007-08. The Government will now guarantee that, as part of the national programme, where employers are prepared to offer their low-skilled employees paid time to train up to level 2, the costs of this training will be fully subsidised. The Government will allocate a further £197 million over 2006-07 and 2007-08 to fund this national programme.

The key features of the national programme are:

Brokers who will act for employers and their employees to assess training needs, and source high quality training provision that can be delivered flexibly in the workplace;
Fully subsidised costs of training to level 2 where employers are prepared to offer their low-skilled employees paid time to train;
Financial support - equivalent to that for a level 2 qualification - towards the cost of a level 3 qualification for those who can jump straight to level 3;
Support from brokers to design and source training packages at level 3 and higher; and
Creation of links with Jobcentre Plus in order to support adults making the transition into work to get training in a way that meets the requirements of their employer.

Most of the pilots tested the impact of compensating employers for the paid time that their employees take to train – 'wage compensation'. The Report claims that evidence on wage compensation is mixed, but early evidence suggests that it is certainly important as a way to initially engage those employers who would not usually provide training.

And here, should you need it, is confirmation that the big cash to business hand-outs are unlikely "The Government will continue to consider this issue and look to further evaluation before making a final decision on the inclusion of wage compensation within the national programme."

Enhanced Effectiveness of Regional Skills Partnerships (RSPs)

Our own RSP – the SWESA will I'm sure be taking note of these developments, designed to enhance its effectiveness by reinforcing closer links between Regional Development Agencies (RDAs) and Learning and Skills Councils (LSCs). The Government has already committed to consider proposals for further integration of planning and funding of adult skills and workforce development at the regional level, including, where the partners in the region want 'dual key' arrangements for planning and funding adult skills, training and workforce development. Dual Key – refers to the way that the three ‘Northern Way’ regions have indicated that they plan to start working closely with the LSCs by April 2005 - something the Government is looking upon favourably.

For each region, the RDAs, the LSC and the RSP have been asked to contribute to Budget 2005 with an update of progress in aligning regional priorities for adult skills provision. Where the regional partners identify obstacles to further integration of skills provision in supporting regional economic development, the Government has committed itself to working with them, to remove the obstacles.

A new independent panel on national skills forecasting

The new independent review on national skills forecasting is something most commentators have missed – but when it comes to Labour Market Analysis, Ben, our head LMI honcho, has a nose like a bloodhound, and if only the resemblance ended there.

The panel’s aim is to inform the Government’s view of how to respond to the long-term challenges set out in Skills in the Global Economy. The Government has asked Sandy Leitch, Chairman of the National Employment Panel and formerly a Chief Executive of Zurich Financial Services, to undertake the independent review - examine the nature of the UK’s long-term skills needs and priorities of business and the economy.

The terms of reference for the review will be:

To examine the UK's optimum skills mix in order to maximise economic growth and productivity by 2020; and;
In particular, to consider the different trajectories of skill levels the UK might pursue.

Forecasting (thanks to Granny SLIM’s fortune-telling past) is something we know lots about, so as we sit rubbing our strangely magnetic balls, we can safely predict:

A broad welcome for the childcare reforms;
Difficulties in rolling out the Employer Training Programme should they not get employer cash incentives (for initial training at least);
More announcements on Incapacity Benefits;
Plenty of pondering within LSCs, RSPs and RDAs, but ultimately all to the good; and
The replacement of the word 'Pilot' in all bids to DfES and its substitution with 'Prototype', 'Pathfinder' or my own personal favourite 'Sounding-Board Areas'.

For more on Incapacity Benefits in the region see our SLIM Comments section below.

SLIM Comment

Information from the Department for Work and Pensions (DWP) shows that as at May 2004 there were 158.7 thousand claimants of Incapacity Benefit in the South West. This equates to about 5.4 percent of the working age population in the region, one of the lowest proportions of the English regions.

Chart 1 – Incapacity Benefits as a proportion of the working age population

Graph - Incapacity benefits as a proportion of the working age population
Source: DWP 2004 and ONS 2004.

Within the region, as a proportion of the working age population, Torbay, Plymouth, Bristol, Cornwall and the Isles of Scilly, Bournemouth and North Somerset have proportions above the regional average.

Chart 2 – Incapacity Benefit claimants within the South West

Graph - Incapacity Benefit claimants within the South West
Source: DWP 2004 and ONS 2004.

As a proportion of the total number of claimants, more men than women claim Incapacity Benefit at 62 percent of claimants being male and 38 percent female. This equates to about 6.5 percent and 4.2 percent of the working age population. Again these figures are amongst the lowest in England.

Amongst working age men in the region, the highest proportion of IB claimants are seen in the local authority areas of Torbay, Plymouth, Bristol, Cornwall and the Isles of Scilly, Bournemouth and North Somerset.

Amongst women of working age in the region the highest proportion of IB claimants are within the local authority areas of Devon, Cornwall and the Isles of Scilly, Bristol, Gloucestershire, Somerset and Plymouth.

Chart 3 – Incapacity Benefits by gender within the South West

Graph - Incapacity Benefits by gender within the South West
Source: DWP 2004 and ONS 2004

In terms of age of those claiming Incapacity Benefit, as at May 2004, there were 75.7 thousands claimants aged between 50 to retirement and about 71.1 thousand between the ages of 25 to 49. This equates to 9.4 percent and 4.4 percent of their relative populations with figures skewed towards older people.

Within the region Torbay has the highest level of under 25s claiming Incapacity Benefit relative to the under 25 population. Of those aged between 25 and 49, the areas with the highest level of claimants are Torbay, Bristol and Plymouth.

For those aged between 50 and retirement, Plymouth, Bristol, Torbay, Cornwall and the Isles of Scilly, Bournemouth and North Somerset have the highest level of claimants relative to their respective populations.

Finally it is crucial to look at the steady upward creep of the numbers of those on Sick and Disabled Benefits compared to the downward trend in unemployment in the region. These figures are from May 95 – May 2003 and cover working age claimants of key benefits by statistical group in the South West.

	Unemployed %	Sick and Disabled Benefit %
May 1995	5.8	5.4
May 1996	5.3	5.8
May 1997	3.8	6.1
May 1998	2.9	6.3
May 1999	2.5	6.5
May 2000	2.1	6.5
May 2001	1.8	6.7
May 2002	1.6	6.8
May 2003	1.6	7.0

Clearly there are relatively few left on unemployment benefits but more on inactive benefits of various types. The chancellor’s focus has swung around because:

a) This is where the money goes and can be saved.
b) We have much higher rates on these benefits than other countries in Europe, and the OECD are suggesting our unemployed are actually on inactive benefits which contradicts the EU drive to ensure that all member states adopt 'Active' employment policies.

Andy		Laura
Andy Dean (Editor)		Laura Smith (Labour Market Analyst)