Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 100 - 119)



  100. When I asked the NAO why an analysis was not done of the unit cost to measure against outputs because we have used measures or outputs rather than the cost of outputs, the NAO's response seemed to be that they did not look at it on the understanding that there was not a great deal of variation. It now appears that there is some variation. I then tried to ask you whether there was a great variation in the £5,000 to £8,000 and £4,000 to £7,000 and you said no. My further questioning seemed to be eliciting a slightly different response. I am not quite clear now whether you are stonewalling me or not. Could you indicate to me in a few words what you believe the variations are in cost?
  (Mr Wells) May I mention the difference between gross and net costs? The gross costs, the costs of dealing with each individual young person, will be greater for the reasons Mr Lewis has given. The numbers you mentioned of £5,000 to £8,000 are actually the effect of everything going through.

  101. If you do not mind me interrupting you, I think you are on the wrong track there. What I am trying to do is get a gauge of two things: one is that the governance of this whole scheme depends crucially on our capacity to get the most difficult people back into work and therefore one would have thought that somewhere along the line someone would make a decision to put more money into those areas where there are multiple problems relative to other areas. I am afraid you are not really giving me a very straightforward answer.
  (Ms Lomax) Is it worth mentioning that this is not the beginning and the end of all the welfare to work provision there is for deprived areas? We have not talked about Action Teams for Jobs, we have not talked about Progress to Work, we have not talked about Step Up. There is an enormous number of other schemes which areas like your constituency will benefit disproportionately from, which are targeted on exactly those hard to help. Just looking at this sort of data at the back is not giving you a measure of the help which is available.

  102. It is data which you have provided.
  (Ms Lomax) Yes, but we are just taking a slice of what is going on here. It is not the whole story.

  103. If we are saying that the efficacy of the New Deal depends on all kinds of other hidden projects, that is a very significant statement. What I want to be able to do is to judge the performance as a constituency Member of Parliament first of all but then as a member of this Committee, to judge the efficacy in expenditure terms of my own units of delivery and to measure it against the average and the expectations which you have and then to see whether or not any financial judgement is made as to the efficacy of the units of delivery. The only information you have provided for us is what is in front of us which you say in any event is misleading. I think I have made the point but it would be useful, if other members of the Committee are interested, because it is a significant discussion, to see some note which specifies the amounts of variation per output across the units of delivery. Is that okay?
  (Mr Lewis) Yes.
  (Ms Lomax) Yes; certainly.[3]

  104. May I just move on to another question about units of delivery? I see that you privatised ten units of delivery. Can you tell us the circumstances which lay behind the privatisation since they do not seem to be working any better or any worse than the public sector providers?
  (Mr Lewis) Ministers concluded that it would not be right to see a single delivery model, so they took a decision early on in the life of the New Deal that in ten areas private or voluntary sector organisations would be invited to lead the delivery of New Deal. You are right to say that we have done a good deal of evaluation which suggests that while there are individual variations, overall the performance of the private sector led New Deal areas and public sector led New Deal areas has been similar.

  105. I am interested in the distribution of finance, since I think that is the core to everything. I should just say that it is surprising that is not in this Report. In terms of the private providers, how have you decided how much money they should receive per unit of output or per number of people unemployed in the area?
  (Mr Nicholas) We contracted them with some incentives to increase the number of young people going to work. So if they get more young people into work they receive more money as a result. Broadly the costs available to them are the same as those available across the country as a whole.

  106. Have we ever bothered to measure, since we have not bothered to tell the Committee, whether or not they are performing as well financially as the public sector comparators? Is that something we have ever measured?
  (Mr Nicholas) Yes, our understanding is that the cost is slightly higher per job in the private sector ones, but broadly comparable.

  107. But slightly higher.
  (Mr Nicholas) That is my understanding.

  108. Are the providers using different methodologies?
  (Mr Nicholas) Yes, some of them do. They have different combinations of the numbers of personal advisers, how much they rely on training, how much they rely on job subsidies. They have flexibility to put together the provision they see is right for the clients in their area.

  109. Do the public sector comparators have the same capacity to be flexible?
  (Mr Nicholas) There are areas of methodology where the private sector ones have from the outset had greater flexibility. We are learning from the way they use those flexibilities in things like Action Teams in the public sector so that we can draw all the more flexible models for staff throughout the organisation.

  110. Notwithstanding the fact that there are fewer regulatory impositions on the private sector and that they have tried other methodologies, they are actually more expensive and not producing any additional outputs relative to the public sector. Is that a reasonable summary of what you have said?
  (Mr Nicholas) The comparison is that they are broadly in the same position as the public sector ones.

  111. Notwithstanding the fact that they have fewer impositions on them in terms of the regime which they must use and notwithstanding the fact that they are more expensive than the public sector. Is that also true?
  (Mr Nicholas) Yes, that is broadly true.

Geraint Davies

  112. May I first of all ask the NAO why it is that we have no regional breakdown of the impact of the New Deal in this Report?
  (Sir John Bourn) I recognise that the Report could usefully have been developed in such a way as to provide this.

  113. Presumably the reason it is not in the Report is that it was not asked for or was it because you did not think to provide it?
  (Ms Lomax) This is the NAO's Report.

  114. The point I want to move to is that the issue here is how many of these jobs would have been created anyway by the economic upturn and the reality as we all know is that there is enormous regional variation in levels of economic performance and change and therefore in so far as there has been a relative boom in the South East if we find an enormous proportion of these jobs are there and not in the North, the real challenge for the New Deal is the regional impact. Mr Wells, I understand you are a bit of an expert in this area.
  (Mr Wells) The growth in employment has been relatively evenly spread across the country. Overall there has been roughly the same growth in most areas of the country with the areas with the lowest employment rates tending to do slightly better than the other areas.

  115. Might it be possible to provide the Committee with some breakdown on that? I think people would be interested.
  (Mr Wells) Yes; certainly.[4]

  116. I am very glad to hear that.
  (Mr Wells) It is also true that the areas which appear to do relatively badly in terms of the units of delivery tend not to be geographically concentrated. They tend to be concentrated in the middle of cities or urban areas with London as a particular example of the tail of the graph we were talking about. It is not actually the distribution across the country. The clusters were chosen more to do with the types of the labour market.

  117. Anyway you can provide the regional data if we want it.
  (Mr Wells) Yes.

  118. Do not misunderstand me, I am very pleased with what has happened in the New Deal and this Report and I think you have done a wonderful job. I just want to ask some questions. Something like 340,000 have participated in New Deal and we have generated something in the order of 30,000 sustainable jobs. Is that right? Have I got this wrong?
  (Ms Lomax) Something like 700,000 people have participated in the New Deal and about 340,000 young people have actually gone into jobs.

  119. I am confusing things. Something like 340,000 are doing this and the National Institute of Economic and Social Research suggest these various figures for the marginal extra jobs which have been created which would not have otherwise been created. I hope therefore I cannot conclude that those people who would have got a job anyway have inadvertently been stopped from getting a job by being put in the New Deal but in fact what we have done is put them in the New Deal, they would have got a job otherwise and we have just lost a lot of tax.
  (Mr Lewis) Not at all and indeed one of the findings of the National Institute, and this was up to March 2001, was a much higher figure of 60,000 young people leaving unemployment for a job more quickly than they would otherwise have done.
  (Ms Lomax) People still have to go on doing active job search when they are on the New Deal. You do not get relieved of the need to look for a job.

3   Ev 23, Appendix 1. Back

4   Ev 23-25, Appendix 1. Back

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