Select Committee on Education and Employment First Special Report

Fourth Report: Employability and Jobs: Is there a Jobs Gap? (HC 60)

Fourth Report: Employability and Jobs: Is there a Jobs Gap? (HC 60)
Published: 19 April 2000
Government Reply: Fifth Special Report, Session

 1999-2000 (HC 603)

Published: 23 June 2000


Government Response

Further Government Action

1. It has been suggested that employers should be compelled to notify Jobcentres of vacancies in order that the number of total vacancies can be better assessed. Although this would certainly improve the quality of labour market data, in our view it would place excessive administrative burdens on both business and the Employment Service. Nonetheless, now that the Government has given greater prominence to vacancy data, the method of estimating total vacancies need to be improved. We recommend that the Government should show caution in drawing inferences from vacancy data until it has established a robust method of estimating total vacancies.

The Government agree with the committee that it is inappropriate to compel employers to notify their vacancies to Jobcentres. In addition to the reasons given in the report it is also likely that other sources of vacancies, newspapers, specialist employment agencies provide a broader range of job opportunities. In fact, the general trend internationally is in the opposite direction with countries liberalising the provision of vacancies. Moreover, considering forms of vacancies other than Jobcentre vacancies is a common part of the Jobseeker's Agreement which aims to achieve the most effective way of getting a job. That will generally include more than one form of jobsearch.

The Government does, however, agree that more information on total vacancies is needed and ONS is currently exploring the possibility of an employer based survey to try to estimate total vacancies. The timetable for this is to start a survey on a preliminary basis from October this year with the aim of commencing publication of data during 2001.

DfEE also have work planned to relate information from Jobcentre vacancies to other national statistics such as estimates of new jobs from the Labour Force Survey to see whether the rule of thumb that total vacancies are three times Jobcentre vacancies is still applicable and whether it is generally true across the country and by industry and occupation.

In the meantime, ONS suggest that notified rather than unfilled jobcentre vacancies are the most appropriate Jobcentre vacancy series to use. This is the summary statistic they highlight in the monthly labour market statistic press release.

The ONS is starting a new employer-based survey this November which will have the aim of estimating total vacancies. The survey will be experimental initially, but the aim is to commence publication of data during 2001.

The DfEE work is in progress.

2. We recommend that the Employment Service should publish in its Annual Report details of the effectiveness of the programme to improve services to employers, including the impact of the strategy on its market share of vacancies.

In this year's Annual Performance Agreement there is a new target for employer service. The target level is not yet agreed but is likely to be set in July. Performance against this target will be reported on the ES website on a quarterly basis and in the ES Annual Report and Accounts for 2000-2001.

There are plans to consider the impact of the strategy on its market share of vacancies. The Employment Service wishes to ensure that its jobcentres have a good range of vacancies, by type and location, so that it can offer a more useful service to jobseekers.

The target, set in June 2000, is for ES to meet the standard for employer service, as defined below, in 80 per cent of its dealings with employers. The standards are to: provide a named contact to handle the employer's vacancy; advise the employer about the services ES can provide; confirm with the employer their minimum requirements; and keep in regular contact with the employer until their vacancy is filled. During 2000/01 ES will measure performance on a quarterly basis, alongside a broader assessment of employers' overall level of satisfaction with the service received. The latter measure will enable the agency's performance to be benchmarked against a range of public and private sectors organisations.

3. We recommend that the Government should undertake an assessment of Jobcentre vacancy data to establish that they are accurate.

Work to consider the Jobcentre vacancy data and its relationship with total vacancies is already underway. For example, there is the work of the DfEE described above. Also, the ONS has been in contact with the Greater Manchester Low Pay Unit to consider and answer some of the issues they have raised.

4. We recommend that all Government statements on unemployment should include the headline ILO measure, together with the claimant count and the Want Work rate. Where it is not possible to present the broader measures of unemployment, because the geographical area in question is too small to provide robust survey data, announcements should always explicitly recognise the limitations of the claimant count.

The ONS considered how to describe the labour market when it introduced the new monthly labour market statistics press release in April 1998. The statistics are generally presented in line with International Labour Organisation conventions. One of the major changes was to give greater prominence to employment including the employment rate (the proportion of the population of working age who are in employment). The other advantage of the employment rate is that it is the inverse of the proportion of the population who do not have work which includes both the ILO unemployed and the economically inactive.

