Select Committee on Education and Employment Minutes of Evidence

Examination of witnesses (Questions 179 - 199)




  179. Minister and Leigh, you are very welcome. You have no objection to us calling you Tessa and Leigh, have you?
  (Tessa Jowell) Certainly not.

  180. I begin to think that so frequently do we meet we shall have to continue meeting like this.
  (Tessa Jowell) It is a pleasure for me.

  181. Would you like the opportunity to make a statement to begin with?
  (Tessa Jowell) I should indeed. Thank you very much. Before I begin, however, may I just introduce my colleague, Leigh Lewis, who is known to many of you. Leigh is the Chief Executive of the Employment Service and also Chief Executive designate of the new Working Age Agency. We shall between us do our best to answer your questions.

  182. Would you like our congratulations or commiserations?
  (Mr Lewis) I will stick to congratulations, but thank you very much.
  (Tessa Jowell) Thank you very much indeed, we are very pleased to be here today to give evidence to your inquiry on the evaluation of the New Deal for Young People programme. One of the key features of the New Deal for Young People has been the transparency of the evaluation and I hope that is something which has become clear to you in the course of the inquiry. Perhaps as importantly, the part that evaluation has played in the continuous improvement and development of the programme since it became a national programme in April 1998. That is all part of our aim to ensure that the programme is grounded in the best available evidence of what works. Evaluation so far has proved that the New Deal for Young People has made a tangible difference to the lives of young people, to the recruitment patterns and satisfaction levels of employers and to the efficiency of the labour market and the national balance sheet. Last November we met our pledge of helping 250,000 young unemployed people move from welfare into work, helped by the New Deal. We have for the first time the prospect of an end to long-term unemployment among young people with now only 33,600 people who have been unemployed for more than six months, the lowest level for over 25 years and fewer than 5,000 unemployed for a year or more, which is the lowest level for 30 years. This improvement in the young people's labour market has been due to a combination of economic stability and the New Deal: not one or the other but the two together. The National Institute for Economic and Social Research, who gave evidence to you just before Christmas, showed in their report, that the New Deal for Young People has both cut unemployment and raised employment, some of its key findings being 25,000 more young people in work because of the New Deal, total youth unemployment down by 40,000 due to the New Deal, half as many young people unemployed for six months or more, due to the New Deal. They also estimate that the overall economy is richer by £500 million a year thanks to the net investment of £150 million a year by the Government in the New Deal for Young People programme. In overall economic terms, the New Deal has easily paid for itself and it has proved in turn a good deal for the country. These positive results are only the early results of what a programme building on long-term investment and with long-term ambitions will show. What the New Deal aims to achieve is radical improvement in the employability of young people, giving them the necessary skills which in turn become personal assets, not just to get a job but to stay in work for the rest of their lives. There is also good evidence to show that people who do return to unemployment are leaving at least as quickly as short-term unemployed people. Even people who have been on the New Deal, who lose their jobs, who return to unemployment, are less disadvantaged than they would have been had they not had the benefit of the New Deal programme. The evaluation has also confirmed that the basic model is the right one for helping long-term unemployed people. The key elements which are now entrenched in our labour market policy comprise personal advisers and unprecedented levels of individual help in the first gateway period, the something-for-something approach embodied in the delivery of a programme which offers no fifth option of a life continuing on benefit, and flexibility in the light of local labour markets and individual need. These lessons have been translated in a slightly different form to the strengthened and intensified New Deal for Older Unemployed People, which will be becoming a national programme with effect from the beginning of April this year. The evaluation has also identified where we need to do more and improve the programme still further. I am sure you will want to cover some of these areas in this session. All that we do to develop the New Deal is based on evidence from the evaluation and the evidence has been shared widely and that evidence is indisputable. Evidence that there are now fewer than 5,000 on benefits for a year or more, compared to 300,000 in the mid-1980s. Against the background of our discussion about quantitative and qualitative evidence, the impact of deadweight, additionality and all the other ways in which we examine and apply tests to judge the effectiveness of labour market programmes, I think that some of the most compelling evidence comes from young people themselves. Over the past few weeks, I have had the opportunity to meet hundreds and hundreds of young people on the New Deal and the vast majority of them are absolutely clear that it has been the experience of the New Deal, the relationship with their personal adviser, that has enabled them to make the journey from unemployment often for the first time into work.

