Select Committee on Work and Pensions Minutes of Evidence

Memorandum submitted by the Trades Union Congress (ES 09)


  1.  This memorandum has been drawn up in response to the Work and Pensions Committee's inquiry "to examine the impact of the economic slowdown on the Government's employment strategy and to assess the employment assistance availa6ale to those facing unemployment". We expect the current economic downturn to have a modest impact on overall labour market performance. Nonetheless, economic circumstances will be less favourable than in recent years not least in making further progress in reducing high levels of inactivity among particular groups in the labour market. The key challenges in the short term will be sectoral and regional rather than national—in particular the continued big job losses from the manufacturing sector and the impact on regional divides and local economies.


  2.  This submission argues:

    —  The TUC expects overall growth in 2002 to be within HMT's forecast range of 2 to 2.5 per cent.

    —  But we expect manufacturing to continue to face severe problems.

    —  Performance may be better in 2003, but this will depend on a strong recovery in world trade.

    —  We expect overall employment to continue to grow in 2002, but with continued significant job losses in manufacturing.

    —  Much of the rise in unemployment in the last year has been in the South and particularly in London. In 2002, we expect job losses in manufacturing to result in a return to the traditional North-South divide.

    —  The New Deals have met their main objective—producing a structural reduction in unemployment by helping disadvantaged groups. They are not job creation programmes, and should not be judged as such.

    —  Against this background of overall success, a number of problems need to be addressed. One general concern about the New Deals is the extent to which equal opportunities objectives are being met:

      —  Black participants are less likely to get jobs from NDYP and NDLP;

      —  The reformed New Deal 25 Plus may not be as successful as its predecessor in delivering equal results for unemployed women; and

      —  Disabled people and men are losing out in NDLP.

    —  In areas where unemployment rises there is a risk that more unemployed young people will be directed to the less attractive work experience options. If, at the same time, the number of sanctions rises, there is a serious risk that young people will turn against the New Deal, which they have generally supported up till now.

    —  The reforms of New Deal 25 Plus, introduced last year, seem to have been a success, and to have been introduced in time for the programme to be better able to cope with labour market developments in 2002-03.

    —  The New Deal for disabled people and New Deal 50 Plus are likely to be faced with severe challenges in areas where unemployment rises.

    —  Employment Zones have only been operating for two years, but the early results are good, and they have the added advantaged of being located in the towns and cities that are most likely to be hurt by any slowdown.

    —  The new Step Up programme is an excellent initiative, and the TUC has called for extra funding to double the number of jobs it provides.

    —  The Government should make even greater efforts to develop regional and local approaches within its overall national employment strategy. This will necessitate setting aside substantial funds to support industry and the regions in 2002 and beyond, including a significant increase in funding for the regional development agencies to maintain UK capacity in viable manufacturing.

    —  The TUC especially welcomes the development of Frameworks for Regional Employment and Skills Action (FRESAs), which provide a possible vehicle for linking workforce development and economic planning.

    —  The new Local Strategic Partnerships, with their emphasis on coordinating employment and industrial strategies, is a welcome development. The social partners should be fully involved in these networks.

    —  The decision to merge the Job Transition Service and the Rapid Response Fund into the better-resourced Rapid Response Service is very welcome.

    —  Linkages between the RRS and appropriate welfare-to-work initiatives are important, especially where the impact of a redundancy on a community is severe. Trade unions can also make a leading contribution this process, as they often have advance warning of redundancies and will be able to trigger action by the RRS at an early stage.


  3.  The economy has grown in line with the November Pre Budget forecast of 2.1 per cent. However, manufacturing did even worse than expected, but many of the non-service sectors did better than expected. These imbalances worsened over the course of the year. Growth in the final quarter of 2001 fell to zero, as the manufacturing recession worsened and growth in some service industries moderated.

  4.  Growth in 2002 will be supported by a very rapid increase in planned public spending. We expect consumer spending to moderate somewhat but to remain relatively strong. As shown below, the aggregate labour market has held up well and we expect real wage growth to remain robust. Households are unlikely to find servicing debt a problem in the short term. We expect growth in 2002 to be within the Treasury's forecast growth range of 2 to 2.5 per cent.

  5.  There are indications that the worst is over for the manufacturing sector as a whole, although the recovery to date is weak. However, we expect job-shedding to continue as redundancies work their way through and firms attempt to restore profit margins by short-term cost-cutting measures.

  6.  The biggest single risk to economic prospects for the UK in 2002 remains the global economy. There are encouraging signs of economic recovery in the US, and prospects for the Eurozone also appear to be improving. The outlook for the Eurozone is more important to the UK as we export roughly three times more goods to Eurozone markets compared with exports to the US. The feed-through into orders for UK exports is still uncertain, but provided the recovery in the international economy continues we expect to see stronger export growth over the coming months.


  7.  The aggregate labour market has held up well in 2001 with continued employment growth. Moreover, the majority of new jobs continued to be full time and permanent. However, there have been very big job losses in the manufacturing sector, especially in the second half of 2001 as redundancies in the high tech industries accelerated. ILO unemployment increased in the second half of 2001 but the rise so far has been modest. There has been no sustained rise in the claimant count measure of unemployment at the time of writing.