The ONS recognise that different users have different needs for labour market statistics. That is why the ONS publishes a breakdown of economic inactivity. A 'Want Work' rate can be derived from this breakdown. However, the Government does not think that the Want Work rate provides sufficient extra information to warrant use as one of the primary summary statistics for the labour market. Consistency with existing guidelines and international comparisons is important. The Government continues to believe, ILO unemployment and economic inactivity are two distinct categories which provide more information if they are presented separately rather than lumped together. In general the Government tries to provide information on employment, ILO unemployment and the claimant count when describing the labour market either at a national or local level. Although the claimant count is not a complete measure of unemployment, it is important particularly in relation to our welfare to work agenda. Furthermore, ILO measures of unemployment are not available for small geographical areas nor over such a long time as the claimant count. This makes the claimant count the only choice for certain detailed analyses of the labour market.

The Government commends the monthly regional labour market statistics which provide a substantial amount of local labour market information and have been improved substantially over the past couple of years. The cross benefit analyses which are being developed by the DSS and which are published quarterly also provide important complementary information. There are also international initiatives to harmonise the provision of indicators complementary to employment and unemployment.

The "Cross Benefit Analysis" has been renamed "Client Group Analysis". The information continues to be published quarterly.

5. The evidence presented here leads us to conclude that, in certain parts of the country, a lack of appropriate jobs is one of the barriers to employment faced by unemployed people.

In the context of the New Deal it is true, as the report suggests, that inner city units of delivery have a relatively poor performance in moving New Deal participants into work. Yet, in cities, the number of jobs generally exceeds the number of residents in work with commuters making up the difference. Also, Jobcentre vacancies cover most industries and occupations with the numbers of vacancies tending to reflect the share of employment in that industry or occupation rather than whether employment is rising or falling.

Therefore, there are a range of jobs created by the market. The role of New Deal and other policies is to equip people so they can take up the jobs; and help employers fill their vacancies.

The continuous improvement strategy for people on the New Deal is partly designed to improve the performance of inner city units of delivery and get more youngsters there into jobs.

However, it still remains true that certain areas have low employment rates and in recognition of this the Government announced in the Budget, Action Teams for the areas of the country with greatest labour market disadvantage. These include the major conurbations where, over the past few decades, employment has declined. There is an existing suite of area based initiatives whose aims include raising the quantity of local jobs, including the New Deal for Communities, the Single Regeneration Budget, European Structural Funds and Regional Selective Assistance. These complement the drive to raise standards of education to equip people with the skills and knowledge they need to be able to take up jobs.

6. We recognise the difficulty in attaching specific local employment quotas to grants. We are concerned that the refocusing of the RSA, and the focus of the Enterprise Grant, on skilled jobs might make it more difficult for local people in deprived areas on benefit. We recommend that in the administration of the grants, Government should make every effort to ensure that local people will benefit from the investment in their area.

Wherever possible, we will continue to encourage employers to recruit locally. Advice and jobsearch help provided by the Employment Service has a strong local focus; and so will Action Teams.

7. We welcome the Government's recognition that co-ordination of policy should be improved. We recommend that the Government should develop and bring forward specific proposals aimed at streamlining the funding and administration of regeneration and employment assistance initiatives and achieving greater synergy between these policy areas.

The Social Exclusion Unit launched a major initiative aimed at neighbourhood renewal. The Policy Action Team on Jobs was one element of this initiative. The report 'Jobs for All—National Strategy for Neighbourhood Renewal' was published in December 1999 by DfEE.

The Social Exclusion Unit expects to publish the National Strategy for Neighbourhood Renewal Action Plan towards the end of this year.

8. In our view there is scope for greater devolution in employment assistance and that this would allow for better co-ordination between demand-side and supply-side initiatives. We recommend that the Government should examine how this could best be achieved.

As well as Action Teams which is mentioned below, there are also other policies aimed at favouring employment in certain areas; Regional Selective Assistance and the Single Regeneration Budget for example. As well as this, there are recent innovations such as the New Deal for Communities.

The Employment Service is working to increase its local intelligence so that it is aware of large scale job creation initiatives such as those associated with inward investment projects. Local responses to large scale redundancies are provided through the Regional Rapid Response Units. One of the most recent and high profile projects is the Task Force associated with the sale by BMW of the Rover plant at Longbridge, Birmingham.

Certain employment policies are delivered at a local level. Employment Zones and Action Teams are good examples.

The fifteen Employment Zones have a high level of discretion in achieving their objective of getting as many long term unemployed people as possible into sustainable employment. In reaching local solutions the contractors are not bound by National Programme rules and conditions. The funding system largely focuses on outputs (sustainable jobs).

Action Teams will focus on areas with low employment rates, high unemployment rates and those with disadvantaged ethnic minority groups. The Teams will work flexibly with disadvantaged jobless people and employers. They will help overcome the barriers preventing jobless people taking nearby vacancies. Each Team will decide how best this might be achieved in the light of local circumstances.