  183. When we embarked upon this study, which was really entitled the New Deal Two Years On, we agreed that the New Deal, certainly for the 18 to 24-year-olds has been the most well-resourced and comprehensively evaluated programme, certainly in my political lifetime. We certainly value the continuous improvement philosophy that the Employment Service has been employing. You would not expect us to let you escape without some fairly probing questions about the evaluations and also about the future direction of the New Deal. Let me begin. Is your current estimate of the total cost of the New Deal programmes to March 2002 significantly different to the £1.5 billion that you estimated last time you gave evidence to us in May 2000? If so, why has the estimate changed?
  (Tessa Jowell) I am just looking for my schedule of costs. The short answer is no, the estimate of cost for the programme is not significantly different. We anticipate the estimate of the total cost for the programme to 2001 to be £1 billion for 18 to 24-year-olds, one quarter of that for 25+. Looking retrospectively, the cost of the programme, as you will know, has been less than anticipated for two and a half principle reasons. The first reason is that the fall in unemployment has been faster and more substantial than expected. The second is that when the programme was originally designed, the expectation was that about 40 per cent of young people would leave at the gateway stage within the first four months and 60 per cent would go onto the more expensive training options. In practice that ratio of proportion has been revised and about 60 per cent of young people now leave the programme within the gateway period; only 40 per cent then go on to the options. The options themselves have turned out to be rather cheaper than we expected. We shall want to watch these costs very carefully indeed because all the evidence is that young people coming onto the programme now are significantly more disadvantaged than those who joined the programme at the beginning. Certainly the training period is therefore having to help young people with acute and unless they are remedied insuperable obstacles in many cases to their being able to hold down sustained jobs.

  184. In the 2000 Spending Review, it was announced that New Deal would become a permanent feature of Government policy. It is going to be funded by the creation of an Employment Opportunities Fund. What effect do you think the creation of this Employment Opportunities Fund will have on the delivery of the programme? Will it be available for groups such as the economically inactive rather than giving priority to those registered job seekers? What resources, other than remaining windfall tax receipts are being channelled into the Employment Opportunities Fund?
  (Tessa Jowell) The Chancellor in the Pre-Budget Report indicated that over the next three years the allocation to the Employment Opportunities Fund will be £1,040,000,000 in 2001-02, over the CSR period, £1,390,000,000 in 2002-03 and £1,370,000,000 in 2003-04. There is also a small remaining underspend from the windfall levy which is in the process of being bid against as part of the budget process. In response to your two questions: what difference will the Employment Opportunities Fund make? It is important to be clear that the fund provides the money to deliver the policies which I hope are pretty clear. Yes, I think that in the second stage of the New Deal programmes, there will be a major emphasis on two areas: first of all, reaching out more to those who are presently inactive; secondly increasing support and help for the most disadvantaged. We are at the moment in discussion with the Treasury about a number of proposals to strengthen both the New Deal for Young People, the New Deal for People over 25 in order to meet what we see as the emerging needs. I think that last time I came to give evidence to you, I made clear our view that the New Deal needs, in order to meet the sustainability test—breaking the cycle of unemployment, or no employment, that many unemployed people come onto the programme with—to focus on the skills which are described as work readiness or employability skills. All the evidence shows that unless you are numerate, literate and increasingly have a measure of IT competence, have the sort of soft skills which increasingly a service-dominated labour market requires and you have had some work experience, then the likelihood of being able to learn and then progress in work or to stay in work is substantially diminished. We are increasing the focus on ensuring that unemployed people have the opportunity to acquire these skills. We are also concerned about those young people who are at the moment beyond the reach of the New Deal. They do not necessarily meet the labour market conditions which mean they are eligible for the Jobseekers' Allowance, but we believe that we must do more to bring them to a point where they are close to the labour market, close to meeting the labour market conditions of JSA and in a position where they can benefit from the New Deal. This will be a real challenge for joined-up government, because the New Deal is not a drug treatment agency, it is not a mental health service, it is not a housing department but these are young people who need the help of the programme and whose lifetime prospects will be greatly enhanced if they can get a job, and getting a job for them means sorting out many of the other problems in their lives as well. That is the shape of the future and the future will be driven much more by policy than the renaming or the replacement of the windfall tax by the Employment Opportunities Fund.