  8.  Our assessment for the labour market reflects our view of economic prospects. We expect overall employment to continue to grow in 2002, supported by increased public sector employment and continued growth in construction and some service industries. However, manufacturing job losses will be considerable, and will hold overall employment growth down. ILO unemployment may continue to edge up over the next few months, but we think it unlikely that UK unemployment on the ILO measure will exceed 5.5 per cent in 2002. More surprising has been the fact that claimant unemployment has not risen at all. This may reflect the effectiveness of government labour market measures, as well as the availability of attractive jobs for those made redundant.

  9.  Much of the rise in unemployment to date has been in the South and particularly in London. This may reflect the impact on the capital's tourist and travel related industries of 11 September However, we believe that more traditional North-South divides will reassert themselves in 2002 reflecting the regional pattern of job loss in manufacturing. With the exception of the South West the biggest falls in manufacturing employment have been in Northern Britain and the Midlands. This will in turn exacerbate underlying regional divides in economic and employment performance.

Regional Manufacturing Job Losses 2000 Q3 to 2001 Q3
RegionShare of GB total (%) Employees Q3 2001 (000s)Change Q3 2000 to Q3 2001(000s) (%)
Scotland4.6%286,000 ¸18,000¸5%
East Midlands10.0%368,000 ¸19,000¸5%
West Midlands13.0%480,000 ¸22,000¸4%
North West13.0%481,000 ¸20,000¸4%
Wales5.2%192,000 ¸9,000¸4%
South West8.0%295,000 ¸11,000¸4%
London7.6%281,000 ¸8,000¸3%
South East11.7%431,000 ¸9,000¸2%
Eastern8.9%329,000 ¸6,000¸2%

Source: National Statistics


  10.  The New Deals are at the heart of the Government's active labour market policy, and will have to take the strain of any increase in unemployment. In our view the New Deals have been a success so far, but the continuation of that success depends upon continuing monitoring and reform of the programme.

  11.  Much discussion of the New Deal has assumed that it is a job creation programme, and criticised for having high levels of "deadweight"—most of the jobs participants move into would have been created even if the programme had never existed, or are created at the expense of such jobs.

  12.  It is important to remember what the New Deal programmes are—and are not. New Deal is not a job creation programme—it is designed to improve the relative employment opportunities for unemployed people who are members of groups that have previously fared badly in the competition for jobs. Of course, the Government can't inject as much money as has been spent on the New Deal programmes[15] without it creating some jobs, but that is not their purpose. [16]Jobless people from these groups can be helped into employment without increasing inflationary pressures, and the New Deal thus reduces unemployment indirectly, not by creating jobs for unemployed people.

   New Deal for young people £910 million

   New Deal 25 Plus £600 million

   New Deal for lone parents £530 million

   New Deal for disabled people £190 million

   New Deal for partners  £80 million

   New Deal 50 Plus  £60 million

  13.  And it seems to have worked. The most authoritative study of NDYP concluded that "the number of young people in jobs has risen by approximately 15,000 as a result of NDYP." [17]This does not sound like a particularly big deal, but it is important to remember that this is not just a matter of helping that many young people: at any one time, there will be 15,000 more young people in jobs than there would be if New Deal had not existed.

  14.  Successful structural changes in employment that can be traced directly to a deliberate action of Government are rare. In our view the New Deal is the most successful active labour market policy ever introduced in this country—and remarkably cheap, with one study forecasting that, in the four years initially planned for the programme, it would be "more or less self-financing." [18]


  15.  As the last section indicates, the TUC would make a positive assessment of the New Deal, and it is against this background that we would wish to draw the Committee's attention to some problem areas, especially in the New Deal for Young People.

The under-performance of the work experience options

  16.  Roughly two fifths of New Deal leavers leave for "unsubsidised employment." [19]This compares reasonably well with many schemes operating before 1997, especially those that concentrated on "motivating" unemployed people. The figures below are for shorter programmes, and are taken from a different point in the economic cycle, but the contrast is still notable: [20]

ProgrammeProportion finding a job
Workwise 9%
Jobplan 4%
Restart courses4%
Restart interviews 1.7%

  17.  There is undoubtedly room for concern about the fact that one graduate in four who gets a job leaves in the first three months. [21]On the other hand, the New Deal is the first active labour market programme in which a serious attempt has been made to discover whether or not participants who get jobs are keeping them. For previous programmes there was plenty of anecdotal evidence that many of the jobs people moved into were short-lived, but the truth is that we don't really know whether the New Deal compares well or badly on this count.

  18.  The TUC is rather more concerned about the fact that some of the NDYP options appear to have been much more successful than others.

Proportion of NDYP leavers leaving for unsubsidised employment[22]
Before first interview33.3%
During the Gateway, after at least one interview 44.2%
From an option40.9%

Education and training32.4%
Voluntary sector37.8%
Environmental Task Force36.7%

  19.  The subsidised employment option is clearly the most successful. Unfortunately, the number of participants on this option is much lower than was originally expected—in January, it accounted for just 15.7 per cent of young people on any option. [23]When NDYP was being designed, the planning assumption was 40 per cent.

  20.  But even the proportion of participants on this option getting sustained jobs is worrying. 52.2 per cent seems low, given the fact that this option is likely to claim the most job-ready of those on an option.