There are also other initiatives such as the cities network which is a forum for District Managers responsible for large city Jobcentres. They meet regularly to discuss the particular problems facing disadvantaged jobseekers in their areas. The forum provides the opportunity to ensure good practice and innovative ideas.

In addition, there is the New Deal Innovation Fund which provides venture capital to test ideas and activities. Of the £9.5 million available for the next three years £5 million is ringfenced for projects in inner city areas. The purpose of the inner city Innovation Fund is to support intermediary organisations in developing demand-led, employer focused strategies that will increase the placement, retention and progression of unemployed people in work.

An inter-Departmental group is exploring how strategic planning, funding and advice currently the responsibility of a number of players at a regional and local level can be enhanced and rationalised so we can better respond to the needs of the individual and of business.

We are also exploring how our response to large-scale redundancies— currently dealt with by Rapid Response Units and Rapid Response Funding—can be enhanced. We want to make the service more tailored to the needs and aspirations of both individuals and new employers. 'Road-testing' activity is being put in place in a number of regions and sectors so that the eventual service meets real need in the most flexible and cost-effective way.

9. We welcome the enhanced role for the ES outlined by the Minister. In our view, in order for the ES to be effective in this role, there will have to be greater decentralisation within the organisation so that it can respond to local needs. We recommend that the Government explore ways in which greater decentralisation within the organisation can be achieved.

The Government believes that an important strength of the Employment Service as a tool of labour market policy is its national focus and clear central leadership. This gives confidence that national policies to reduce unemployment such as the Jobseeker's Allowance will be delivered consistently across the country. It also enable meaningful comparisons to be made between different units of delivery in programmes such as the New Deal, and subsequent action to be taken to raise overall performance. The Government would not want to weaken what it sees as a successful model of delivery.

However, it recognises that in certain areas local discretion can also produce improved performance and stimulate innovation. In recent years the Employment Service has encouraged its local managers to get far more involved in local initiatives, such as the Dearne Valley partnership mentioned by the Committee.

Such local initiatives might take advantage of the mass of labour market information that ES collects whilst delivering its services. In the future the ambition is to use this in a more systematic and co-ordinated fashion.

The degree of discretion at local level will also need to be considered carefully when the new working age agency is introduced. This agency will combine parts of the Benefits Agency that deal with people of working age and the Employment Service.

10. The Minister for Employment stated that the Government must "aspire to saying that nobody will leave the New Deal for Young People illiterate or innumerate". We welcome this commitment and we urge the Government to bring forward detailed proposals as early as possible on how this could be achieved.

We have already moved beyond the stage of developing proposals. For the first time ever, unemployed people are being systematically screened for Basic Skill levels on entry to New Deal using the Client Progress Kit; and where appropriate, people are referred for a more in-depth assessment of their needs. In addition, more than 1,000 New Deal Personal Advisors are undertaking further training with the Basic Skills Agency to raise their awareness of basic skills issues and help them support learners.

New Deal provides the most comprehensive choice of learning ever for unemployed young people with opportunities available through the Gateway and every single one of the Options, making learning and working a reality.

11. We recommend that the Government should actively encourage organisations from ethnic minority communities to develop bids for the Intermediaries Fund.

The Government is in contact with a range of organisations who are supporting us in engaging people from ethnic minority backgrounds in the New Deal. We have worked with the Black Training and Enterprise Group who have developed a self assessment pack called "Closing the Gap". The pack helps New Deal partnerships in the work they are doing to engage ethnic minority jobseekers and businesses in New Deal. In addition, the Employment Service, the Minority Ethnic Advisory Group and the Black Training and Enterprise Group are working closely with partnerships to explore the reasons for differences in employment outcomes between ethnic minority jobseekers and white jobseekers.

We plan to build upon these developments through the Innovation Fund. The aim of the Fund is to test ideas and activities which will increase performance outcomes and extend our knowledge of what works in helping people to move from welfare to the workplace. The main focus of the innovation fund over the next three years will be to test out approaches to develop intermediary organisations, particularly in inner cities and with disadvantaged groups. The guidance issued to bidding organisations notes that special attention should be given to serving participants from ethnic minority backgrounds. There is potentially a strong role for voluntary and community groups in becoming or developing as intermediary organisations.

12. We agree with the Policy Action Team conclusion that job tasters should be used more widely. These may not always lead immediately to an employment outcome, but they will help to supplement the work of Personal Advisers in providing people with a knowledge of new forms of employment.

Job tasters or work trials are already one of the menu of options available to the Employment Service in the New Deal for Young People and elsewhere. However, it is not always possible to get enough employers to engage with this initiative. Many wish to engage people directly without trying a job taster. The Government will continue to try to promote this form of active labour market policy where possible.