  185. From the figures you gave us, annual figures, I think you said £875 in the first year going up to £1.4 billion in 2003-04, the £875 is round about £200 million more than we are currently spending. That is interesting that you should be allocating £200 million more than we are currently spending. Can you explain why that is thought to be necessary?
  (Tessa Jowell) For the 18-24 programme the estimate for 2001-02 is £420 million, that being the single year cost. The figures I gave you were cumulative figures to cover the spend on all the New Deals but also including other labour market programmes like action teams for jobs, the proposed job transition service, one pilots, modernising ES. This is the total welfare to work spend which will be included in the Employment Opportunities Fund.

  186. So really the amount of money you are spending on the New Deal for the 18-24s currently is about the budget you are building in for future years.
  (Tessa Jowell) It is about the same; we shall expect to see the numbers fall but the clients of the programme need more intensive care. We may spend broadly the same amount of money but I would expect, all the signs are this, that the level of spend per individual may well rise.

  187. Because we have allocated another £400 for the intensive gateway.
  (Tessa Jowell) The gateway to work course is more than that. From memory the gateway to work courses are costing £700 per person, but already the early indications are, and these are early indications, that we are seeing a faster rate of young people moving into work as a result of the gateway to work courses than was the case beforehand. We shall also want to look at the impact on retention of the improved gateway training. You will remember that these were programmes which were established very much in direct response to the demands employers were making of the programme.
  (Mr Lewis) We are also resourcing the personal adviser service more richly. We are taking account of the fact that overall numbers have dropped, so on average each person tends to face more barriers, tends to need a more supportive environment, more help from more skilled advisers.

  188. Your employment forecasts lead you to believe that we shall be needing more intensive support beyond the next election. As the last two ILO figures began to rise, certain people were forecasting that the USA recession might impact here. Are we still expecting that we shall be mainly dealing with those most disadvantaged?
  (Tessa Jowell) We do not formally forecast employment or unemployment. We put in place a range of measures to provide the assistance which is deemed to be necessary. Our intelligence about the prospective demands on the programme come from three sources: from employers, from the experience of personal advisers and the Employment Service and from the impact of evaluation. As we have discussed in this Committee before, also, the evidence is that the pattern of unemployment may well change. We are seeing high employment on a region by region basis, but very marked contrasts in employment rates within regions, which is why the efforts of the New Deal have been fortified both by employment zones and very particularly by action teams for jobs, which are addressing on a very local basis the obstacles that people in the districts in the country with the lowest employment rate are facing to getting into jobs.

Mr Nicholls

  189. As we understand it something like 22 per cent of all moves into jobs from the New Deal for Young People actually last for less than 13 weeks. Of those who are counted as having entered sustained employment, can you tell us what proportion are still in employment after six months?
  (Tessa Jowell) We estimate that about three quarters are still in work after three months and 80 per cent are not back on benefit after six months. These were figures which were identified in the National Institute's report which looked at the macro-economic impact of the programme.

  190. Why did you use a different definition of sustainability for the Innovation Fund? Is there not a case for still using the 26-week definition more widely?
  (Tessa Jowell) We discussed this at some length last time I appeared before you when I indicated that taking a 26-week period for the Innovation Fund was part of piloting a longer period. The standard measure of sustainability under this Government and previous Governments has been 13 weeks. We are placing increasing importance on retention and people not just getting into a job but staying in work and that is why, as part of the piloting and the experimentation of the Innovation Fund, we are looking at a longer sustainability period or retention period.

