Examination of Witnesses (Questions 120
WEDNESDAY 20 DECEMBER 2000
120. I am rather happy that you raised it rather
than me. And there is a bit in your Executive Summary on that,
but I will let you answer the question.
(Dr Young) Our estimate is that the cost per regular
job is about £7,000 per person. If you include in the `jobs'
figure the numbers who are on the environmental task force and
voluntary service options then the cost is about £4,000 per
121. And that still stands, with all the new
(Dr Young) I think there have been other estimates
of that, but they were done on a different basis, and it is just
coincidental that the number comes out the same as ours. Our estimate
is that the net cost is about £150 million per annum, and
the numbers in regular employment, as a result of the programme,
are 20,000, and so the cost per job is about £7,000 per person,
on that basis.
122. And where did you get your forecasting
(Dr Young) And that is when we include people on the
voluntary sector option and on the environmental task force options,
which are also included in the official employment series; so
if we include those then we get down to the lower figure.
123. When you said the net cost is £150
million per annum then, it is not fair to just divide that between
the numbers that are in regular employment, because that £150
million also includes the costs of the environmental and voluntary
(Dr Young) It does.
124. If you discounted the cost of that from
your £150 million figure, what would then be the cost per
job of those that were actually in jobs?
(Dr Young) We have not done that.
125. Because that £7,000 figure is going
(Dr Young) I think there are a number of caveats.
126. The headline figures grab the, whatever,
so we need to
(Dr Young) There are a number of caveats about
this. One of the caveats I would stress really is that
this figure is not something that we can measure exactly, it is
an estimate, and there is quite a wide range around that estimate,
but it is our central estimate, it is our best guess of what the
127. But we should not be dividing that £150
million by the number of people that are in jobs, because they
(Dr Young) I think there is a case for dividing it
by that, because, if you are interested in the net cost to the
Exchequer, that is the net cost to the Exchequer of the programme,
and then dividing it by the number of jobs, additional jobs, that
are there, at any given point in time, gives you what the costs
of those additional jobs are. So I think that is a perfectly reasonable
and good way of doing it, but there are other ways of doing it.
128. And, when you got down to the £4,000
figure, how would you describe what that £4,000 figure represents?
(Dr Young) That is the net cost per extra person in
work, as defined by workforce jobs, which is the official employment
129. So it is £150 million divided by the
numbers who are on the employer option or the voluntary sector
or environmental task force?
(Dr Young) Yes; not the numbers on them but the numbers
who are additional because of the New Deal.
130. Who have work as a result of it, yes.
(Dr Young) So both measures are additional measures.
The additional annual cost, and the additional employment at a
point of time, and we are just dividing those.
131. I think we have got to get this clear.
We can see the calculation of those going into jobs; now I am
not absolutely certain myself of the distinction between those
going into jobs and when you include the environmental task force
and voluntary option, are they going into jobs or are those in
(Dr Young) Those are in the options; so you could
argue that it is not legitimate to include those, because it would
be very easy to design a scheme where you just say, "Well,
this is a job, you go into that," and we do not spend anything
132. But, to return to Judy's line of questioning,
it must be possible to identify the total cost to the Exchequer
being incurred to produce the 20,000 who go into the jobs, which
presumably is a figure lower than £150 million?
(Dr Young) No; but the people going on the environmental
task force, and so on, are a very important part of the programme,
and this is how people are getting out of unemployment, a lot
of them, and so you cannot really ignore the cost of that in calculating
the overall cost per job.
133. It is producing a different benefit, in
terms of employability and skills, and it seems that they were
including the cost without any reference to the benefit, the outcome?
(Dr Young) No, because there is a sort of benefit
in the economy more widely from that. I accept that we are not
including social benefits in that, but we would be including any
sort of measured economic benefit from people working in those
134. How much of that £150 million cost
is the cost of the environmental and task force option?
(Dr Young) I do not have that figure.
135. Would it be possible to send that to us,
because I think for us to be able to have the range of different
figures that mean different things we would probably need that
(Dr Young) I am not sure that it would be legitimate
to take it out, really, because I think it is a key part of the
programme as it is running at the moment. For your own purposes,
you might ...
136. There is a range of different figures,
is there not?
(Dr Young) Yes.
Judy Mallaber: I am not saying the £7,000
is not relevant, but the £4,000 is also relevant, and we
need to know what the range of things is.
137. So, am I right, just coming in, in thinking
that the environmental task force and the voluntary sector options
are different because they are not the end point, they are not
an outcome, and they are not a positive outcome in the terms of
the New Deal, they are a stage on the way towards an outcome,
and that the positive outcome is reached after the £7,000
has been spent, effectively, or the £7,000 per job is, to
reach the positive outcome, which is the unsubsidised, sustained,
long-term employment, which is the one that is defined as the
(Dr Young) I think that is one way of looking at it.
138. Can I come back again though, and I am
not trying to get one figure or another, I am just trying to clarify
the range of different things, because we need to be clear what
we are talking about. The £7,000 per person is talking about
those people that are in jobs as a result of being at the end
of the Gateway period, it is not the people that may need jobs
at the end of
(Dr Young) No, it is a consequence of the whole programme.
Chairman: No; the whole of the programme.
139. So they are the people that are in jobs
still at the end of a period of subsidised employment?
(Dr Young) No. At a point of time, we have calculated
the additional jobs that are due to the New Deal, and this averages,
over the four years, our estimate is, about 20,000. At any particular
point of time, there are 20,000 more jobs in the UK economy as
a consequence of the New Deal. And we are saying that the overall
cost per annum is about 150, the figure is actually 140, which
is why, when you divide it by 20, you get £7,000 per job.
As I said, there is a caveat; one caveat is that
there is a lot of uncertainty estimates in both sides, in the
numerator and the denominator of that calculation, and when you
have a numerator and a denominator that could make the estimate
quite broad. So I would not like to say that it is £7,000
exactly, I would not say it is at least that, or less than that,
that is the centre of what could be a broad range. But the other
caveat I would give is that that is only measuring the
cost to the Exchequer of it; now there are other benefits which
obviously do not get counted when you evaluate the cost to the
Exchequer, such as the benefits that the individuals who have
been through the programme are getting. A better way of looking
at that is, in some sense, to look at what the overall GDP effect
is of the New Deal programme, and we estimate the GDP is about
half a billion pounds per annum higher, as a consequence of the