Memorandum from Rt Hon Tessa Jowell MP,
Minister for Employment, Welfare to Work and Equal Opportunities
At my recent appearance at the Employment Sub-Committee
I offered to write to you with additional information on some
of the points we discussed.
I promised to let the committee have a regional
breakdown of the national figure of 60 per cent of young people
who leave the New Deal from the Gateway before taking up any of
the options. The percentage for each region is as follows:
Office for Scotland53 per cent;
Yorkshire and the Humber55 per cent;
Office for Wales52 per cent;
West Midlands63 per cent;
East Midlands and Eastern61 per cent;
London and South East66 per cent.
Great Britain60 per cent.
I offered to write to the Committee to provide
an explanation of the "cost per person into job". I
attach a copy of the letter I have subsequently received from
Patrick Nicholls on this in case the Committee has not yet seen
it. In the letter he makes the claim that the cost per New Deal
job is £22,788. This figure is contrived by subtracting from
the number of young people who have found work from the New Deal
those young people who found a job that didn't last 13 weeks and
those young people who have found a job through the New Deal employment
option. He also takes off the number of young people who may or
may not have found work without the New Deal. He then divides
the total New Deal budget by this figure.
This is wrong on a number of counts. Firstly,
it implies that the only jobs worth counting are those that are
unsubsidised and sustained work, which is plainly wrong. The point
of the New Deal is that it finds real job opportunities for young
people who have been out of the labour market for some time. Even
though a job may not be sustained, it can still transform people's
confidence, their ability to work, and their prospects of getting
another job with recent work experience to show to their next
employer. And for some young people, a subsidised job is their
best chance of finding a way back into the labour market. It is
unfair to young people to dismiss their jobs as in some way "not
genuine": I can assure you that is not the way young people
themselves feel about their work.
Secondly, it is simply not sensible to discount
those people who may or may not have found a job because we can't
possibly know who these people are. No employment programmes in
the past have done so, including those with which Patrick Nicholls
Thirdly, it is a schoolboy howler for Patrick
Nicholls to base his calculations on the total budget allocation
rather than the actual spend for the two years the programme has
been going, since the allocation of funding is for the lifetime
of this Parliament. In the same way it is of course not sensible
to include only some, rather than all the job outcomes from the
New Deal. Of course, after two years of the programme we haven't
spent the whole budget. At the end of March 2000 we had spent
around £650 million and had helped 210,000 young people into
work. We estimate that, on average, the amount spent on a young
person in New Deal is £2,000. Over half of New Deal participants
have found a job; the cost per job therefore is below £4,000.
The "cost per job figure created by New
Deal" approach is also flawed because it assumes the New
Deal is a job creation scheme. New Deal is a supply side measure,
not a demand side one. The issue in assessing the net impact of
New Deal is its effect on the economy and the labour market. Independent
research by the National Institute for Economic and Social Research
(NIESR) has looked at precisely that point. In its report published
last year it says quite clearly that the New Deal's impact is
substantialso much so that the New Deal is now close to
paying for itself.
Patrick Nicholls also claimed that "58
per cent of young people who started New Deal go back onto benefits".
This claim is wrong as the following information from the Government
Statistical Service shows:
At the end of April 2000:
Starts to New Deal470,400;
of which left benefits264,900;
other known destinations not including JSA25,700;
remained on benefit79,700.
It is important to remember that what is being
shown in this table are those young people who leave the
New Deal. The figure for 139,100 young people leaving for employment
therefore does not include the 24,800 young people who found work
through the employment option (who are still on the New Deal)
and the 52,300 young people who returned to the New Deal after
taking a job that did not last for 13 weeks but benefited from
useful work experience, and then returned to New Deal to receive
further help and support to find employment.
The table of leavers from New Deal shown above
makes it clear that over three quarters of young people leave
benefit. Included in those who have left benefits, as I explained
in my evidence, are those young people who are put I the category
of "unknown destination" because they have not told
the Employment Service where they have gone. Although we do not
know their destination, we do know that they are not claiming
benefit or else, by definition, we would count them as a known
destination. So far, surveys have shown that the majority of the
young people who were recorded as leaving the New Deal for unknown
destinations are going into employment.
It was also claimed by Patrick Nicholls that
the New Deal has had a negative effect on youth unemployment and
that the fall in long term unemployment has actually slowed down
since New Deal was introduced. The facts are that long term youth
unemployment has fallen faster in the last three years than the
previous three. This is true of both claimant count and International
Labour Organisation (ILO) statistics.
The following table shows the numbers in the
client group for the New Deal for Young Peoplethose aged
18-24 who are unemployed and have been on the claimant count for
six months or morefrom April 1994 to April 2000.
|Date||Claimant Count Unemployed
The table shows that between 1997 and 2000 unemployment in
the New Deal client group fell by 70 per cent and between 1998
and 2000, when the New Deal was in operation, by 56 per cent.
This fall in the New Deal client group of 70 per cent over
the past three years and 56 per cent over the past two years compares
favourably with both the fall in overall claimant unemployment
for 18-24 year olds (37 per cent and 23 per cent respectively)
and the fall in claimant unemployment amongst those of all ages
unemployed for six months or more (49 per cent and 26 per cent
respectively). The fall in unemployment in the New Deal client
group over the past three years is faster than the 52 per cent
fall between 1994 and 1997.
The more rapid fall in unemployment amongst the New Deal
for Young People client group, on both claimant count and ILO
measured unemployment, shows that the New Deal is making a difference.
This finding complements the conclusions of the work by the National
Institute of Economic and Social Research, as I told the Committee
when we met.
Finally, you asked for further information on my evidence
that sickness rates were declining in the Employment Service.
Statistics from Employment Service Personnel show that absence
levels declined from an average of 3.4 days per person in the
quarter January to March 1999 to 3.2 days from January to March
I hope this information is helpful to the Committee.
Rt Hon Tessa Jowell, MP
Minister for Employment, Welfare to Work and Equal Opportunities