  191. I ask that question because it seemed to me it flowed neatly on from what you were saying in your opening statement, which I think I could characterise as really making two essential points. One of them was that you felt the whole of the New Deal programme had been good value for money and that secondly it had made a real difference. Would that be a fair way of describing the two key points of your initial statement? You thought it had been good value for money on the one hand and had done the job on the other?
  (Tessa Jowell) Yes.

  192. What I find some difficulty with is actually squaring that with some of the other facts we have already had put to us. You will be aware that we produced a short report some little while ago and in that report we said, amongst other things, that we noted the average cost of unsubsidised, sustained jobs, which the New Deal participants would not have obtained without the help of the programme, would be much higher than £4,000. So although we would not be ad idem, I have to tell you, and you will not be surprised, on both sides of the Committee about precisely what the cost would be, there was a general view it would be higher than £4,000. I just wondered whether, in the light of the exchange which we had last year, you would want to revise that figure or whether you still think it does amount to simply £4,000.
  (Tessa Jowell) The most recent confirmation of that figure came from the National Institute report, which concluded that if you include the voluntary sector and the Environmental Task Force work experience programmes, the cost per job is about £4,000; £7,000 if you exclude those. It is important to be clear that as a Government or as Employment Ministers, there has been consistency about the way in which the cost per job for the programme has been calculated since the programme was launched, which is to take the spend on the programme and to divide it by the number of young people who get into jobs. It was made clear at the beginning that while we would count all jobs and sustained jobs as a figure within the jobs total, the New Deal programme is about getting young people into work. That does not mean we are not also concerned to maximise the numbers that get into a job and stay in work and do hit the sustained job target. The fact is that that is how we calculate it. We have made it clear to this Committee, we have made it clear to Parliament in Parliamentary Answers. I am sure there are all sorts of way of calculating it to produce higher or even lower figures, but those are the rules of engagement that the Government has set.

  193. I should certainly be interested—I say that with all the insincerity I can command, which is considerable, Chairman, I am grateful for your support—in a calculation which would get at lower than £4,000; that would be remarkable. However, one does not really have to work too hard to find it might be substantially above that. Anyone can appreciate this; I think it would be common ground between us. If someone is only in a job for a very short period of time the fact that they have been in that job will hopefully have done something for them which they would not have got had they not been in that job. The fact is, using figures which you gave us when you appeared before us before, you said on one occasion that you thought something like £800,000 had been spent on NDYP. That would in fact mean that you then assumed 60 per cent deadweighting—and I shall come back to how I substantiate that figure in a moment. We would then be looking at a cost per job of something in the region of £17,873. I know this has been the subject of correspondence between us before and in due course the Committee will doubtless come to a view on these things. I really would press you on this. I really do not think you are going to be able to find a figure which is less than £4,000. You may not want to come up with £17,873, but I need to know and I am sure the Committee do, whether it is your last offer that it really does come out at about £4,000 per job.
  (Tessa Jowell) On the basis of the calculation, which is the agreed basis on which we calculate the cost per job, yes. I would add to that that the Opposition, in a press release publishing their Britain Works proposals last July, conceded precisely the same point. They said in notes to editors that they estimated that Britain Works would cost about £3,000 per person, that is about £1,000 less than the New Deal. So there appears to be a broad agreement about cost per job. I would only reiterate that the basis on which we calculate it is the simplest one available and that is the sum we get.

  Chairman: I think this is something of a blue herring, if I may say so, as opposed to a red herring which would come from our side. This is very interesting and we have trawled all over this before. The authoritative statement from the National Institute, which is independent of Government said £4,000 on one basis £7,000 on another and frankly going beyond that is not all that relevant, if I may say so. I am more than happy to let you continue with questions but that particular line is a bit unfruitful.

  Mr Nicholls: With respect, you may find it unfruitful, but I find it relevant and after all there are two sides to this Committee even if my side happens to be in something of a minority just at the moment. I do not want to throw blue herrings too far but there is just one further point, if I may crave your indulgence.

