The New Deals have helped over
600,000 people into work.
52. The overall scale of New Deal achievement since
January 1998 is impressive in reducing youth unemployment. Over
three quarters of a million young people aged 18-24 have entered
the programme with 362,000 known to have entered work as a result.
The National Audit Office Report of 28 February 2002 pointed out
that the majority of those aged 18-24 who found work through NDYP
would have done so anyway and the overall tendency of youth employment
had been steadily to decrease over many years. However, we are
convinced that most will have been placed into more sustained
employment than might otherwise occur because the job matching
process will have been more exacting whilst the skills and job-readiness
of New Deal job entrants will have been greater. As the NAO report
also says, other less tangible benefits such as employability,
reduced social exclusion and the estimated improvement to the
economy as a whole have not been measured but are considered to
have had a positive effect.
Just over 65,000 people aged 25+ have entered jobs whilst another
157,000 have been helped into work by the New Deal for Lone Parents.
The latest figures available also show that the New Deal for Disabled
People (NDDP) has helped 8,000 into work with almost 20,000 gaining
jobs through Employment Zones and 15,000 through Action Teams.
As a result, 627,000 people are known to have entered employment
through these programmes.
53. We have reviewed the macroeconomic evidence
about the effects of New Deal on the labour market since 1998.
Whilst it was not the Government's policy intention for New Deal
to create jobs, the National Institute for Economic and Social
Research (NIESR) estimated that the New Deal for Young People
led to a reduction in longterm youth unemployment (more
than six months' duration) of 45,000. Long term youth unemployment
would have been almost twice as high in March 2000 without NDYP.
NIESR estimated that total youth unemployment was reduced by approximately
35,000 over the same period. This took account of some increased
inflows into shortterm unemployment following NDYP. NIESR
also estimated that, over the first two years of the programme,
60,000 more young people moved into jobs than would have been
the case without NDYP.
Furthermore, the NIESR found little evidence of job substitution
with other age groups. In conclusion the NIESR found that the
New Deal for Young People increased the effective labour supply,
reduced benefit expenditure and increased tax revenue with the
result that national income was around £500 million per annum
54. There are also success stories that are yet to
be revealed. Almost 200,000 young people have left New Deal but
their destinations are unknown although evidence strongly indicates
that about half of these have also entered work. We know that
about 10% of New Deal leavers have been placed on to a benefit
that is more appropriate than JSA and others have gone into full
time further and higher education.
55. However, we are concerned that almost 40% of
18-24 year old New Deal leavers end up back on JSA within 6 months
and this is reflected in the fact that one in three currently
joining New Deal are not doing so for the first time. Since 1998,
nearly 80,000 of the known job entrants started jobs that were
not sustained beyond 13 weeks duration. Many of these find themselves
back on New Deal as re-entrants. Using the most demanding definition
of sustained, unsubsidised jobs, where the young person has not
returned to benefit within three months, 262,680 young people
are known to have left New Deal for sustained, unsubsidised jobs.
We believe that the most rigorous definition of New Deal achievement
should measure sustained job entry as a proportion of those leaving
New Deal. On this basis, New Deal has a job entry rate of 40%
nationally - with some notable performance variations between
different geographical areas. Although these job entry rates are
significantly better than any other equivalent previous labour
market programme, there is a consensus that New Deal can and should
deliver higher performance. This can be achieved in a number of
ways, particularly recognising that the client groups are changing
56. We recommend that the emphasis of the New
Deal should shift from the younger JSA claimant population to
older JSA recipients, those facing acute barriers to work, those
on other benefits, and those who are economically inactive.
57. With JSA claimant numbers at an historically
low level, the Employment Green paper heralded a shift in emphasis
from JSA claimants towards those on Income Support (IS) and Incapacity
Benefit (IB). JSA claimants now constitute less than one million
of the five million working age adults receiving benefits.