13. The attainment of communication skills should be a theme which runs right through the New Deal. We recommend that New Deal participants should be given the opportunity to develop these skills in both the Gateway and as an intrinsic part of their work-based and training options.

The importance of communication and other 'soft' skills is one of the major lessons coming out of the New Deal evaluation. In response to this there has been a shift in emphasis with greater provision of soft skills during all stages of the New Deal. This was one of the key points of the 10 point continuous improvement plan introduced in January this year.

The Employment Service is introducing a more intensive New Deal Gateway which offers additional help and support in the early stages of the programme. This includes a mandatory 2 week course in the second month of the Gateway to develop the soft skills of communication, time-keeping, self-presentation and teamwork which employers have told us they require from the people that they take on. This 'Gateway to Work' course will be available everywhere from July.

The Gateway to Work programmes have been available nationally since July 2000.

14. We urge the Government, when it develops and publishes the details of the Action Teams proposal, to ensure that there are specific targets for helping the most disadvantaged people and that the emphasis will be on placing people into high-quality jobs. The Government should also set out how the Action Teams will work with existing local intermediaries

On 14 June, the Government announced the launch of three pathfinder Action Teams for Jobs, in Thanet, East Ayrshire and Hartlepool. They will start their work on 26 June and focus on the hardest to help, with close employer links and new solutions to overcome barriers to work, such as poor transport. The teams, led by the Employment Service but with members from the private and voluntary sectors, will each have £1.5 million to invest over the next year.

We will expect Action Teams to work with existing organisations to make the best use of their resources. Each Team will be required to produce a delivery plan outlining the disadvantaged groups upon which they will concentrate their help and the organisations they will be working with. If local intermediaries exist Teams should work with them. The Teams will have to demonstrate that they have made a clear and measurable improvement in the labour market prospects of the disadvantaged clients that they work with.

40 Action Teams for Jobs have been operational throughout Great Britain since 16 October 2000. The selected areas have primarily low employment rates, high unemployment rates or a high proportion of disadvantaged ethnic minority groups.

The Teams are focusing on those with barriers to employment including ex-offenders, people with history of drug or alcohol abuse, people without NI numbers and generally those furthest from the labour market.

15. We welcome the Minister's commitment to engaging at the national level with the DETR on transport issues and the prospect of an enhanced role in this area for the Employment Service. It is important that the Transport Plans being developed by local authorities should be effective in improving people's access to work. We recommend that the Department of the Environment, Transport and the Regions and the Department for Education and Employment should work jointly with local authorities to develop "access to jobs" targets for inclusion in the full five-year transport plans which will come into effect in 2001.

We agree with the Committee that access to and cost of transport can provide major barriers to some people taking up work. Therefore, as well as the existing plans and policies it will continue to be a major plank of our policy development with DfEE and DETR working in tandem.

The Employment Service has a mobility strategy; and a key element involves ES working in close partnership with Local Authorities, Rural Development Agencies, local County Councils as well as employers and transport providers to identify solutions to overcome transport and other mobility related issues representing barriers for jobseekers. Areas covered include:

· developing local transport solutions to accommodate shift working patterns;

· creating better access to employer premises sited on the periphery of towns and cities;

· developing better public transport in poorly served areas;

· revising local transport timetables and enhancing coverage;

· providing reduced rail and bus fares; and

· improving links between different modes of transport.

Action Teams will work closely with others in their locality to develop transport links where the lack of reliable and affordable transport is a barrier to work for jobless people. This will include working with local operators to try and ensure that local transport caters for shift and part-time workers as well as those working normal office hours. Teams will also have the flexibility to help individuals with their transport costs to ease the transition to work.

We recognise that poor public transport reinforces social exclusion, which can blight lives in urban, as well as rural areas. A recent report by the Audit Commission (A Life's Work: local authorities, economic development and economic regeneration. Audit Commission, September 1999) found that 52 per cent of job seekers identified lack of transport as a key barrier to employment.

Reducing social exclusion by improving access to jobs and services is one of the key aims of this Government. This will be reflected in the 10 year plan to modernise our transport system, which will be published this summer, as well as in the forthcoming urban and rural white papers.

Local authorities are currently preparing full local transport plans (LTPs), for submission at the end of July. These plans will run for five years and cover all forms of transport. The guidance to local authorities (published in March 2000) makes clear that plans need to be co-ordinated with policies on health, education, planning and social exclusion. We will be looking for strategies that, amongst other things, promote better access between job seekers and employers.

The links in the past have been relatively weak between local transport and social exclusion policies, and they are still evolving. We will be watching this area closely, to make sure that Government policies and strategies are working to reduce social exclusion and improving access to jobs and services, either through offering improved services or through reducing the need to travel.

