Bookmark and ShareAleksi Knuutila is a researcher in the Valuing What Matters programme at nef

Some commentators believe that the worst of the current recession is behind us. Whether this is true or not, we can be sure that its full social consequences have not yet been felt. People are still losing their work, and unemployment may well rise to 3 million next year. Drastic cuts in spending may make this harmful trend worse.

As previous nef research expected, the recession increases the gap between wealthy and poor areas. Recent research by the Joseph Rowntree Foundation the communities that already had highest unemployment have suffered the largest losses of jobs. These areas don’t suffer only from a lack of employment. The downturn has also forced over half of local authorities to reduce their staff and cuts services. The poorest neighbourhoods suffer from both job losses and a cut in the services that support them.

In the form of benefit payments, billions of pounds are spent on these areas. These resources succeed in keeping their recipients out of the gutter. At the same time, benefit payments constrain claimants’ possibilities to improve their lives. Our social security functions more like a trap than a ladder, and is fuelling the deprivation of poor communities.

Welfare reform has for long focused on making work pay. nef’s new report, Benefits That Work, shows that purely financial calculations don’t capture what matters to the unemployed. Benefit claimants are above all concerned that accepting work will make their life more insecure. Benefits systems are function like an on-off switch; either you are on it or not. This makes it insensitive to the fickle and uncertain nature of today’s labour market. Taking up a job with irregular hours and no employment protection risks leaving people penniless.

The benefits spend could be channelled so that it allows people to improve their own communities while helping them to move towards employment. Benefits That Work presents an Social Return on Investment (SROI) analysis of an innovative scheme to make the happen. With the Community Allowance, community organizations would be able to hire unemployed people to work with them for the good of their area. The participants would have their benefits secured for a year, and would be able to earn a small, capped income on top of them. Protecting the current level of benefits would allow the claimants, with the support from the community organization, to focus their efforts on moving towards the labour market.

What makes the Community Allowance effective is that it plays up the strengths of the claimants. Many employment schemes offer subsidized work placements for the unemployed. They often leave the participants feeling stigmatized, as if they would not be good enough for the work without government footing the bill. In contrast, Community Allowance engages the unemployed in work that they are best placed to perform, due to their close connections with the neighbourhood or their capacity to act as positive role models.

Our SROI analysis of the Community Allowance shows that for each £1 invested into it, £10 of social value is created. This extra value is received by the participants, their communities and families. The state is likely to recuperate more than the resources necessary to run the scheme. Channelling the benefits spend so that it works for the good of deprived will take the edge off the ruin of the downturn.

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