  21.  A survey of subsidised jobs in the NDYP and the 25+ programme[24] may give some clues as to what is happening. The researchers found that 31 per cent of participants had left before the 26 weeks subsidy period was up. [25]Of this group 40 per cent resigned, 30 per cent were dismissed, 21 per cent were made redundant and 2 per cent left for health reasons. Of those who were dismissed, 60 per cent were dismissed for poor attendance, 36 per cent for insufficient quantity of work, 17 per cent for disobedience, 11 per cent for dishonesty and 19 per cent for some other reason. [26]

  22.  Now, these figures almost certainly do not tell the whole story, but they do not seem to show large numbers of employers cynically taking on subsidised recruits, and then letting them go when the subsidy ends. Instead, they rather tend to substantiate employers' complaints that the New Deal recruits they are sent are not yet job-ready.

NDYP and equal opportunities

  23.  The TUC has also been concerned about the New Deal's racial bias. Black and ethnic minority young people have been—quite consistently—between 75 per cent and 80 per cent as likely to get jobs as white participants. Or, to put it another way:

Black and ethnic minority young people and NDYP[27]

Proportion of participants leaving NDYP for any destination
Proportion of participants leaving NDYP for sustained employment 11.7%

  If we look at the options we get a slightly different picture:

Black and ethnic minority young people and options[28]
Education and
Work experience
All participants who have left the Gateway for an

Ethnic minority participants who have left the

Gateway for an option

  24.  Plainly, in addition to not getting sustained jobs from NDYP, black and ethnic minority young people are much less likely to enter subsidised employment. On the other hand, nor are they referred to the less popular work experience options, which we would expect if discrimination by PAs were the explanation. Two other possible explanations immediately suggest themselves:

    —  We know that there is racial discrimination in the labour market. It could be that black and ethnic minority young people face the same discrimination in subsidised as in open employment.

    —  We also know that black and ethnic minority young people show a stronger preference for further education than their white counterparts, and it could be that, where white participants choose subsidised employment, black and ethnic minority participants are much more likely to choose education/training.

  It is also possible that there is more than one explanation.

  25.  On the positive side, more than 39,000 young people from minority ethnic groups have gained jobs through the New Deal, [29]and the Government has responded to concerns about this issue. In particular, the TUC welcomed the announcement in April 2000 of a series of measures specially designed to address this issue, including training, obtaining advice from the New Deal Task Force Minority Ethnic Advisory Group, and special events around this theme. [30]

  26.  A few months ago we would have noted that young women also lose out in the New Deal (though not to the same extent as young black people) but their relative position has improved significantly in recent months:

Young women and NDYP[31]

Cumulative total
to Aug 2001
Cumulative total
to Jan 2002
Proportion of participants leaving NDYP for any

Proportion of participants leaving NDYP for sustained


  27.  It is not possible to make the same comparison for disabled people, and many disabled young people would participate in the New Deal for disabled people instead. For young women and young disabled people the comparison of likelihood of allocation to different options is particularly interesting:

Women and disabled young people and options[32]
Education and
Work experience
All participants who have left the Gateway for an

Female participants who have left the Gateway for an

Disabled participants who have left the Gateway for

an option

  28.  Young women are pretty much as likely to be referred to subsidised employment than the average, and less likely to be referred to work experience options. Young disabled people are rather less likely to be referred to subsidised employment, and rather more likely to be referred to training/education.

  29.  These figures suggest that the most important equal opportunities issue facing NDYP relates to black and ethnic minority young people, though problems around equal service delivery to young women and young disabled people, which should not be ignored.


  30.  The TUC is concerned about the New Deal sanctions regime, but before we discuss our concerns it is worth noting that the New Deal has also been quite popular with young people, and contrasts well with what went before.

  31.  A survey of 6,000 participants[33] found that nearly two thirds believed that the New Deal was very or fairly useful, and nearly half were completely or very satisfied with their PAs, but people from disadvantaged groups were least satisfied. Of those on an Option, 87 per cent were satisfied with it, with the employment option gaining the highest scores, and the Environmental Task Force the lowest.

  32.  This is a good result for a compulsory programme. By contrast, the pre-1997 compulsory programmes were rated very poorly by claimants, being given much worse scores than other ES programmes:

Perceived Effect of Schemes on Job Prospects[34]
Learning for Work2.46
Training for Work2.21
Community Action *2.20
Business Start Up1.96
Jobsearch Seminar1.94
Job Review Workshop1.87
Job Interview Guarantee1.86
Jobplan Workshop1.83
Work Trial *1.81
Restart Course1.66

NOTES: Italicised programmes were compulsory

Perceived effect: 1 = no difference, 4 = improved a lot

*small sample size

  33.  These results were supported by 1991 research, [35]which found that unemployed people believed that they were being exploited, not empowered, and that their chances of finding work were not being improved. Unemployed people unsurprisingly therefore had very little regard for these programmes, and the government had to intensify the use of sanctions to force people on to them: [36]

Claimants Sanctioned for Failing to Attend or Complete a Compulsory Programme: Numbers and Proportion of those Who Started
YearNumbers Proportion


  In 1993-94 there were two compulsory programmes—Jobplan Workshops and Restart courses. Workwise and 1-2-1 were piloted in 1994-95 and extended nationwide in 1995-96.

  34.  One of the changes to NDYP has been the introduction of a tougher sanction regime. Young people who break the New Deal's rules previously faced suspensions of benefits lasting for two weeks in the first instance, and four weeks for each succeeding instance. A third offence now brings a benefit sanction lasting up to 26 weeks—the toughest penalty ever in UK social security.