The 10 year plan to modernise our transport system, entitled "Transport 2010: The 10 Year Plan", was published in July 2000. The plan outlines the Government's commitment to make a substantial increase in funding to local authorities, public transport authorities and other transport providers to develop the packages of measures that best answer people's needs and reflect local conditions.

Total public spending and private investment over the next decade will be £180 billion, of which £59 billion is allocated for local transport; £60 billion for rail; £25 billion for London; £21 billion for strategic roads; and £15 billion for future projects and other transport areas.

The 10-Year Plan also announced the establishment of an Urban Bus Challenge to improve links to deprived urban areas. The Plan also promised significantly increased support for flexible and community-based transport projects in rural areas and the extension of Rural Bus Subsidy Grant to services in and around market towns. The Plan also signalled the extension of fuel duty rebate to more community transport services, and more support for flexible transport in rural communities.

The Transport Bill includes a minimum half-fare concession with a free pass for the elderly and disabled for local bus travel. Local authorities have discretion to set concessionary fares in their areas with more than the new statutory discount and bringing in other groups.

Local authorities submitted full local transport plans (LTPs) at the end of July 2000.

16. The cost of public transport can present insurmountable barriers to mobility and employment. We recommend that, in areas displaying the lowest levels of employment, the Government should pilot a scheme in which the travel to work costs of those leaving long-term unemployment would be subsidised for a period of six months.

As part of the Mobility Strategy, ES in partnership with national train companies help jobseekers overcome financial barriers that travel costs can present by offering New Deal clients fifty per cent reductions on rail fares. ES also works in each region with local bus transport companies to offer up to 80 per cent savings on bus fares. Solutions to transport problems will also play a major part in the work of the Action Teams.

As well as the existing range of measures which include the Travel To Interview Scheme, there are a number of policies aimed at easing the transition into work. There are also two regions in the country where greater flexibilities in the Travel to Interview Scheme are being piloted.

Once again, the new working age agency will also need to consider how it deals with these employment barriers.

The Travel to Interview Scheme pilots ended in September 2000. The measures will be evaluated over a six month period to see what additional impact they had, including evaluation of the impact on help for disadvantaged groups. This will inform any decisions on whether they will be extended nationally.

17. We recommend that people who have been unemployed for one year or more should continue to receive their existing entitlement to income support or Jobseeker's Allowance for two weeks after they enter employment.

We agree that the financial risks of leaving benefits for work are a significant barrier to taking up work for many people. In a recent study, anxiety about the transition was cited by half of all jobseekers as a concern about starting work. This is particularly true for those who have been living on benefit for some time, are comfortable with the guaranteed regular payments, but have little or no savings to fall back on when the benefit stream is interrupted. And this barrier does not only affect people receiving benefits for the unemployed.

That is why we are introducing a £100 Job Grant for people moving into full-time work after a year or more in receipt of Jobseekers Allowance, Income Support, Incapacity Benefit or Severe Disablement Allowance. This simple and broadly based scheme will provide cash at the point of transition to help people to bridge the gap between benefits and work.

Lone Parents on Income Support will not receive the Job Grant but will continue instead to receive the two week run-on of IS. Since October 1999 lone parents who start work of at least 16 hours a week and five weeks' duration after at least six months on IS or JSA(IB), keep their benefit for two extra weeks. This lone parent benefit run-on helps to remove a barrier to work by giving financial security during the transition period. This has helped over 25,000 lone parents in the first six months alone.

In conjunction with the lone parent run-on, we would expect the Job Grant, which will be introduced in April 2001, to have a significant impact in breaking down the barriers to work. We will undertake a programme of evaluation to determine the extent to which the Job Grant scheme has met its objectives, and will consider whether any further action is needed when the results of that evaluation are known.

The Job Grant will only be payable to those aged 25 or over.

18. We agree with the Policy Action Team on Jobs and recommend that the Government should introduce a scheme, initially for those who have been unemployed for two years and over, which guarantees that if a job collapses within 12 weeks of a person taking up employment all relevant benefits will be reactivated at the pre-existing level until a new assessment can be made.

We recognise that anxieties about the effect on benefit entitlement can deter people from taking a short-term temporary job when an offer of work arises. These concerns may also arise for people whose job does not last for as long as expected.

To remove the perceived risks for people taking up short-term temporary work, from April 2002 we are introducing a mechanism which will streamline the process for re-claiming benefit for people on Jobseeker's Allowance and Income Support returning to benefit after taking up full-time, temporary employment for periods of up to 12 weeks. Although entitlement to the benefit would still cease for the duration of the period of work, this measure will streamline and speed up the reinstatement of benefit should a person become entitled to JSA/IS again when the work ceases.