58. The latest comparable data (the 3 months to November
2001, GB) show that the total number of JSA claimants had fallen
to 853,000 whilst the number of lone parents claiming Income Support
was 845,000. Both these population groups had declined since May
1997, with JSA claimants down by 674,000 (-43%) and lone parents
down by 122,000 (-12%). By contrast the numbers receiving a sickness
or disability related benefit have risen by 131,000 (+5%) over
the same period and now total 2,733,000.
59. Information from the Labour Force Survey indicates
that almost 38% of non-employed people with a work-related disability
or health condition want to work; amongst Lone Parents, it is
estimated that 55% want to work. This means that at least 1.6
million of these economically inactive claimants want to work,
nearly all of whom will have been detached from the labour market
for a long period. The DWP in its evidence stressed that, whilst
the long term unemployed comprise only 20% of the JSA population,
80% of lone parents, sick and disabled claimants have been receiving
benefit for more than 12 months.
|Employment rates of disadvantaged groups compared with others|
(LFS, Winter 2000-2001, not seasonally adjusted)
|Disadvantaged group||Group employment rate
||% not working who want to work
||Number who want to work in group
|| ||Employment rate not in disadvantaged group
||Not ethnic minority||75.6%
||All working age||74.7%
60. The number of 18 to 24 year olds unemployed for 6 months or
more has declined by 75% to stand at 41,000, whilst long term
unemployment amongst older men has declined by 50% and currently
stands at 71,000. Part of this reduction could be explained by
claimants transferring to other benefits - such as IB - rather
than entering employment.
61. In evidence, Working Links reported from experience that,
during economic downturns, "there almost always remains a
steady supply of vacancies". Although recently laid-off applicants
have a competitive advantage over longer term unemployed job seekers,
more severely disadvantaged applicants "can win through with
the right support."
To avoid further growth in the "population of severely deprived
individuals, families and communities, we have to ensure greater
equality of opportunity in the labour market".
We endorse this view and believe that the Government should
prioritise its support for more disadvantaged jobseekers, particularly
those who have been in receipt of benefits that previously did
not qualify them to receive a full range of labour market services.
More Jobcentre Plus clients face multiple barriers to work
compared with former ES client groups.
62. The New Deal's success in helping younger JSA claimants into
work combined with the nature of Jobcentre Plus's new client groups,
means that services, in future, will inevitably need to accommodate
the range of multiple barriers faced by these claimants. The DWP
told us that it remains firmly "focussed on outcomes"
notably job entry and a new emphasis upon sustained employment.
This is welcome. However, Jobcentre Plus needs to strike a careful
balance between its intensive job entry services for JSA claimants
and others who are closer to the labour market and the longer
term work required to help people who face multiple and complex
barriers to employment.
63. Jobcentre Plus is already testing a range of new interventions
designed to help people facing the most acute barriers to employment
and the Committee welcomes these developments. One example is
"StepUp". This two-year £40 million initiative
builds on the 'intermediate labour market' (ILM) approach and
provides a guaranteed job to those clients who have not been able
to find work 6 months after completing NDYP or the New Deal 25+
Intensive Activity Period. The pilot project is evaluating a new
way to help the most disadvantaged back into the labour market
which the previous Secretary of State promised would "guarantee
those who qualify a full-time job, lasting up to a year, and paid
at the national minimum wage. They will have the same employment
rights, and they will be entitled to the same in-work benefits,
as anyone else".
64. Eligibility for StepUp is restricted to JSA claimants although
the original DWP announcement had indicated that 'lone parents,
men over 50 and people on sickness and disability benefits' could
benefit too. The Committee believes that the StepUp approach is
a good way to help clients who face significant barriers - regardless
of their claimant category. We recommend the StepUp approach
should be extended beyond the original pilot areas in order to
accommodate a wider group of clients.
65. The Committee recognises that offering a 'guarantee' is a
significant step for the Government to take because such an offer
potentially might not be met or might involve long-term financial
commitments. We commend the Government's confidence in the
underlying strength of the labour market and its relationship
with employers prepared to engage in the programme.
