Select Committee on Education and Employment Ninth Special Report


The Education and Employment Committee has agreed to the following Special Report:—



The Education and Employment Committee reported to the House on New Deal: An Evaluation in its Fifth Report of Session 2000-01, published on 20 March 2001 as HC 58. The Government's response to that Report was received on 9 May 2001. The response is reproduced as an Annex to this Special Report.



1. We welcome the Government's acceptance and implementation of our earlier recommendation that evaluation reports and summaries should be published in the New Deal Website but stress the need to ensure that the website is comprehensive and kept up to date (paragraph 14).

The Government will ensure that evaluation reports are available on the website and that the website is kept up to date.

2. We accept that the overall target for New Deal is not to make participants job ready but to help them into sustained employment. The evaluation programme also needs to take into account improvements in employability which result from participation in the programme but which may not result in employment in the short term (paragraph 17).

Within the programme of evaluation, the quantitative survey of participants and the qualitative research with participants both took account of increased employability over time.

Evidence from the qualitative research conducted by the National Centre for Social Research suggests that the New Deal has a significant impact on young people's employability. It can do so by providing new occupational or basic skills, through the acquisition of qualifications, by gaining work experience and references, by enhancing job search skills, by changing or refining occupational choices, and by helping to strengthen confidence, motivation and interest.

The Policy Studies Institute examined the issue of employability in the quantitative survey with participants on NDYP. They estimate that participation in an Option contributed substantially more to gains in employability than staying on Gateway beyond the usual four months.

3. We have noted in an earlier Report that assessing cost per job is a complex area and one which merits independent analysis. We welcome the National Institute for Economic and Social Research's (NIESR) Reports on macroeconomic implications of NDYP and look forward to the results of the NAO's forthcoming value for money study. Over-emphasis on the assessment of NDYP on a basis of cost per job obscures the wider purpose of New Deal (paragraph 20).

The Government agrees that over-emphasis on assessing New Deal on a cost per job basis obscures its wider purpose. The New Deal for Young People aims to reduce youth unemployment and to improve the long-term employability of its participants. The success of the New Deal should be judged by the impact it has in reducing unemployment and raising employment. Its cost should be judged by the net effect it has on the economy. The research published by NIESR in December 2000 concluded that national income is around £500 million higher each year as a result of the programme. The Government looks forward to the results of the NAO study.

4. We recommend that the Government should monitor closely the impact of New Deal on wage pressures (paragraph 29).

We have and will continue to monitor the impact of the New Deal on wage pressures. It was one of the elements considered in the evaluation of NDYP, and, in particular, by NIESR. Their analysis shows that the New Deal has reduced the average duration of unemployment, which would be expected to reduce wage pressure. NIESR also suggest that the New Deal has increased jobsearch activity and employability and improved the functioning of the labour market. The New Deal is likely, therefore, to have helped reduce wage pressure and thus enabled not just youth employment but total employment to rise—indeed, NIESR estimate that overall employment has increased as a result of NDYP over and above the rise in youth employment.

5. We recommend that the Government should monitor closely the extent to which costs per client increases as NDYP evolves and those with multiple barriers to employment become an increasingly large proportion of the total number of NDYP clients (paragraph 32).

The Government agrees that the cost per client of NDYP should be monitored closely, and will continue to do so.

6. We recommend that the Government should continue to monitor substitution under NDYP closely (paragraph 35).

The analysis conducted by NIESR found little evidence of substitution within NDYP. The work of NIESR is coming to an end, but substitution is still being monitored through an analysis of off-flows by the Department and by the continuing work of the Policy Studies Institute as part of the overall macroeconomic evaluation of the programme (to report in 2002).

7. We agree that there is benefit in providing young people with short-term work experience. Nevertheless, we remain concerned that the proportion of moves into unsustained employment remains as high as 40 per cent. As the Minister has told us on more than one occasion, young people on New Deal are ambitious and aspirational and that New Deal must be aspirational for them. Those aspirations will not be met by a cycle of continual short-term employment in entry level jobs, registered unemployment and participation in New Deal (paragraph 40).

While 40 per cent of the jobs New Dealers move into may be unsustained, 76 per cent of those individuals who got a job through the New Deal got a sustained job. For the minority of young people who move into an unsustained job, the work experience obtained through the New Deal can substantially improve their future employability. This is particularly important for the many young people without any experience of work prior to joining the New Deal. It should also be remembered that young people tend to be inexperienced in the labour market and often try out different opportunities whilst learning where their long term goals lie. The New Deal ensures that if a young person tries out a job that does not last, they can continue to benefit from help from the programme. Internal analysis by Employment Service suggests that re-entrants to the New Deal are more likely to get a job, and to do so more quickly, than those on the New Deal for the first time.