Automatic re-activation of benefits at pre-existing levels, whatever the circumstances, is a matter which needs very careful consideration, not least because of the significant security issues involved. The amount of benefit payable to a person claiming benefit again after a period of work will, of course, be dependent upon the individual's circumstances at the time of the claim. It would not be reasonable to "guarantee", in advance of any claim being made, levels of benefit which may not be appropriate to a person's circumstances.

The package of existing and new measures we are introducing is designed to alleviate the disincentives around the points of transition into (and out of) work and to encourage the take-up of temporary work as a route into full-time employment.

19. We welcome the commitment to make payments under the Housing Benefit Extended Payments scheme as near-automatic as possible. We also welcome the Government's commitment to provide a four week Income Support for Mortgage Interest run-on for those entering work.

As part of the Government's commitment to support Sustainable Home-Ownership, and to encourage people back into employment, we are introducing a Mortgage Interest Run On (MIRO) from April 2001. This is targeted primarily at those claimants entering into the job market. The extension of Mortgage Interest Run On for the first four week period of a claimant entering into employment aims to provide support and an incentive for home owners that will help to maintain a reasonable level of support during a period of financial reassessment.

In addition, from April 2001 we are reforming the Housing Benefit and Council Tax Benefit Extended Payment schemes to make access more automatic. This will ensure that most long-term unemployed people can receive their full HB/CTB entitlement for the first four weeks of work. The existing "Fast Track" scheme also provides subsidy incentives to local authorities to help ensure that any in-work claim for HB/CTB follows on from the end of the Extended Payment period.

20. We recommend that the Government should undertake and publish an analysis of the cost of our proposals for removing benefit traps.

We have already announced a number of new measures which are designed to smooth the transition from benefits to work and to remove the anxieties, real or perceived, which people thinking about taking up work may experience. We believe that the measures already announced will address the concerns raised by people facing barriers to work. We need to allow the changes to bed-in properly so that we can assess their effectiveness in breaking down those barriers before we consider introducing further new measures.

21. We recommend that the ONS should investigate the possibility of establishing a composite measure of unemployment for use in small areas.

As mentioned above, employment rates provide not only a useful measure of employment but also its inverse; the proportion without work —both ILO unemployment and the economically inactive. Employment rates also have the advantage of being available for smaller areas than ILO unemployment rates because they are larger in scale.

The ONS is already investigating ways in which estimates of unemployment can be improved for small areas using LFS data together with claimant count and other information.

The ONS is researching a methodology for producing publishable estimates of ILO unemployment for unitary and local authorities which draws on LFS and claimant count information. Any proposed methodology will need to be quality assured and users consulted about presentational issues before the estimates can be released.

22. There seems to be a general consensus that TTWAs do not provide useful information on the state of labour markets and that it might actually obscure important trends. We recommend that the ONS should establish whether there is any value in continuing to publish workforce claimant unemployment rates for Travel To Work Areas.

It is true that Travel to Work Areas have become larger over time as commuting has grown. However, for some users and for certain purposes the Government does believe that Travel To Work Areas are a useful concept. ONS carried out a full consultation in 1996 before updating the TTWAs. Feedback from economic users indicated that they were still useful. Also, they are not the only local statistics available. ONS provides a range of local labour market statistics.

ONS will be consulting users again during 2001/02 on whether to produce a new map based on the 2001 Census.

23. Workforce claimant unemployment rates are used, with other indicators, to determine which areas will receive Assisted Area status and benefit from the European Structural Funds. Given that policy decisions are founded on claimant unemployment data, we recommend that the ONS undertake a review to establish whether data should be presented in a workforce or residency-based form.

ONS are reviewing the calculation of unemployment rates for small areas. They will carry out a wide ranging consultation. Publication of new measures will be in response to a clear user demand.

The Government believes that there are advantages in having comparable local information to national workforce claimant unemployment rates particularly since it gives some idea of the amount of employment in the area rather than the amount of an area's residents who are employed.

ONS recognise that different users have different needs for labour market statistics. Therefore, it may be that information is provided so that users can carry out analyses which address particular issues. For example, a comparison of claimant unemployment as a proportion of the local workforce and claimant unemployment as a proportion of the resident population would give some information about the potential for getting local claimant unemployed people into local jobs.

The public consultation on small area unemployment rates concluded at the end of October. Users were asked about preferences for a new claimant count residence based rate, to complement the existing ILO rate for small areas where the latter is not available. The results of the consultation are being analysed, and the outcome will be published early in 2001. Publication of any new measures will be in response to a clear user demand.