66. StepUp is only one model of "transitional employment"
and the Committee heard in the United States from a wide range
of organisations delivering innovative and effective services
to jobseekers. These offered carefully tailored personal services
to each participant who was then placed either into an existing
work site or into employment with a specially created project.
67. We also heard evidence from UK based providers of Intermediate
Labour Market (ILM) programmes.
These are a tried and tested way of improving employability that
gives economically disadvantaged people the time, support and
wages to get off benefits and into work. ILMs can help to create
real waged jobs in areas that have few opportunities, especially
where structural change has meant a severe loss of employment
from many primary industries. They also help to regenerate communities
and provide additional public services, particularly in environmental
68. The Committee was impressed by the creative way in which many
of these projects or job placement services create practical "joined
up" solutions to local problems by bringing together local
partners and diverse funding streams with jobless individuals
and communities that need work. In stark contrast to many bureaucratic
efforts to create policy coherence and "joined-up" delivery,
these organisations have found practical mechanisms to integrate
many different government goals, often by finding ways to circumvent
highly prescriptive funding rules, targets and beneficiary groups.
69. These solutions are effective because they provide pathways
to work through bottom-up, community-based activity and nurture
social entrepreneurs who are finding home-grown ways of restoring
vitality to communities. Whilst many of these organisations concentrated
on community based jobs, all aimed to place their successful employees
into jobs in the open labour market by enhancing their ultimate
prospects of obtaining a job.
70. We do not believe that these forms of innovative transitional
employment can be fostered through specific Government programmes.
Instead they can only flourish by allowing local organisations
imaginatively to design solutions matched to problems that are
understood by local managers and community leaders. Jobcentre
Plus needs to offer flexible funding and, whilst measuring outcome
as a key indicator of success and the basis for continued funding,
it must avoid setting rules that prescribe the processes that
these providers have to follow.
71. We recommend that the Department for Work and Pensions
actively explores routes to create flexibility and encourage these
innovative Intermediate Labour Market solutions to unemployment
and economic inactivity amongst the hardest to place, like lone
parents, longer term unemployed, people with health problems or
Outreach for ethnic minorities
72. Outlined in the April 2001 Green Paper, Jobcentre Plus has
agreed contracts with local organisations, as part of a £15m
two-year programme announced in July 2002 to engage actively with
jobless people in the five urban areas where three quarters of
Britain's ethnic minority people live. 
The contractors included small, locally-based organisations which
have an established or potential rapport with specific groups
of disadvantaged ethnic minority people. The projects will work
by attracting people to mainstream services such as the New Deal,
by improving links between communities and employers or by providing
specialist training where necessary. There are 52 contracts with
organisations in the five urban areas in which the ethnic minority
outreach project will operate. Specific areas within the five
urban areas are: Birmingham, Black Country North, Black Country
South, Bolton, Bradford, Calderdale & Kirklees, Coventry,
Edgware, Lambeth, Leaside, Leicestershire, Lewisham, Manchester
North, Manchester South, Oldham & Rochdale, Thames Gateway.
73. We believe it is essential that the 17% gap
between the employment rates of ethnic minorities and the general
working age population be narrowed. Whilst we commend the active
approach being taken by Jobcentre Plus, we recognise that the
pace of improvement until now has been relatively slow and highly
varied between different parts of the country. Recognising that
Jobcentre Plus is aiming to improve performance in 60 areas of
deprivation and low labour market participation by ethnic minorities,
we nevertheless do not believe that this will necessarily mean
better outcomes for ethnic minorities. We recommend that Jobcentre
Plus urgently reports on the effectiveness of its ethnic minority
outreach projects and identifies further ways in which its programmes
can be targeted to achieve parity faster. We particularly recommend
that Jobcentre Plus places a greater emphasis on self-employment
entry in conjunction with black and minority ethnic business development
74. The £40m initiative called "Progress2Work"
was announced in the 2001 Budget and aims to provide help for
those whose misuse of drugs puts them at a disadvantage in the
labour market. It will support them into and through types of
existing employment interventions. Co-ordinators will agree local
employment-focussed plans between Jobcentre Plus and key agencies,
especially Drug Action Teams, to ensure that all organisations
with an interest work together as productively as possible to
improve the capacity of Jobcentre Plus front-line staff to help
those with drug misuse problems and to provide additional specialist
help for those more seriously affected by drugs misuse.