  35.  Even if one were to leave aside the effectiveness of sanctions per se, the TUC opposed this reform because we believe that it will have the worst impact on the most disadvantaged young people. A Government research study, [37]carried out before the establishment of the New Deal, found that the JSA sanctions were disproportionately likely to be applied to certain groups of claimants. These groups included ethnic minority claimants, people with caring responsibilities, and those with health problems. This research also emphasised the degree to which sanctions forced people into debt, and the fact that those affected were unclear about how long the sanctions would last and their rights to appeal or to claim hardship payments.

  36.  Not only are sanctions applied disproportionately. There is a risk of the penalties being used to force participants into NDYP's least popular and least effective options. We saw above that the work experience options are much less effective than other elements of the programme, and many participants are correspondingly reluctant to take part in them. [38]The Environmental Task Force accounts for 20 per cent of all option participants, [39]but 43 per cent of sanctions applied to people at the options stage. [40]

  37.  In areas where unemployment rises there is a risk that more unemployed young people will be directed to the less attractive work experience options, as subsidised and unsubsidised job vacancies become harder for Jobcentre Plus to obtain. If, at the same time, the number of sanctions were to rise there would be a serious risk that the New Deal could begin to attract the same opprobrium as the pre-1997 regime.


  38.  The TUC also has a number of proposals that relate to the other programmes:

    —  New Deal 25 Plus.

    —  New Deal for lone parents.

    —  New Deal for disabled people.

    —  New Deal 50 Plus.

    —  Employment Zones.

    —  Step Up.

New Deal 25 Plus

  39.  The New Deal 25 Plus (ND25+) is aimed at adults aged over 25 who have been on JSA for 18 of the last 21 months. Participation in ND25+ was originally voluntary, but it became compulsory in April 2001, when the programme was substantially reformed. The programme now resembles the 18-24 programme much more closely—a move welcomed by commentators who had worried that the bulk of New Deal resources were being devoted to young unemployed people, when older long-term unemployed people faced greater barriers to employment.

  40.  ND25+ was a priority for reform, as its performance was weak: just 17 per cent of those leaving the programme left for unsubsidised employment, compared with 55 per cent returning to IS or JSA. [41]Given the fact that the programme was then voluntary (which would mean that the most demotivated would be unlikely to participate) this was an astoundingly low figure. The reformed programme has already improved on this, with 30.9 per cent of leavers leaving for unsubsidised employment, and 17.9 per cent returning to JSA (though this last figure is likely to rise over time, as people who have spent longer participating come off.) [42]This improved performance is very welcome, and the 25+ programme looks to be in better shape for coping with increases in unemployment than it was a year ago. The TUC is particularly pleased to welcome these figures as we were cautious about welcoming the reforms: the improvement is better than we expected.

  41.  The pre-reform programme was rather better than NDYP at delivering equally to black and white participants, with black and ethnic minority participants 90-95 per cent as likely to get jobs as white participants. [43]It is early days at present, but the reformed programme's performance is similar, with unemployed people from ethnic minorities accounting for 11.9 per cent of all those who have left the programme, and 11.0 per cent of those who have moved into unsubsidised jobs. [44]This is better than the 18-24 programme, but any differential is a failure, and the Government should maintain its commitment to eliminating the race gap in all the New Deal programmes.

  42.  In the old New Deal 25 Plus, 15.7 per cent of those leaving the programme were women, and women accounted for 15.6 per cent of those leaving for unsubsidised employment. [45]In the reformed programme, women account for 18.1 per cent of leavers, but just 15.4 per cent of those leaving for unsubsidised jobs. [46]Of course it is too early to say whether a new pattern has been established, but these figures are worrying. If the reformed New Deal 25 Plus faces a more difficult future in some parts of the country it very important that unemployed women should not pay the price.

New Deal for lone parents

  43.  The New Deal for lone parents (NDLP) is a programme that illustrates how working age benefit claimants' rights and duties to participate in active labour market programmes are changing. The programme is particularly important, as the Government has made a public commitment to raising the employment rate of lone parents from 50 per cent to 70 per cent by the year 2010. This is an ambitious target, and one which would be more difficult to achieve if a slowdown hit job creation.

  44.  One little-noticed consequence of the importance granted to this programme (and of falling youth unemployment) is that NDLP is now the largest New Deal programme:

Participants in January 2002[47]
New Deal for lone parents 107,640
New Deal for Young People83,900
New Deal 25 Plus 64,800

  45.  An interesting April 2001 written answer shows that more than two fifths of those who decide to participate get jobs and a tenth move into education and training—but that only a quarter of those invited to an interview agree to participate: [48]

Proportion of
Proportion of
those attending
Proportion of
Initial invitation letters issued761,290
Initial interviews booked254,853 33.5%
Initial interviews attended212,490 27.9%
Number agreeing to participate188,500 24.8%88.7%
Number entering education/

20,4502.7%9.6% 10.8%
Jobs obtained77,140 10.1%36.3£40.9%
(Those obtained by part-time

workers increasing their hours)
(2,470)(0.3%)(1.2% (1.3%)

  46.  The Government take on this has been that the programme is a success, and that the main difficulty is in getting lone parents to the initial interview. So it should come as no surprise that lone parents claiming benefit are now required to attend a "work-focused interview" to discuss the advantages of employment.

  47.  NDLP's record on equal outcomes from black and ethnic minority participants is no better than NDYP's, and the results for disabled people and for men are worrying as well:

Proportion of NDLP leavers who leave IS for employment[50]
All participants53.8%
Disabled people 46.4%
Black and ethnic minority people40.4%

  48.  As with the other New Deal programmes, equal service delivery for all groups of participants is important. The distance between the results for all participants and for black participants is greater than in the 18-24 or 25+ programmes, and this suggests that the programme needs careful watching.