  Chairman: One further point.

Mr Nicholls

  194. Which may have to be subdivided into two. You mentioned a moment or two ago, I am sure in a way which was designed to be helpful, the National Institute for Economic and Social Research and indeed the Minister herself referred to that a few moments ago as well. I detect an assumption underlining this that every time jobs come down and the New Deal is in operation, the assumption is easily made by Government that one thing must have caused the other. The fact is that in information published by the Department themselves, 12 July 2000, the National Institute for Economic and Social Research concluded that 60 per cent of the jobs created would have been created anyway. Is that simply wrong or irrelevant?
  (Tessa Jowell) First of all, the New Deal is not and has never claimed to be a job creation programme. When the New Deal is judged against the extent to which it has created jobs, I frankly discount that. The report published just before Christmas showed an additionality of about 15,000 jobs. That is a macro-economic calculation which I suspect has more to do with macro-economic calculation than real life. The fact is that what the National Institute report did show was that young people through the programme were leaving benefit more quickly, over 200,000 leaving benefit more quickly, that the labour market generally was benefiting from a higher level of skill from which employers could recruit and that long term unemployment among young people would be double its present rate were it not for the programme. As I made clear in my opening remarks, it is the combination of economic stability which has generated more jobs and the New Deal which is equipping previously unemployed people to take those jobs which is the essence of the success. Just before we move from this, I was challenged a moment or two ago by Patrick Nicholls as to whether or not the figure of £4,000 per job might be reduced. At last count 269,210 young people had moved from benefit into work. Those were the latest figures we published. We also published, and you may have seen this last week, a survey we conducted into what are called unknown destinations, about 30 per cent of young people leaving the New Deal go into unknown destinations, and we are as concerned and interested to find out what happens to them as I suspect you are. What the survey has shown is that we have almost certainly undercounted the number going into jobs by about 75,000. Of those who go into unknown destinations, about 56 per cent, the same proportion as from the main programme, go into work.

  195. Are you saying that therefore accounts for the fact—
  (Tessa Jowell) That is arithmetically how you get to below £4,000.

  196. Is that how you would also seek—and you raised this, I did not, I was mindful of the Chairman's strictures—to account for the fact that if you in fact refer to the Office for National Statistics, the known estate base, the UK youth unemployment 18 to 24-year olds claim account, if you actually look at what has happened, you can see that for a long time, with occasional seasonal blips, youth unemployment has been declining and in fact the rate of decline has tailored off during the time of New Deal.
  (Tessa Jowell) In 1986, if we take six-months-plus unemployment among young people, you can fall very fast if you have very high numbers and in 1986 you had very high numbers: more than half a million young people had been out of work for six months or more. In 1990, 176,000, in 1997, 169,000, in 2000, 33,500, a fall of 80 per cent.