8. We welcome the increasing emphasis on helping young people into sustainable employment. Job retention and career progression should be built into future measures of achievement for New Deal (paragraph 41).

A New Deal core performance measure has been used since Autumn 1999 to monitor retention. Following a pilot in two regions in 1999-2000, the Employment Service Annual Performance Agreement for 2001-02 includes a new national target based on this core performance measure. The target measures the percentage of long-term JSA clients, including young people participating in New Deal, who remain off benefit 13 weeks after starting a job. A target level of 75 per cent has been set for the operational year.

9. We recommend that the Government should collect information on the length of employment retention to inform the development of policy aimed at increasing employment retention (paragraph 42).

The Government has examined the issue of employment retention through a survey of employers participating in the Employment Option, and through the survey of leavers to unknown destinations. We are continuing to explore ways of collecting this information through better use of administrative data within the current legislative boundaries and within reasonable cost limits.

A benchmark for retention in work was set in April 2001: that two-thirds of New Deal clients entering work following an Option should still be in work after 13 weeks.

10. We welcome the range of additional measures that have been introduced to help personal advisers identify those NDYP participants with inadequate basic skills and to help participants reach higher standards of numeracy and literacy. The drive towards increasing the basic skills levels of job seekers will become more important as the hardest to help become an increasingly large proportion of the New Deal client group (paragraph 44).

Use of the Client Progress Kit is helping New Deal Personal Advisers to identify young people who are likely to have basic skills needs. In addition, over 1,000 New Deal Personal Advisers will be trained to identify basic skills needs and provide ongoing support. This will mean that there is an opportunity at every intervention to identify basic skill needs. Help with basic skills continues on New Deal Options, either integrated into vocational training and work experience, or as a separate intensive course for up to 20 weeks prior to vocational training.

11. The development of basic skills is important, but it should be matched by a recognition of the diversity of the New Deal client base and the need to develop higher skills which may be required for job retention and career progression (paragraph 45).

The Government is testing new approaches which will help young people to raise their skills, and enhance their long-term employability. A demand-led approach within different industry sectors is an effective way of doing so, because it uses employers' hiring requirements as the standard of job readiness. Early evidence indicates that this approach is particularly effective in opening access to better paying jobs in sectors which have tended not to recruit unemployed people. Ambition:IT, which is being piloted for three years from Autumn 2001, will enable 5,000 long-term unemployed people and lone parents to take up IT technician posts, typically paying £15-20,000.

12. We welcome the introduction of the post of Senior Adviser, which should help the Employment Service to retain its best staff, train its junior personal advisers and minimise the effect of promotion on the relationships between personal advisers and their clients. The impact of Senior Advisers in these areas should be closely monitored and other measures to increase continuity should be brought forward if required (paragraph 48).

Noted. Senior Adviser posts provide more experienced advisers a routeway for progression, while keeping them primarily as New Deal personal advisers. Senior Advisers will be deployed across all New Deal Units of Delivery over this operational year, and will play a key role in strengthening the delivery of the New Deal.

13. We believe that the model of general medical practitioners for personal advisers is a valuable one. We recommend that the Government should consider developing the role of personal advisers on this basis (paragraph 49).

We recognise the potential value in such an approach but will need carefully to consider the role of personal advisers in the wider context of the new agency for people of working age, JobCentre Plus.

14. We welcome the Employment Service's determination to adopt an account management approach to its relationship with employers. This is consistent with an earlier recommendation we made that the Employment Service should continue its development into a demand-led service and strengthen the service it provides to employers. We accept, as does the Employment Service, that it has not yet achieved its potential in terms of relations with employers (paragraph 50).

The development of demand led practices and relationship building with employers are central to the development of the New Deal and of JobCentre Plus. In the coming year the Employment Service will implement a number of sector based recruitment services to employers and introduce the principles of local account management more widely. Both initiatives will engage employers in the design and delivery of these services and form part of the wider strategy to develop a demand led approach, particularly developing the relationship with small and medium sized enterprises.

15. We recommend that the Government should thoroughly examine the impact of mandatory referrals on both the motivation and subsequent success of participants, and on the effectiveness of the options themselves (paragraph 53).

The Government will keep under review the impact of mandatory referrals, but will maintain policy on the New Deal options within a framework of rights and responsibilities. We intend to pilot a modular approach in the Option period, to better tailor provision to individual need.

16. Although the benefit sanction is infrequently applied, it must be recognised as an important factor in encouraging unemployed people back into the employment market. We recommend that the Government should monitor closely the frequency with which sanctions are imposed and examine the consequences of the threat of sanctions (paragraph 54).

The Government has examined experiences of those sanctioned in research conducted by the National Centre of Social Research (NCSR). The research suggests that the threat of sanctions has sometimes ensured that young people comply with the requirements of the programme. The report indicates that sanctions may be less effective where the young person has access to other forms of financial support, such as from parents, or where their dissatisfaction with the content of the programme is great. Further research is being conducted on the impact of sanctions within NDYP and the New Deal 25 plus.