New Deal for disabled people

  49.  Until July 2001 the New Deal for disabled people (NDDP) was a pilot programme, but it is now being gradually extended nationally. NDDP has two components, the first is a "gateway interview" looking at the advantages of employment, the second, and more widely noticed, is the "Job Broker."

  50.  It is too early to assess the new national NDDP, but the lessons from the pilot programmes are mixed. On the positive side, more than 8,000 disabled people got jobs through these pilots—over half those leaving the programme left for jobs. On the other hand, these participants amounted to a very low proportion of those invited to join—about 2.2 per cent. [51]

  51.  If, as we expect, the impact of the slowdown is limited to certain areas, then we can expect the problems encountered in NDDP's pilot phase to be repeated in those areas. Many disabled people who could well be capable of returning to employment write themselves off because they make a downbeat (but often realistic) assessment of the opportunities for them in their local labour market. This is a serious problem for the Government, as Incapacity Benefit receipt (control of which is a major NDDP objective) tends to be concentrated in areas dependant on manufacturing—precisely the areas most likely to be affected.

New Deal 50 Plus

  52.  The New Deal 50 Plus (ND50+) is a voluntary programme for people aged 50 and over, who are not in employment and have been claiming a qualifying benefit for at least six months.

  53.  Overall, the programme has been a success. Of those who decided, after their initial meeting, to enter the programme, more than 70 per cent got jobs, and the most comprehensive evaluation concluded that ND50+ has "been successful in moving a high proportion of clients into employment. Moreover, drop out from employment during the period of the Employment Credit has been modest. Sustained employment outcomes look to be significant." [52]

  54.  The main difficulty has been that the programme has not attracted the people it was primarily designed to reach. The Government wants to cut the growing number of people who leave the labour market before normal retirement date, via Incapacity Benefit—just over half of all IB claimants are aged over 50. [53]Among working-age benefit claimants over 50, there are 7.8 receiving IB for every one receiving JSA. But 90 per cent of participants have been people receiving JSA, not IB. [54]

  55.  The Government has responded with the establishment of a £1 million marketing budget for ND50+, and extra funds for personal advisers to help with return to work expenses. This is very worthwhile, but it is hard to avoid the conclusion that, in coping with an economic slowdown, ND50+ will face very similar problems to New Deal for disabled people.

Employment Zones

  56.  Employment Zones are a welfare-to-work initiative, established in parts of the country with persistently high levels of long-term unemployment. Employment Zones a response to the fact that large sums of public money are spent the regeneration of these areas, and on training and benefits for the people who live in them. EZs are an attempt to promote a more flexible and imaginative use of these funds by targeting them directly on individuals. Each participant has a personal job account, combining resources from benefits, training and other programmes, and EZ providers have a great deal of discretion to use this account to fund whatever they think will help the individual client to get a job.

  57.  EZs are structured in a different way from the New Deal programmes, which makes comparisons complicated, but possible if we look at "cohorts"—groups of participants who all joined at the same time. For EZs we only have data for one cohort, the people who joined between April 2000 and March 2001. By the end of 2001 31 per cent of this group had been in employment for 13 weeks, and another 4 per cent for less than 13 weeks:

Step 1/2Step 3 Sustained employmentLeft for other reasons
16%4%31% 49%

  58.  If we compare this with a similar NDYP cohort (people who had their first interview in January 2001), we get a similar performance by the end of last year:

Options Follow-throughUnsubsidised job Left for other reasons
3%8%8% 36%46%

  59.  The table may under-state EZ performance, as the "other reasons" group includes people who found employment, but left the EZ before being in the job for 13 weeks. The Departmental press release for the statistics says that, if we add in these people, then 39 per cent of this cohort got jobs, 80 per cent sustained for at least 13 weeks.

  60.  The figures also show that EZs are doing well on equal opportunities criteria. By the end of 2001:

    —  85 per cent of all entrants were male, and 72 per cent white.

    —  85 per cent of those getting sustained jobs were male, and 71 per cent were white.

  61.  To the extent that we can judge EZs' performance so far, they seem to be doing well. What is more, they are sited in some of the areas where any slowdown is most likely to have an effect. The main problem is that they cover fairly small geographical areas, which means that many unemployed people who could benefit from their assistance will lose out.

Step Up

  62.  The Government's active labour market measures build on the foundation of economic success and rising employment. These circumstances favour a policy that aims to help unemployed people to take advantage of the jobs generated by the open economy. This is more difficult during a slowdown, and in areas where unemployment stays high even though other parts of the country are in the recovery phase of the economic cycle. In times and places where this happens, programmes that help people compete for jobs that don't exist are very likely to become discredited. That is why, since 1999, the TUC has lobbied for a time-limited and geographically-targeted job creation supplement to the New Deal in high unemployment localities.

  63.  Job creation is not a panacea, and it is important to bear in mind the fact that there are very real problems associated with badly-designed job creation:

    —  Participants in job creation programmes have little time to look for other jobs, and their qualifications, skills and experience soon become outdated.

      —  Where programmes are time-limited, most participants return to unemployment when their time is up.

      —  Where programmes are not time-limited, participants stay in them indefinitely (even when economic conditions improve, and they might otherwise have been able to get a job in the open labour market.)

