Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 40 - 59)



  40. Thank you very much. Has an estimate been made of the job opportunity cost of the utility sector from the £5 billion windfall tax which has led to a cutback in the capital expenditure programme? When you assess whether this has been a worthwhile programme, has any estimate been made of potential job losses or opportunity costs of the tax?
  (Mr Wells) It was not done either with DfEE or DWP. I am not sure that it was done within the Treasury either. I am not sure there is a figure.

  41. How do we know as Members of Parliament, in assessing whether this was a worthwhile thing to do, whether it is a worthwhile thing to do?
  (Mr Wells) Part of it is the way the evaluation of the National Institute works which looks at the whole effect of the New Deal moving through the economy and will include the effect of raising the windfall tax. Their estimates are that overall there was an increase in employment and also in GDP.

  42. What were the two figures Ms Lomax gave for the increase in GDP as a result of this programme? Was it £200 million or £500 million? There were two figures. The range is presumably between £200 million and £500 million.
  (Mr Wells) Those are the two estimates which have been given.

  43. What is the opportunity cost of £5.2 billion? What is the annual return which in business you might be expected to achieve from investing £5.2 billion a year?
  (Mr Wells) I am not sure that is the appropriate comparison because the £5.2 billion will be built into the National Institute model. The reduction in profits and various others things will work their way through.

  44. So the £200 million is already taken out.
  (Mr Wells) Yes.

  45. May I ask the Comptroller and Auditor General whether that is right? Is it already taken out?
  (Mr Jones) Yes.
  (Ms Lomax) Yes.

  46. What was the total youth unemployment figure in May 1997? I am really referring to a comment on page 13 that there was a commitment to get 250,000 under-25-year-olds off benefit and into work and this has happened. What was the total youth unemployment in May 1997, which was the starting point?
  (Mr Wells) The total for unemployed 18 to 24-year-olds was 397,000.

  47. In May 1997.
  (Mr Wells) In 1997.

  48. What was it by, say, June 2001 or the end of the Parliament.
  (Mr Wells) In January of this year it is 253,000.

  49. So if I deduct 253,000 from 397,000 I get 134,000; so the reduction is 134,000.
  (Mr Wells) There is a slight problem because these figures are not seasonally adjusted and you should do year on year comparisons.

  50. Can we have the seasonally adjusted year on year figures then? I am just trying to understand, to get to grips with it.
  (Mr Wells) If you compare, for example, January 1997 with January 2002, to try to take account of seasonal adjustments, then the January 1997 figure was 475,000.

  51. And the January 2002 figure was . . .? That was the 253,000.
  (Mr Wells) Yes.

  52. So that does come to 222,000.
  (Mr Lewis) May I add one thing to what Mr Wells has said, which is that those figures are for all 18 to 24-year-old unemployed people of any duration of unemployment. The New Deal normally begins when somebody has been out of work for six months.

  53. I understand that.
  (Mr Lewis) If you look at the figure for 18 to 24-year-olds six-months-plus unemployment in 1997, it was around 178,000 and the current figure is 38,600 and that is probably a more meaningful figure to look at to see the impact of the New Deal.

  54. I was really looking at this number here. So if unemployment was 475,000, is that the starting point rather than 397,000? There does seem to be a large difference between a seasonally adjusted number and the actual number, 397,000 and 475,000.
  (Mr Wells) These are all seasonally unadjusted numbers and January is a month when there are many unemployed people compared with the rest of the year because of the seasonal pattern after Christmas.

  55. Why is it fair then to take a January 1997 figure when you say there are all these people coming onto the lists for seasonal reasons rather than the May 1997 figure? Why is one intellectually more objective than the other?
  (Mr Wells) Because the figure you are comparing is January 2002. You could compare May 1997 with May 2001, but that is nearly a year old now. I could give you those figures.

  56. Yes, please; that would be helpful. What is the number now, the latest figure?
  (Mr Wells) The number now is January 2002, 253,000.

  57. Is that the latest figure?
  (Mr Wells) Yes, that is the latest figure. The May 2001 figure is 233,000 and the May 1997 figure is 397,000.

  58. It would be helpful if we could have a chart with all those numbers on. As far as I am concerned they are the key figures.[1] May I turn to page 3, paragraph 9 and the numbers there? It says the effect was to reduce youth unemployment between 25,000 to 45,000 and to increase youth employment between 8,000 to 20,000. Why are those numbers different? I do not quite understand why they are not exactly the same numbers on each line.

  (Mr Wells) Not everybody who leaves unemployment goes into work. Some of them go onto the programmes themselves, the Options. In general, there is a range of other avenues as well as employment for young people. The biggest is the number of people who are on the Government's training programmes.

Mr Steinberg

  59. We were told in the Report that in January 1998 120,000 young people were long-term unemployed. We were told that every month 15,000 to 20,000 young people became unemployed adding to the numbers and within two and a half years of the scheme being introduced, 250,000 youngsters had found work. That is fantastic. That is great. Then the Report says, which is a bit of a downer, that a lot of them would have found work anyway. What do you say to that?
  (Ms Lomax) I say that the fact that people will find work anyhow is a feature of any employment programme. The evidence of the evaluation is that people found work quicker. Some people who would never have found work found work, but the employability of those people who were helped into work may also have been improved. So over a period of time they have been helped in a way which will improve their longer term employment in a way which is not captured by these short-term figures.

1   Ev 20, Appendix 1. Back

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