17. We recommend that the Government should examine the reasons for the regional variation in the frequency of sanction imposition and should ensure that sanction criteria are applied uniformly by the Employment Service (paragraph 55).

The Government is aware of the regional variation in the frequency of sanction imposition. The Employment Service is currently working to establish the reasons for the variations in the percentage of New Deal cases referred to the Sector Decision Making teams. This research is still in its early stages and no initial findings are yet available.

18. The Government should ensure that there is not a single further instance income support sanctions affecting the receipt of housing benefit. Being made homeless is too strong a sanction for non-participation in New Deal (paragraph 56).

The Government agrees that young people should not lose their housing benefit or accommodation because a sanction has been placed on their benefit. As the Committee noted, we have already issued further guidance to prevent this happening, and we will be keeping a close watch on the situation to ensure that there are no further occurrences.

19. While we acknowledge the commitment of the DfEE and the Employment Service to the recruitment of New Deal candidates, we remain extremely disappointed that other Government Departments and agencies have remained so apparently unwilling to recruit New Deal candidates, despite the efforts of the DfEE to encourage them to do so. We recommend that the DfEE should bring forward proposals indicating how the Government intends to reach the two per cent target across the Civil Service (paragraph 58).

Civil Service participation is currently running at 1.3 per cent of all New Deal starts across the public and private sectors. Although there was never an official target, a 2 per cent benchmark emerged, reflecting the Civil Service share of the labour market. Total employment in the UK has since risen faster than Civil Service numbers. Employment in the Civil Service now accounts for 1.7 per cent of the national workforce.

Amongst the measures being taken to increase New Deal take-up in the Civil Service has been the development of a customised job preparation programme to prepare New Deal candidates for jobs in the Civil Service. This has recently been piloted for MAFF and DTI. Following evaluation, further programmes will be organised according to demand from departments and agencies. The Employment Service is preparing a good practice brochure drawing on a number of success stories to highlight the benefits of employing New Deal candidates in the Civil Service. National Account Management is offered to over 20 Departments and agencies through the ES Large Organisation Unit, and a further dozen small agencies are being provided with ad hoc consultation and advice.

20. There is a strong case for increasing the spread of best practice in the provision of the FTET option (paragraph 59).

Dissemination of best practice is a key feature of the Continuous Improvement Strategy for New Deal. Examples of activity undertaken include the running of regular workshops on all Options. Workshops focus on best practice and encourage providers to network beyond their normal geographical area.

The Learning and Skills Council (LSC) allocated £500,000 of its Standards Fund to support identification and dissemination of best practice among further education colleges. A steering group which included Employment Service representation was established and a contract was awarded to Learning and Skills Development Agency (LSDA) in December 2000 to take this work forward.

21. We recommend that greater flexibility should be permitted with the FTET option, to allow colleges to tailor courses and learning programmes to individual student needs (paragraph 60).

The Green Paper, Towards Full Employment in a Modern Society, demonstrated the Government's commitment to the development of greater flexibility within the New Deal options. In the FTET option, these proposals include the development of modular, intensive courses with greater relevance to the local labour market.

22. We welcome the Government's decision to increase the funding limits for FE colleges in respect of New Deal provision. We recommend that consideration should be given to funding New Deal participants on a par with those FE students supported by the Learning and Skills Council (paragraph 61).

The Employment Service and the LSC are working together to introduce new, more coherent and transparent funding arrangements. Through Formula Funding, national rates have been set for all ES adult provision, and national rates will be set for Employment Service Young People's provision (including FTET) over the coming year. The Employment Service will be working closely with the LSC to ensure that, where possible, coherent rates will be set for similar provision across the LSC and the Employment Service.

23. We have previously called for the greater use of intermediate labour markets within the provision of the ETF in particular. We welcome the Government's commitment to achieving this. We also welcome the fact that, following the last contracting round, a proportion of the payments to providers will depend on ETF participants gaining employment. The impact of this measure on participants' job retention should be closely monitored and the concept should be extended if it proves successful (paragraph 62).

The impact of the wide range of measures being taken to improve the performance of the Options, including the piloting of transitional employment programmes and changes to output related funding, will be monitored and evaluated in a number of ways. In addition to the regular information produced from the Evaluation Database, job entry rates from the Options are monitored on a monthly basis through Provider Performance Tables.

From April 2001, we have set a benchmark of 40 per cent entry into work by all Option leavers. On this basis, all Option providers have an individual target built into their contracts. The complete set of national tables will be made available to all contract holders from April and will be published from October 2001.

24. We welcome the Government's and the Employment Service's efforts to determine the profile of destinations of those who are recorded as leaving for unknown destinations (paragraph 64).

