The Community Allowance

1. Background: Problems with the Benefit System

The £92 billion a year we spend on benefits (not in administration or in employment support, but the actual weekly money) is keeping people just above the gutter but forms no part of the ladders or bridges that we need to lift people out of poverty.

The benefits system is constructed as an on-off switch not a dimmer switch. Research at Oxford University has found that the benefits system is over-responsive to this kind of work and that as a consequence people prefer to stay with the certainty of benefits rather than risk losing them and having their income and other safeguards like free school meals thrown into chaos for months.

The labour market in poor communities creates predominantly part time, sessional and irregular jobs and reflects a national shift away from a 35 hour week towards a labour market that is more dynamic. Many of these are ideal ‘entry level’ jobs that could be a first step into work for the long term unemployed.

The consequences of this are significant:

• Community organisations often have money to create part time, sessional or short term work but are unable to recruit local unemployed people
• Socially valuable work does not get done, often in our most deprived communities, where it is most needed
• As a result money is lost from the local economy
• Individuals stagnate, trapped on benefits instead of gaining invaluable experience and skills in a supportive, rewarding environment
• Individuals get work in the informal economy, which can mean working at below the minimum wage in exploitative situations, making it impossible to draw on references for future employment opportunities

2. Proposal: The Community Allowance

Over the last 8 years the CREATE Consortium(the Development Trusts Association, Community Links, the National Community Forum, the British Urban Regeneration Association, and Slivers of Time) has evolved from the National Community Forum’s work on this issue, to develop a proposal called a Community Allowance. The work to pilot a Community Allowance is backed by over 80 organisations, including key national infrastructure organisations from England, Scotland, Northern Ireland and Wales. Over 50 community-based organisations wish to pilot the Community Allowance for the benefit of their community.

We want community organisations to be able to pay people to do work that strengthens their neighbourhood, while supporting them on their journey back to work, without it affecting any of their benefits for a limited time period. Maximum earnings on top of benefits would be capped at £4,305 or the equivalent of up to 15 hours a week on the minimum wage. Earnings could fluctuate depending on what work is available and the payment of benefits would be unaffected over the course of one year.

To pilot the Community Allowance we estimate this would cost £69,000 per pilot area which would generate £92,000 of investment in jobs in the local economy – the pilot would also enable us to calculate an additional cost saving to the state from the socially beneficial work that is undertaken.

3. Outcomes: The Benefits

For the individual participant the Community Allowance would enable them to:

• Gain access to personalised, tailored support and training, from a local community anchor organisation, that would address barriers preventing them from working
• Unlock their talents to increase their confidence, skills, knowledge and experience
• Build new connections with people and groups in their neighbourhood, increasing their social capital, health and well-being
• Draw people away from the informal economy

For the local community:

• Vital work for the well-being of the community is carried out; this work will benefit the local community in a number of ways, making it cleaner, greener, safer, healthier and more cohesive while generating considerable cost savings for the state

For the local economy:

• We have estimated that around 80 part time (4 hours a week) jobs could be generated by the Community Allowance on a single estate, unlocking around £92,000 a year investment into each disadvantaged community
• Money invested in this way not only improves the lives of individual residents, but also circulates within the local economy rather than being drained away via external contractors
• At a time of economic downturn, these part time, sessional and short term jobs are a relatively stable source of work for local people, as funding for them comes from a range of statutory sector partners involved in neighbourhood renewal, enabling the community anchor to earn additional income through trading, creating a virtuous circle of economic development

4. Policy Context

• The Government’s aim to pilot the Community Allowance was announced in the Community Empowerment White Paper^[1]
• The UK National Action Plan on Social Inclusion^[2] talks of increasing labour market participation through targeting areas of high worklessness by devolving decision-making and empowering communities
• Work Skills: Unlocking Talent^[3] - we would like to unlock the resources in Skills Accounts and Train to Gain initiatives in neighbourhoods with high concentrations of worklessness through Community Allowance pilots
• The DWP Welfare Reform Green Paper^[4] has proposals to pilot ‘work for your benefit’ initiatives for the projected 2% of JSA claimants who are still unemployed after 2 years by requiring them to undertake mandatory full time work in their community, the DWP’s own research^[5] has found that this approach is not effective

5. Next Steps

• Stephen Timms MP has supported piloting the Community Allowance for Employment and Support Allowance claimants, pending the outcome of the Housing Benefit Review
• We believe that a Community Allowance pilot programme should take place as soon as possible alongside other pilots proposed in the Welfare Reform Green Paper for all benefit claimants and the findings of this can be fed into the Housing Benefit Review

For more information:www.communityallowance.org or contact Naomi Alexander on 07515 062 846 or email n.alexander@dta.org.uk

[1] Communities in Control: Real people, real power, CLG July 2008 p. 37

[2] Working Together: United Kingdom National Action Plan on Social Inclusion, DWP, September 2008 p.17

[3] Work Skills, DWP and DIUS June 2008p.19

[4] No one written off: reforming welfare to reward responsibility, DWP, July 2008 p. 41

[5] DWP Research Report No 533: Comparative Review of workfare programmes in the US, Canada and Australia, August 2008