    —  A work programme offering similar pay to that available in the open labour market would be very expensive.

      —  Low-paid jobs, on the other hand, threaten the pay of existing workers.

      —  This is why job programmes have often become "make work"—the only tasks which avoid both problems.

    —  Put both these problems together and you get the worst possible outcome for job creation programmes—people unable to escape from low-paid work on schemes no-one respects.

  64.  Despite these problems the Organisation for Economic Co-operation and Development has suggested, [55]that one of the lessons to be learned from studying active labour market programmes around the world is that work programmes may be useful in keeping unemployed people in contact with the labour market. What is particularly relevant to the current inquiry is that the OECD argue that this is especially useful when vacancies are scarce. Even then, however, it is important for Governments to ensure that schemes are of limited duration and do not "become a disguised form of permanent employment."

  65.  If we want to avoid this danger we have to make sure that one of the prime objectives of any programme is to make participants attractive to employers in the open labour market. Any programme should aim to move participants on as soon as the economy is again generating jobs locally, and should set aside time and support for job-search even while participants are working in the programme.

  66.  A job creation programme may well be ideally placed to succeed in this task of marketing participants as potential recruits. A major study[56] of employers' attitudes to unemployed people, carried out in 1996, found that employers do not consciously discriminate against unemployed job applicants, but they do take unemployment into account. In particular, longer and repeated spells of unemployment were taken particularly seriously by most recruiters: 56 per cent believed that skills deteriorated during unemployment, and 54 per cent believed that the same happened to work attitudes.

  67.  What this means is that the people we want to help are most likely to succeed if they apply for jobs as current employees, rather than unemployed people. Employers are particularly unimpressed by "make work" schemes, and do not regard participants in such schemes as current employees. This means that it is really important that any job creation programme should offer real jobs—and the key component of a real job, the TUC has always pointed out, is that it pays real wages, not "benefit plus".

  68.  Last Autumn the Government announced Step Up, a £40 million pilot programme with many of the features the TUC has advocated for three years:

    —  Participation will be time-limited.

    —  The programme will run in areas with high levels of long term unemployment.

    —  Participants will be paid the national minimum wage, not "benefit plus."

    —  Participants will have access to jobsearch support, including a personal adviser.

  69.  Unsurprisingly, the TUC has given Step Up a very strong welcome. In our submission to the Chancellor for this year's Budget we called for it to be introduced on a much bigger scale. We called for extra funding to double the original intention of providing for 5,000 jobs, and for Step Up also to be offered (on a voluntary basis) to non-JSA claimants who have participated in other New Deal programmes. If there is an economic slowdown we would like to see this excellent new initiative in a position to help even more of the victims.


Co-ordination of employment and industrial policies

  70.  The initial part of this submission highlighted the fact that the TUC believes that in the short term the key employment challenges will be sectoral and regional rather than national, in particular the continuing big job losses from the manufacturing sector and the impact of this on regional divides and local economies. The TUC believes that these labour market developments requires even greater efforts by the Government to develop regional and local approaches within its overall national employment strategy.

  71.  In addition, it is increasingly clear that recent policy measures designed to drive forward the Government's national productivity strategy and industrial policy at the regional and sub-regional level will require a more explicit coordination of employment and industrial policy strategies at this geographical level. The Government has made it clear that the "RDAs are the key agents in driving forward this new regional industrial policy" and also appear open to the question of whether they (and other regional agencies) "need further flexibilities or institutional changes to deliver that agenda"[57].

  72.  In its Pre-Budget Submission the TUC strongly welcomed the emphasis in the Pre-Budget Report on the regional dimension to delivering higher productivity and argued that the UK needs to create coherent regional networks, with RDAs taking a strategic lead on the implementation of economic and industrial policy. We also recommended that in the forthcoming Budget the Chancellor should set aside over £500 million to support industry and the regions in 2002 and beyond, including a significant increase in funding for the regional development agencies (RDAs) to maintain UK capacity in viable manufacturing.

  73.  There is also increasing evidence that one of the key factors behind the UK's inability to improve its productivity levels and to cope with industrial change is the lack of a coordinated approach at the regional level and the disconnection between employment and industrial policies at both the national and regional levels. According to a report by the Industrial Society the key policy foundations required to address this failing is to place "employment policy front and centre within a UK productivity strategy" and to ensure that this strategy is coordinated across a wide range of policy areas and facilitated by developing dynamic networks of the appropriate institutions at the regional level. [58]

  74.  The TUC believes that the remit set out for the RDAs in the recent Treasury paper, in addition to the increase in funding and operational flexibility that they have received, offers an opportunity to coordinate employment and industrial policies at the regional level and also to develop a more collaborative approach between the diverse range of regional agencies. Over the past year there have been some significant developments in establishing a more coordinated approach between both statutory and non-statutory agencies with responsibility for some aspect of either economic or employment development at both the regional and sub-regional level. The main agencies involved in this policy area are the RDAs, local Jobcentre Plus offices, local Learning & Skills Councils, Local Authorities, Government Offices and representative bodies of both trade unions and employers.

  75.  One of the new initiatives that the TUC especially welcomes is the development of Frameworks for Regional Employment and Skills Action (FRESAs), which have been coordinated by the RDAs in association with all the relevant agencies. The PIU report on workforce development is right when it states that "at regional level workforce development should be linked to economic planning" and that a possible vehicle for this is the FRESA model. [59]In addition, the TUC agrees with the thrust of the argument in the PIU report that RDAs are the appropriate agencies to take the lead in coordinating this strategy.