The Government is keen to reduce the proportion of New Deal leavers who are recorded as leaving for unknown destinations and to build on its knowledge of such clients. The Employment Service is taking steps to improve the quality of recording and will monitor the effectiveness of this.

25. We welcome the Government's intention to improve the effectiveness of the follow-through period. We recommend that this aspect of NDYP reform should be undertaken with some urgency (paragraph 66).

The Government is committed to identifying effective support for the hardest to help, at follow-through and earlier in the programme. The Employment Service is already working to ensure that good practice is shared between local offices by twinning offices within regions, and by disseminating guidance on good practice.

26. NDYP should become flexible enough to be able to respond to the needs of a diverse client group (paragraph 72).

Increased flexibility is a key element in proposals currently being developed for New Deal in the next Parliament, as outlined in the Towards Full Employment in a Modern Society Green Paper. Proposals include the introduction of modular tailored pathways in the Options period, and specific support for hardest to help clients, for example, ex-prisoners will be guaranteed employment help before they are released and clients with drug problems will get improved mentoring and training support.

27. Voluntary sector organisations should not be required to subsidise New Deal in order to make it effective. Referral of NDYP clients from the Employment Service to voluntary sector organisations should always be followed by adequate funding (paragraph 73).

The Government is aware that the voluntary sector have raised issues around funding difficulties in their NDYP contracts. The main difficulty has been shortfalls in referrals resulting in lower cashflows than had been anticipated, which to an extent, reflects the lower unemployment levels nationally.

The current NDYP contracts were contracted for by competitive tender which included price. It is difficult, therefore, for the Employment Service to pay more to any organisation which has won a contract based on the tender and price they put forward. However, the Employment Service is introducing 'Formula Funding' for the current contracting round for the New Deal 25+ and Work-Based Learning for Adults programmes. A set national price is agreed for each type of provision and a competition is run based on the provision offered by providers for the set price. This should help to ensure that providers know how much the Employment Service will pay them to deliver programmes.

The Employment Service is also actively exploring, with voluntary sector led bodies, how financial risk can be shared more equitably with the voluntary sector in order to enable them to remain involved in delivering Government programmes.

28. We recommend that the future development of NDYP should take account of the fact that those who are hardest to help will form an increasingly large proportion of the programme's client group. In Local and Regional Economic Development: Renegotiating Power Under Labour, Professor Robert Bennett and Dr Diane Payne argue that a high proportion of the 43 per cent of young people and the 67 per cent of 25 year olds and over who leave the Gateway without informing the Employment Service are the longest-term unemployed, indicating the challenge for New Deal. The Employment Service will need to pay increasing attention to this group of clients. It should seek to identify quickly the particular barriers which a participant faces and make appropriate referrals to specialist organisations, many of which will be in the voluntary sector. The Employment Service should build its capacity to recognise difficulties and make appropriate referrals and its capacity to collaborate with external organisations. It is not acceptable for young unemployed people in the NDYP client group to be overlooked (paragraph 74).

Increasing attention is already being paid to this group. In June 2000 we put in place arrangements to provide a more intensive Gateway for young people in the New Deal. One key goal of this is to improve the early assessment of young people and ensure access to specialist help. From April 2001, all clients on NDYP will be screened for basic skills needs and pilots in six districts will explore the most effective means of identifying and engaging learners, including through the use of financial incentives. Pilots testing transitional employment approaches will be aimed at the hardest to help and will provide a highly supportive environment for people with multiple barriers to enable them to become progressively independent during their time on the programme. The Employment Service will be working closely with partners in the voluntary and not-for-profit sector in all these areas, in both design and delivery processes.

However, we recognise that even more needs to be done. Help for the hardest to help was a key theme in the Green Paper Towards Full Employment in a Modern Society which outlines the additional support that will be available to clients with drug problems and ex-offenders.

Building Employment Service capacity to recognise the barriers faced by those with a range of difficulties which prevent them finding and keeping employment is a key part of this work, as well as strengthening links with key external organisations at local and national levels.

29. The Minister said that the next phase of New Deal would put an emphasis on reaching out to those who are currently economically inactive. We welcome this and look forward to the Government bringing appropriate proposals forward (paragraph 75).

Reaching those who are currently economically inactive was a major theme of the Green Paper Towards Full Employment in a Modern Society. The Paper outlined the steps the Government is taking to help a much wider group of people who face particular problems in getting work, for instance, lone parents, disabled people and partners of those who are unemployed. The Government is also extending Action Teams for Jobs provision to find innovative ways of increasing employment rates in areas with high levels of deprivation. The Action Teams, which allow a more flexible use of resources to help people looking for work, have shown early signs of success. Reaching out to the economically inactive is also an important rationale for the establishment of JobCentre Plus, which will deliver better and more integrated services for everyone in receipt of a working age benefit.

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