A workable auto-enrolment for sickness protection solution is yet to cross his desk says Labour shadow employment minister Stephen Timms MP. But the door remains open. John Greenwood hears more
Just eight months from now Stephen Timms could quite conceivably be the new minister for employment. If he and his party are successful in winning the election, reducing the bill for long-term sickness and keeping Britons healthy and away from the NHS will be top priorities.
So given that auto-enrolment is going some considerable way towards ‘fixing’ pensions, what does the MP for East Ham think of the future role of the private sector in getting Britain fit for work, back in employment and keeping them there? Does he see sickness absence as the next area where government can hand over social policy responsibility to employers and workers?
“This is a very important area and it certainly is the case that if you look at comparisons with other OECD countries, that there are lots of countries that are doing better than we are in getting people with health impairments back to work or into work in the first place,” says Timms.
This does not, however, mean Timms is ready to take forward ideas being shaped by those in favour of some form of auto-enrolment for group income protection whereby once contributions are up to the full 8 per cent, government could cover off workers’ disability risk by channeling a further half a per cent into some form of sickness insurance.
For Timms this feels like an expensive policy commitment too far at this stage, although he is open to ideas if the industry wants to bring them forward.
“What I would say is that I have not yet seen a private sector insurance model that I find compelling. If there are models that the industry wants to put forward I would be interested to see them. But I would underline that I haven’t seen a model yet that I think works, he says, pointing to his spell as a minister in the previous government looking at this area.
“We did look at this when I was a minister at the Department for Work and Pensions before the last election and it just didn’t anywhere near stack up at the time. Now that doesn’t mean that is the case now. It may be that the industry can do things in a more efficient and cost-effective way. If charges can come down on the pensions side then maybe there are models on the sickness side that can make this look more attractive. I haven’t seen them yet, but if there are models, I will be very keen to see them.”
For Timms, the cost of private sector group income protection or return to work healthcare solutions is the key issue, even if, as some in the industry would suggest, insured solutions have an arguably more cost-effective success rate than the millions government has spent trying to get people off the sickbed, out of the healthcare system and back to work.
“It tended to be the cost that was the key factor,” says Timms. “It tended to be that the insured solutions just look prohibitively expensive. Maybe that can now change but it has got to work from the point of view of employers as well as the state. And there are limits to the extent to which the state can offload its obligations.”
Timms is equally non-committal on the idea of tax breaks for any form of insured solution, even if such an approach were likely to reduce costs in the long run. With the nation’s finances in such a parlous state, there simply isn’t the money there to do anything creative he says. Timms is at pains to underline just how little resource the next government will have to play with.
“It is important to understand the background against which the next government will be working – the challenges are threefold; eradicating the deficit – and the current government told us they would do so in this parliament and they haven’t – they are now saying they are going to halve it. The deficit will remain a big challenge. Secondly we have to make sure we embed the economic recovery. But thirdly we have got to make sure the recovery benefits everyone and not just the few. At the moment there are a large number of people who are not benefiting at all. So that context is important to everything we will be doing.”
But for Timms that is unlikely to extend to incentives or rewards for those employers who put in place provision for sickness payments so that individuals place less of a burden on the state, or for employers who have competent strategies to keep individuals in work, again, reducing cost to the state, he says. Nor should we expect any form of contracting out for health and sickness costs leading to reduced NI, even if it means we will continue to have billions of pounds being paid out to members of the public in sickness benefits, costs to UK plc in lost tax and productivity and extra costs on the NHS.
“In my mind fiscal incentives are not going to be high up on the list of things we are going to need to do, partly because we have still got a massive deficit to sort out so the scope for fiscal incentives and tax cuts is limited,” he says.
Timms’ stint as financial secretary to the Treasury in the last government means he has a clear understanding of the mental process of those with their hands on the levers of taxation. While he understands the frustrations of those who argue the government will save more in the long run through prevention rather than cure, he is adamant that anything beyond the £500 per employee return to work break is unlikely.
“Additional fiscal incentives will require some quite creative responses and ideas. And the straightforward business case for employers is a compelling one, so why is it not happening? That is something I will want to understand, and don’t at the moment. Why is it that insurers aren’t able to offer incentives in terms of lower insurance premiums for companies who are doing the right thing,” he says. “I am not ruling anything out but I need to be frank with people that the scope for tax giveaways while we have a deficit of the order we currently have is going to be limited.”
He may lack an appetite for a private sector insured solution, but he is considerably warmer when it comes to a state-sponsored approach.
“The most interesting ideas around this I have seen so far have been around the Institute for Public Policy Research’s recent Condition of Britain report. We are going to be looking very carefully at the proposals in it,” he says.
That report calls for ‘stronger income protections for people who have contributed to the system’, and proposes a that JSA for claimants with a recent contribution record be £30 a week higher and an extension of support with mortgage interest payments to people claiming contribution-based JSA. This would be achieved by creating a stronger institutional foundation
The IPPR makes the point that short-term income shocks affect a significant proportion of the population. While up to 1.5m people were claiming JSA over any month in 2013, over the year, 3.2m people made claims. Around 10.7m people relied on out-of-work benefits in the decade to 2009, but almost half received them for less than a year and many claimed for just a few weeks.
Timms’ interest in the IPPR policy proposals underlines the extent to which the government’s concern is the broader mass of people who fall out of the workforce for whatever reason, and not just those that do so on ill health grounds that could benefit from GIP.
That said, sickness absence is firmly on his agenda. “Last year I went to look at the way employment support was working in Australia and I was struck there by the way there is a separate programme for people who are out of work on ill health grounds, the Disability Employment Service as they call it, which is separate from the regular jobseeker support. The IPPR has suggested that people with a short-term prognosis should be deal with in the short-term process. And those with longer-term problems should be dealt with separately.
But despite appearing warmer towards a National Insurance solution than a provider-led one, Timms’ view is not simply private sector bad, public sector good. He is damning in his criticism of the current government’s record on long-term sickness.
“One of the really disappointing things under this government is the woeful performance of the Work Programme amongst people out of work on ill health grounds.
“For those claiming Employment and Support Allowance only about 6 per cent who go into the Work Programme who get a sustained job outcome after two years, which I think is extraordinary. That is a 94 per cent failure rate. It is clear the way the Work Programme was set up is that people with more serious barriers to work have been very seriously let down. At the time it was started we were told there would be incentives for providers to focus on these people, but it hasn’t worked,” says Timms.
But things could be set to change. In July the government unveiled Health Management Limited, the UK’s largest occupational health provider, which is part of Maximus, as the winner of the tender to deliver assessments for the Health and Work Service. Medical treatments recommended by the Health and Work Service or employer-arranged occupational health service will benefit from a tax exemption of up to £500 a year per employee when the service is up and running.
The service will be launched in late 2014 with a phased roll-out coming to a close by the end of May 2015.
Timms is supportive of the Health at Work Service. “I am a big fan of Dame Carol Black and her work. I was employment minister in 2008 when she was engaged on this then and what she has done then and since has been very important,” he says. “And I see the Health at Work Service as a real opportunity. I welcome it – it could do a very important job.”
Given it could be reporting directly to Timms just as it becomes fully functional, that will be music to the ears of the HWS and its contractor.