24. We welcome the Government's objective of expanding the venture capital provision available for small enterprises.


The Government is creating a £180 million Enterprise Fund to stimulate more finance for small businesses and address market weaknesses in the provision of that finance. The venture capital elements of the Enterprise Fund are: a UK High Technology Fund to support early-stage high-technology businesses; and Regional Venture Capital Funds specialising in the provision of small-scale (up to £500,000) equity to small businesses with growth potential. The UK High Technology Fund has so far raised £111 million of a target of £125 million. The Regional Venture Capital Funds have been notified to the EU Commission. We expect the funds to be ready to make investments as soon as we receive approval from the Commission.

25. We recommend that the Government should develop, in co-operation with the Regional Development Agencies, innovative area-specific tax structures aimed at attracting job-creating investment into low employment areas.

The Government is currently considering the role that fiscal incentives might play in a number of circumstances. The Social Investment Taskforce, due to report to the Chancellor in the Autumn, is looking at how to unlock bigger flows of private investment in low employment areas. The DETR has commissioned a consultancy team lead by Segal Quince Wicksteed to investigate whether there is a role for fiscal incentives in bringing about the economic regeneration of former coalfield areas. And the Government is also considering whether there is a wider role for fiscal incentives in achieving our broader aim for an urban renaissance. In general, much of the tax system is UK-wide and not readily suited to incentives targeted at geographical areas.

The Social Investment Taskforce reported to the Chancellor in October 2000. The Chancellor will give the Government's initial response in his Pre-Budget Report. The report from Segal Quince Wicksteed will be available by the end of 2000. The Government has already announced that it is consulting on possible stamp duty concessions on brownfield land. The Local Government Finance Green Paper sets out possible options for funding town improvement zones through a supplementary rate, and a local tax re-investment programme—where authorities can retain additional council tax and business rate income—to help fund regeneration. Other measures are also under consideration.

26. Local authorities have an important role to play in facilitating and supporting regeneration and job creation in their areas, not only through strategy documents but also in their capacity as major employers in deprived areas and through their role in contracting with third parties for a range of works and services. In the absence of a substantial overhaul of the legislation, we recommend that the Government should issue guidance to local authorities encouraging them to incorporate local labour clauses in contracts and setting out how this might most effectively be achieved.

The Government recognises that local authorities as part of their wider economic development and regeneration activities may wish to consider employment needs within the local economy. It is for local authorities to judge how far the needs of local employment should be promoted in their area working within existing UK and EU legislation.

Local authorities' scope to use local labour clauses is limited by the Local Government Act 1988 as well as by the EC Treaty and the European Directives for Public Procurement. EC Procurement Directives, which are implemented in the UK by various Public Procurement Regulations, prohibit discrimination on the grounds of nationality. To bring local labour considerations into the contracting process may well conflict with these wider requirements. In addition to requiring contracts to be awarded on the basis of non-discrimination, transparency and competitive procurement principles, the EC Directives/UK Regulations set out detailed procedures and criteria for the selection of tenderers and the award of contracts. The selection criteria relate to the financial standing, technical capacity and personal standing of the companies involved and the award criteria cover what is necessary to deliver value for money in performing the contract. The Government has recently consulted on proposals to modify the list of factors, set out in the Local Government Act 1988, that can be taken into account in inviting tenders and awarding contracts. However, any modification will need to be consistent with European legislation and with the principle of best value.

27. Although we recognise that spending on infrastructure is essential as part of the process of regenerating deprived areas, we reject the notion that demand-side policies on their own will be sufficient to provide employment opportunities for the long-term unemployed.

The Government agrees with this assessment. That is why there are a range of both supply side and demand side measures in existence and further development is planned.

28. We recommend that the Government should explore ways in which it can support the growth and effectiveness of ILMs.

The Government believes that Intermediate Labour Markets are an important way of increasing employability and helping people get into and keep jobs in the open labour market.

However, the Government sees an intermediate labour market as a means to an end rather than an end in itself.

29. In our view there is much greater scope for the use of ILMs in both the New Deal and the enhanced New Deal for 25 plus. We recommend that all participants in the New Deal options, other than the Full-time Education and Training option, should receive a wage.

Intermediate Labour Markets are already a feature of New Deal and can be successful where they are tailored to meet the needs of local employers. However, we need to be careful that they prepare young people for the labour market and do not distance them from it.

It is already possible to receive a wage within all the Options (other than full-time education and training). It must be borne in mind that these are work experience and learning opportunities which are intended to prepare people for waged employment.

30. We recommend that the Government should examine ways of increasing the flexibility in the New Deal, including providing the opportunity, for some clients, to move through more than one option and to remain in work-related New Deal options for more than six months.