  76.  The PIU report says that "RDAs are responsible for economic planning at regional level. Workforce development is an important component of economic planning. The RDAs will therefore be responsible for collaborating with partners, in particular the local LSCs, to ensure that the workforce development and skills agenda is appropriately reflected in economic planning, and is then successfully delivered in their regions." Of course, at the sub-regional level the PIU report quite rightly says that LSCs would be responsible for the planning and delivery of the workforce development agenda.

  77.  The TUC believes FRESAs are a useful model for giving RDAs a higher profile in other parts of economic policy that would benefit from coordinating employment and productivity policies at the regional level and also from facilitating collaboration between all the appropriate parties.

  78.  Another important development over the past year has been the creation of Local Strategic Partnerships with a remit to deliver the Government's Neighbourhood Renewal Implementation Strategy in the most deprived communities in the country. The DWP has a clear role in delivering certain "employment objectives" under this initiative[60] and it is working closely with a number of other agencies at the regional level to achieve its objectives.

  79.  The TUC believes that collaborative approaches of this form at the regional level, with an emphasis on coordinating employment and industrial strategies, is an approach that should be developed further in the years to come. There must also be an emphasis on including the social partners in these networks in order to build on recent initiatives at the national level such as the joint productivity initiative undertaken by the TUC and CBI. In addition, the TUC believes that there is a case for further strengthening the role of the RDAs in facilitating a partnership approach of this kind at the regional level and meshing together the various policy strands and initiatives in order to set them within a wider economic strategy for the regions.

Co-ordinating employment programmes

  80.  In the rest of the submission we focus on the evidence about the regional and local impact of particular employment programmes that are the responsibility of DWP and also what can be done to ensure that they better meet the needs of different groups of unemployed people. However, another key theme is the need for linkages between these programmes and related initiatives that are the direct responsibility of different government departments.

  81.  The TUC believes that there is, more than ever, a pressing need for more "joined up Government" when it comes to the vast range of government initiatives designed to improve the economies and labour markets of the UK regions. For example, it is not clear to us that the FRESAs are adequately influencing the direction of skills training of the New Deals in each region in order to build a highly productive workforce of the future.

  82.  For example, the emphasis now on getting New Deal participants into employment as quickly as possible may, in some cases, be contradicting the longer-term objectives of the FRESAs to build a highly skilled workforce. In addition, there often appears to be little linkage between programmes run by different departments aimed at fairly similar client groups, a case in point being the New Deal for Young People (responsibility of DWP and Jobcentre Plus) and the Modern Apprenticeship (MA) programme (responsibility of DfES, LSC and local LSCs).

  83.  While some New Deal participants may ultimately find themselves taking up a place on a MA programme if they get a long-term job with an employer who is keen on using this training provision, there does not appear to be any institutional framework that promotes such transitions. At the same time the DfES is currently implementing a strategy to expand enormously the number of Modern Apprentices over the next five years and a key concern is persuading enough school leavers to apply for an MA place. One obvious solution would be to divert New Deal participants onto this form of provision as this would do much more to improve their long-term employability, especially if they left school with few qualifications. Further points about the regional and local impact of the New Deal are covered below.

Making employment programmes more regionally focused

  84.  There is little doubt that there has been some significant progress in making employment programmes more focused on the needs of regional and local labour markets over the past year and that this trend is set to continue with the roll-out of the Neighbourhood Renewal Strategy. More targeted and flexible approaches have been enhanced by the extension of initiatives such as Action Teams for Jobs. The TUC is very supportive of this and would like the Government to build on this approach it in its future development of active labour market provision.

  85.  The TUC has also long believed that those parts of the country most adversely affected by the long-term decline in manufacturing and with continuing high levels of unemployment and economic inactivity, require even greater local flexibilities to address the "jobs gap" in their labour markets. In addition to the warm welcome we have given to Step Up, we have strongly welcomed the additional resources allocated to the Rapid Response Service in the Pre-Budget Report and also the decision to merge the Job Transition Service and the Rapid Response Fund into this new unified service.

  86.  The TUC also believes that it is important that this service adopts a coordinated approach and involves all the local agencies in any strategy to deal with redundancies. We are glad to say that this appears to be the clear intent of current developments under way and that clear linkages are also being made between the RRS and appropriate welfare-to-work initiatives. For example, the DWP contribution to meeting the objectives of the Neighbourhood Renewal programme states that "where the impact of a redundancy on a community is severe . . . the RRS is increasingly forging links with other programmes such as the New Deal and Actions Teams".[61] The union movement also has a leading role to play in this process as it often has advance warning of redundancies and will be able to trigger action by the RRS at an early stage.

