Barring a sudden downturn in Conservative fortunes, and subject to getting the call from Dave and George, the welfare reform brief within the Department for Work and Pensions could soon be in the hands of a man who has preached the benefits of ’good work’ to politicians of right and left.
David Freud, who was offered a seat in the House of Lords last year, has been described as defecting from Labour to the Conservatives last year out of exasperation. But Freud, the great-grandson of the eminent psychologist Sigmund, describes it differently. “I have never voted Labour in my life. I was just asked by the Government in 2006 to conduct a report into welfare to work. Since then, the Conservatives asked me to take up the brief for them, and I have been glad to do so.”
Freud’s ’defection’ to the Tories a year ago could now see him implementing more of the recommendations he put forward to the DWP back in 2007. At the same time, if he does take office, the group risk industry can expect to see a politician that understands and values the work they do. That said, anyone hoping to push the agenda of state intervention in the form of tax breaks for benefits that promote health and reduce absence, or the creation of extra burdens on employers, should expect no support from Freud.
Freud’s report focused on getting the long-term unemployed back to work, but should he take office, his brief would cover the entire absence piece. He is keen to take forward the ideas put forward by Dame Carol Black in her report Working for a Healthier Tomorrow, and sees overlaps in terms of both best practice and business opportunities.
“There has been a huge incoming movement of workers from abroad, whether from Eastern Europe or elsewhere, and it would be nice to get people off benefit into some of those jobs instead”
“I think we are going to take Dame Carol Black’s work pretty seriously. My ambition is to join it up with my piece of work and meet in the middle, because they are pretty complementary pieces of work,” says Freud.
“It may well be that some of the expertise insurance companies have developed in helping people back into work quickly will be really relevant for those who have been out of work for a long time. It may also be that some of them decide this is a very interesting area for them to become involved in and I personally would welcome that.”
Getting involved in getting long-term unemployed people back to work is exactly what Freud is all about. His 2007 report identified the costs to society of long-term unemployment and proposed incentivising companies to engage in the placement of staff in return for cash. Providers engaged in getting people back into the workplace and keeping them there for three years, say, would be rewarded. Rather than funding government support schemes whose results are difficult to measure, he wants to tie remuneration directly to performance, in the way that insurers’ interests are aligned with employers that want staff back at work.
“One of the essential elements of what I have been promoting is giving the intermediary or provider (engaged in placing long-term unemployed people) a direct interest in supporting an individual back into work. That way the focus of the interventions becomes more effective. The contrast is with the state, where you get centralised programmes,” says Freud.
“In many ways the insurance companies are leading the way in this. They have a very direct interest in whether people get back into their jobs. This is one of the areas where we now discover there is no difference of interest between the individual and the insurance company or the provider because all the research has underlined that work is good for you and is quite therapeutic.”
Freud says he believes all shades on the political spectrum accept the ’work is good for you’ argument, but it is the emphasis when it comes to implementation that differs.
“In ideological terms now there is not a huge debate between the parties. The difference between the parties is their enthusiasm to actually do it. I have been working closely with Dame Carol Black. She has been talking about action to stop people falling out of the workforce and I am saying we need a mentor network when people are getting into work. If you have a mentor network doing that it is likely you can use it for people vulnerable to falling out of work.”
Freud’s proposals are radical, but is not bringing in cheap labour at a time when payroll is under pressure likely to strip out ’proper’ jobs paying decent salaries?
“Doing anything in a real recession is hard. But the reality is if we recover from this recession we want to have the systems in place so we can take advantage of the rapid growth phase that you normally get coming out of one,” says Freud. “It will still take years to get people off IS into ESA. If you are starting to get to people who have been inactive, with support in place, you aren’t going to get people coming out until 2012. Hopefully we will be out of the woods by then.”
“One of the essential elements of what I have been promoting is giving the intermediary or provider a direct interest in supporting an individual back into work”
But could there not be a public backlash, with people fearing losing their job?
“I don’t see that as a major concern. The big impact is in the service industry where there are lots of lower cost jobs and there has been a huge incoming movement of workers from abroad, whether from Eastern Europe or elsewhere, and it would be nice to get people off benefit into some of those jobs instead,” says Freud.
Will that lead to incentives for particular industries to be targeted? “We won’t have specific targets but we will put in place programmes to give pre-employment training in certain industries, such as hospitality, retail and IT,” he adds.
And how warm are the Tories on Freud’s proposals? “The senior Conservative hierarchy – David Cameron and George Osborne have specifically endorsed this approach at a far more vigorous level than the existing Government. The present Government have been happy to do it as trials but haven’t accepted the principle en masse,” he says.
When it comes to financial incentives for employers to improve their practices towards their employees, Freud is less keen. The idea that companies offering group income protection take a burden off the state is accepted, but anyone wanting tax breaks should not hold their breath if Freud does take office. He is not persuaded that such products should merit fiscal stimulus through tax breaks.
“It is clearly something to look at but it is not going to be a priority,” says Freud. “I am not desperate about tax breaks generally. We are bottom line better off having a really simple tax system with as few distortions as possible and finding other ways to incentivise people.”
Nor does he want to increase burdens on employers. He is cool on the idea knocked around earlier last decade that companies be required to demonstrate a health and wellbeing approach to staff on their balance sheet, although this could be encouraged on a best practice basis.
“We have now put too many regulatory burdens on businesses and we have got to roll them back substantially. So any approach to helping companies in management terms has got to be done in a non-regulatory way. I don’t envisage us coming up with anything on a regulatory basis.
His own experiences of pushing the return on investment argument in relation to back to work policy could be seen to reflect those of many corporate advisers and HR directors arguing the case for new initiatives with finance directors. Such was his battle with the Treasury in attempting to get funding for the proposals his report put forward.
“The debate with the Treasury was about the Treasury’s own accounting rules where they would not recognise a saving in one pocket against a cost in another. I thought this was a very poor accounting rule because it prevented the State saving a large amount of money. It effectively stopped the State working out the true costs of its policies and actions, which I thought was deeply concerning.
“So just at the level of efficiency you have to have a system that works out if you are going to spend some money has a proper cost reward assessment, and we haven’t been doing that. At another other level I thought if you could get a reliable saving that was a true saving, you should be spending as much as you could to move people off economic activity.
“The figures on economic activity are that it is costing us £35bn a year just in fiscal terms alone – forget the social on-costs that people need and take up when they are economically inactive, which could double that number – the taxpayer is carrying an enormous burden on people out of work.”
All About Aavid Freud
Born 1950
Educated Merton College, Oxford
Career:
Journalist – Financial Times, deputy economics correspondent, tax correspondent, wrote Lex column for four years
Investment banking – Became a City dealmaker at Rowe and Pitman, worked on high profile flotation of Eurotunnel link and National Air Traffic Services. Became vice-chairman of UBS AG. Retired from the City at 53.
Charity work – Served as chairman of the Portland Trust, which promotes peace in the Middle East.
2006 – Asked by Tony Blair to write report on British welfare to work system
February 2009 – Joined Conservative Party and given life peerage as Baron Freud of Eastry. Shadow minister for welfare in House of Lords.
Enjoys:
Swimming – “I swim in Highgate pool every morning. If you do it every day the cold is no problem.”
Opera – Italian, 19th C
Cycling – Cycles to work most days.
Family – Married with three grown up children
On that family name, benefit or burden? “It drives you pretty hard. It does have an advantage in terms of knocking the doors down but has a disadvantage in that you have got to perform. Net, net, probably a benefit.”