Ms Atherton

  197. One of the fascinating parts of the New Deal is the role of the employer in recruiting young people. Some disappointment has been expressed by some employers that not enough of the New Dealers are job ready when they come for interview. As a Committee we were very, very impressed with some of the programmes like Wildcat in New York where a lot of work goes into getting a young person or an older person job ready. What action do you plan to take to tackle some of the criticisms which a few employers have raised that the young applicants are not job ready enough in some cases?
  (Tessa Jowell) As I indicated earlier, the gateway to work courses which were introduced in June last year, were introduced in direct response to the expressed view by a number of employers that young people were being referred who were not "work ready". Secondly, the focus on these core work readiness skills again is ensuring that young people have the generic employability skills that employers are looking for. As part of our performance monitoring we have judging how well the programme and indeed the Employment Service was doing, we have a target against which the Employment Service performs as measuring employer satisfaction. We have over 80,000 employers who have signed up to the New Deal and in 12 of our large cities we have employer coalitions which really do drive employer leadership of the programme. This is not a new development but over the last two years we have seen an increasingly what would be described as demand-led approach to the programme, which no doubt you have heard Wildcat talk about, and that essentially means identifying the needs of the local labour market and ensuring that unemployed people coming through the New Deal are trained in order to have the skills that those employers need to fill the jobs which are available. Let me just give you a couple of very specific examples. I have been travelling the country as part of the New Deal tour, meeting employers, meeting young New Dealers, meeting the community organisations which are involved in training them and job centre staff. Last week I was in Birmingham and visited the Birmingham City Hospital Trust who when they are recruiting entry level administrators always now have a New Dealer on their short lists. What they say is that New Dealers are work ready, trainable on the job, but highly motivated. That is the sort of endorsement of the New Deal that we want to see right across the piece. We are clarifying the sectoral approach within which New Deal operates. You have the development and the implementation of the work readiness programme, but then also the acquisition of further sector specific skills, working as Wildcat has been doing with the financial services sector, IT, in order to lock together the skill needs that employers have with the training that the New Deal can deliver. We see this as an enormously important part of the long-term sustainability of the programme. What I want to see employers saying about the programme is that there is a kitemark standard of quality which they can take for granted in young people they recruit and that the New Deal is a preferred programme for recruiting to their vacancies. Leigh is very close to the operational delivery of this and may want to add to what I have said.
  (Mr Lewis) Just to say of course that we have had the opportunity to discuss the efforts we have been making in the Employment Service to improve our service to employers. As you know, I am the person more than any other who is not satisfied and never satisfied that we are delivering as good a service yet as we can, though I do believe it is improving and we need to go on improving it further. It is worth saying that the evaluation evidence on New Deal has told us quite a bit about the responses of employers who have recruited through New Deal and a great deal of it is actually very positive. For example, around 85 per cent of employers who have recruited through New Deal said that the person they recruited met their job spec either fully or pretty well and that is not a bad level at all. It would be better if we can make it better, but it is not a bad level to be starting from.

  198. In some ways Wildcat acts as a personal adviser to the employer as much as a personal adviser to the person looking for the job. Have you thought about actually saying to the employers, here is your personal adviser in this process?
  (Tessa Jowell) This is very much the relationship the Employment Service is now developing with employers which I shall ask Leigh to tell you about.
  (Mr Lewis) I do have great sympathy with the question. One of our four employer service commitments now is that every time an employer entrusts us with a vacancy—and I use the word "entrust" very deliberately—one of our standards is that there should be a named contact in the Jobcentre who stays in touch with that employer until that vacancy is filled to their satisfaction. That is in terms of the one-off vacancies which are our bread-and-butter business, day by day. At a national level we have moved to institute an account management function. So if the big major employers, the big organisations in this country want to deal not with 20, 30, 40 separate Jobcentres but want to deal with one person, their account manager, who can deal with their requirements literally from John O'Groats to Lands End that is a service we shall provide as well. We have to get yet better at doing that but in a way we are moving towards the equivalent of a personal adviser per employer.

  199. It has been argued that the increasing case loads of the New Deal for Young People might have compromised the effectiveness of some of the advisers. As more and more young people are involved and the New Deal has expanded it has been suggested that some of the personal advisers are effectively burning out like social workers and doctors. What strategies do you have in place to tackle this?
  (Tessa Jowell) First of all, there is no evidence that personal adviser case loads are increasing. We have also taken steps to offer greater opportunities for career advancement. Personal advisers are crucial to the success of the programme: what we do not want is for personal advisers to feel that the only way they can secure advancement is to move off into management and move away from working directly with young unemployed people, which is what most of them are so gifted at.
  (Mr Lewis) It is absolutely crucial, as you say, and if our personal advisers become overstretched or become overstressed, then of course they are less effective. We are very much concerned about ensuring that does not happen. One of the big advances we are making and introducing and rolling out now, is the role of what we are calling a senior adviser. One of the problems born of success is that our advisers have been so successful in many cases that they have secured promotion within the Employment Service and have ended up doing jobs other than as personal advisers. Great for them, not as good in a sense for New Deal.

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