15   Budgeted spending for 2001-04: Back

16   High deadweight levels are a common problem in active labour market policy, and have afflicted other countries' programmes, and those introduced in Britain before 1997. The OECD's assessment of subsidy programmes found that they "have large deadweight, displacement and substitution effects and hence small net employment gains," with the schemes in Australia, Belgium, Ireland and the Netherlands achieving levels off additionality of about 10 per cent. (Enhancing the Effectiveness of Active Labour Market Policies, OECD, 1997, p 11.) A 1994 evaluation of Workstart, a subsidy programme similar to the New Deal employment option, found that just 17 per cent of all jobs registered under the programme were generated as a direct result of the subsidy. (Commons Hansard, 13-12-95, col 695.) Back

17   Does welfare-to-work policy increase employment?: Evidence from the UK New Deal for Young People, Rebecca Riley & Garry Young, National Institute for Economic and Social Research, Discussion Paper 183, August 2001, p 30. Back

18   Keeping Track of Welfare Reform: The New Deal Programmes, Jane Millar, Joseph Rowntree Foundation, 2000, p v. Back

19   Calculating from table 11 of the April edition of the New Deal statistical first release shows that 39.7 per cent of the cumulative total of leavers left for jobs. Back

20   Working Brief, Unemployment Unit, Feb 1996, p 20. Figures for Workwise, Jobplan and Restart Courses are for April-September 1995, for Restart Interviews figure is for 1995-96. Back

21   Taken from table 11 of the April edition of the New Deal statistical first releaseBack

22   Calculated from table 11. Back

23   Calculated from table 2. Back

24   New Deal for Young People and long-term Unemployed: Survey of Employers, Jon Hales et al, National Centre for Social Research, ES Report 58, September 2000, based on a survey of 3,209 employers. Back

25   Op cit, table 5.7. Back

26   Op cit, tables 8.9 and 10. Some employers listed more than one reason. Back

27   Calculated from tables 1 and 12 of the April edition of the New Deal statistical first releaseBack

28   Calculated from table 4 of the April edition of the New Deal statistical first release Back

29   Table 12. Back

30   DfEE press release 182/00, 27 April 2000. Back

31   Calculated from tables 1 and 12 of the April edition of the New Deal statistical first releaseBack

32   Calculated from table 4 of the April edition of the New Deal statistical first releaseBack

33   National Survey of Participants, A Bryson, G Knight and M White, PSI, ES report ESR44, March 2000. Back

34   Employment Service 1994 National Customer Satisfaction Survey, quoted in Desperately Seeking A Job, Iain Murray, Unemployment Unit, 1995, p 41. Back

35   The Actively Seeking Work Rule: Awareness, Understanding and Impact, A Thomas and J Ritchie, SCPR, 1991. Back

36   Working Brief, Unemployment Unit, August/September 1996, p 20. Back

37   JSA Evaluation: Qualitative Research on Disallowed and Disqualified Claimants, J Vincent and B Dobson, DfEE Research report 15, 1997. Back

38   The Princes Trust, in What Works: young people and employers on the New Deal, 1999, found that "many of those on options other than the employment option, including the full-time education and training option, would have preferred a subsidised job and felt that their choices had been constrained". The voluntary sector and Environmental Taskforce options were "often seen as `make work', offering short-term jobs with poor quality training and few long-term prospects." Back

39   Calculated from table 2. Back

40   Calculated from table on Analysis of Sector Decision Making, quarter ending 30 June 2001, Employment Service, p 3. Back

41   Calculated from ONS press release, 28 March 2002, table LTU. Back

42   Calculated from ONS press release, 28 March 2002, table LTUE5. Back

43   Reported in TUC New Deal briefings, passim. Back

44   Calculated from ONS press release, 28 March 2002, tables LTUE1 and 6. Back

45   Calculated from ONS press release, 28 Feb 2002, tables LTU1 and 6. Back

46   Calculated from ONS press release, 28 March 2002, tables LTUE1 and 6. Back

47   Taken from the latest DWP monitoring data for each programme: NDLP-First Release 4 April; NDYP and 25+-First Release 28 March. Back

48   Commons Hansard, 9 April 2001, Column, 489W. Back

49   Calculated by the TUC. Back

50   Calculated from the 4 April 2002 edition of the New Deal statistical first release for NDLP (ONS) table 4. Back

51   The assessment of the personal adviser pilots found that, between September 1998 and November 2000, 275,200 people were sent an invitation letter. 18,166 disabled people attended an initial interview, 51 per cent of whom had been referred by other organisations, and 49 per cent were responding to the letter. 69 per cent of those attending an interview volunteered to join the programme. Evaluation of the New Deal for Disabled People Personal Adviser Service pilot, J Loumidis et al, 2001, DSS research report 144, p 81. Back

52   Evaluation of the New Deal 50plus: Summary Report, John Atkinson, IES for ES, report ESR103, December 2001, p 39. Back

53   Calculated from table A7 of Incapacity Benefit and Severe Disablement Allowance Quarterly Summary Statistics, DWP, May 2001. Back

54   Calculated from table 11 of Labour Market Statistics, ONS, October 2001 and table A7 of Incapacity Benefit and Severe Disablement Allowance Quarterly Summary Statistics, DWP, May 2001. Back

55   Enhancing the Effectiveness of Active Labour Market Programmes, OECD, 1996. Back

56   Employers, Recruitment and the Unemployed, J Atkinson, L Giles and N Meager, IES, 1996. Back

57   Productivity in the UK. No 3-the regional dimension, HM Treasury and DTI, November 2001. Back

58   New Jerusalem: productivity, wealth and the UK economy, Knell, J and Harding, R Industrial Society, 2001. Back

59   In Demand: adult skills for the 21st Century, PIU, 2001. Back

60   Neighbourhood Renewal: increasing employment amongst deprived areas and groups-implementation strategy, DWP, December 2001. Back

61   Neighbourhood Renewal: increasing employment amongst deprived areas and groups-implementation strategy, DWP, December 2001. Back

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