The New Deal Options were each designed to provide a flexible mix of learning and work experience. However, should a young person find that an Option is not successful, they will be seen by a Personal Adviser who will agree next steps, including a second Option if appropriate.

We are committed to a programme of continuous improvement for the New Deal. This means we keep all aspects of New Deal Design under continual review. We have already:

· realigned earliest entry to all options to two months so that young people complete Intensive Gateway provision prior to option entry, thereby enabling them to acquire the "soft skills" necessary to participate effectively (e.g. motivation, time-keeping and group working);

· focused the options on work-based training and job search; and

· encouraged employers to play a direct role in developing provision so that content is tailored to the needs of the local labour market and learning is consistent with employer expectations of job entrants.

We do not believe that the case for longer work-related options has yet been established. At the same time, we recognise that the more disadvantaged young people require well tailored programme provision and we are keen to develop New Deal to increase its effectiveness in delivering that. With all development in New Deal design, we believe it essential to ensure that time spent on Options does not distance the young person from the labour market.

31. We recommend that the Government should explore ways to engage the public sector in providing jobs in the provision of local services, for those people who have been unemployed for two years, within demand-deficient labour markets.

The Government believes that local residents in areas of labour market disadvantage and groups with relatively poor employment records can take up, and be effective in, public sector jobs. It is important to tap into these currently unused resources. However, such work should be aimed as providing quality public services not as a method of providing alternative work. Otherwise the participants are likely to be considered as second class with potentially undesirable consequences for how long the jobs will last.

32. We recommend that the Government should pilot a job guarantee scheme, in areas displaying the lowest levels of employment, for those who have been unable to secure employment in the open labour market after leaving the New Deal.

The New Deals for young people and, increasingly, the New Deal for the long-term unemployed aim to bring to an end long periods on benefit. They, therefore, have the same objective as the Job Guarantee. We will keep under review whether there are elements of the Job Guarantee model which could have wider application in the New Deal.

33. We recommend that the Government should publish its full-scale evaluation of the prototype Employment Zones and indicate how the lessons learnt have been taken into consideration in the development of the fully-fledged Employment Zones.

The Government plans to publish the evaluation reports carried out on the prototype Employment Zones. The first brings together the case studies carried out across all the prototype zones. The second report is a survey of participants and leavers. The reports are currently in draft and it is intended that they will be published by the end of August. Early work by the evaluators was, where possible and appropriate, taken into account in the development of the policy for the fully-fledged Employment Zones.

The two evaluation reports on the prototype Employment Zones were published in the DfEE research series on 31 October 2000.

34. We recommend that the Government should pilot additional Employment Zones in the original ONE areas, in which ONE clients who have been in receipt of benefit for one year or more, would be eligible for the full range of Employment Zone assistance.

Employment Zones and ONE are two different approaches and for evaluation to be effective we need to be able to separate the effects of the Zones from other areas in which the New Deal pilots and other welfare to work initiatives operate. However, there is employment assistance available to people in the ONE pilot areas. Also, for unemployed claimants Jobseeker's Allowance remains in place; and the New Deals for Young People and the long term unemployed for those who are eligible.

35. We recommend that the Government should re-negotiate the design of the financial incentives in the Employment Zones. Providers should receive a proportion of output-related funding when clients have been in continuous employment (although not necessarily with the same employer) for six months.

The contractors for the new Employment Zones were chosen through a competitive tendering exercise. The funding model, which is largely output related, was included in the bidding guidance for the tendering exercise. The contracts have been signed in the last two months. The contract term runs from April 2000 to March 2002. The current contract terms provide for outcome payments at the stage the client obtains work and also at the 13 week stage if the client remains in employment. As the contractors are unlikely to agree, unless they get substantial compensation, to changes which introduced more onerous conditions it would be inappropriate to alter the contracts now.

36. We strongly recommend that the Government should publish an evaluation of the effectiveness of private sector providers in the delivery of the New Deal.

The evaluation of New Deal was designed to take account of all forms of delivery. The different delivery models, including the private sector led variants, are reflected in all elements of the evaluation programme. So, for example, private sector areas were selected as part of the sample for both the Pathfinder and national case studies on delivery and impact; the sample for qualitative research with individual participants includes private sector areas; and in the quantitative survey of individual participants we will be looking at individual outcomes by type of New Deal delivery, including whether it is private sector led.

In addition, we have recently carried out a separate piece of work to look at individual private sector led areas. An independent research organisation carried out a case study in each of the ten private sector led units of delivery. This involved interviews with key players about how the New Deal is being delivered. A report on this research will be published around the middle of July.

Finally, information on private sector provision are already published in the form of the Core Performance Measures.

The research report was published in mid-August.

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