75. We also believe that additional support should be made
available by Jobcentre Plus to help further groups of working-age
claimants to access specialist services. These need to address
disadvantages such as a history of offending or anti-social behaviour;
alcohol dependency; patterns of homelessness or insecure housing
tenure; and domestic or family stress. Much of the best expertise
in these areas currently lies outside Jobcentre Plus. We believe
that Jobcentre Plus should concentrate on its own strengths and
rely on expert, independent, specialist organisations in the voluntary
and private sectors for the delivery of the many services needed
by these clients who face significant barriers to work. From the
evidence of Action Teams, Employment Zones and our discussions
with providers in the UK and USA, we conclude that services to
these clients - and their ultimate entry into the labour market
- can be significantly improved by funding private and voluntary
sector providers to undertake these tasks. We believe that the
contractual architecture inherited by Jobcentre Plus needs to
be overhauled so that these private and voluntary organisations
are not simply contracted to deliver small bespoke "add-on"
packages of help. Instead, their central role should be recognised,
they should be given flexible funding and a broad remit of devolved
service responsibility, matched by a transparent framework of
New Deal programmes are insufficiently flexible to "mix
and match elements" to arrive at a tailored package for each
76. The DWP told us that it continually seeks to improve its established
labour market programmes. The New Deal for 25+ was re-designed
from April 2001 whilst the New Deal for those aged 18-24 has seen
greater flexibility introduced for its personal advisers and the
Department has "reduced the programme's administrative complexity".
77. However, the Committee heard compelling evidence about the
need to change the prescriptive, fixed design elements of programmes,
such as the four options in the New Deal for young people.
78. Mr Andy Westwood and Mr Max Nathan spoke about the need for
flexibility to suit a locality's requirements and to offer a service
personalised to an individual's needs.
Groundwork, Shaw Trust and Working Links emphasised this.
79. Mr Keith Faulkner argued that in New Deal "there is still
excessive definition of how the funding will be directed ... and
the processes that clients must go through".
He concluded that this "restricts the ability of the people
delivering to do what we would really like to do with those clients".
During the Committee's visit to the USA, the Committee was struck
by the flexible design of programmes that packaged together elements
of training, work placement or volunteering along with personal
support and development. Mr Leigh Lewis described the Tailored
Pathway pilots in 17 areas where a more flexible mix of help is
offered to participants after a spell of Gateway preparation.
This enables advisers to design a bespoke package of help that
draws on items from the menu of Jobcentre Plus services. We
support this approach and recommend that the current pilot schemes
should form part of a national roll-out.
80. We also understand that flexibility has recently been introduced
into the subsidised employment option whereby training no longer
needs to lead to a recognised qualification. Instead employers
can now offer in-house or less formal training as long as it is
in accordance with a written Individual Training Plan agreed between
the New Deal for Young People client, employer and DWP Personal
Adviser who continues to monitor the arrangement. This had been
piloted in a number of areas and has now been extended nationally.
81. We received evidence that competitive pressures are leading
to demand for higher levels of employability in entry-level positions.
To improve tenure and support progression, training also needs
to improve the capabilities and performance of individuals whilst
in work so that they can acquire skills that are portable and
which give them the scope to increase earnings - often by moving
from one employer to another.
82. Training in the New Deal needs to be delivered with flexibility
to ensure that it is sufficiently work-focussed, brings participants
up to employer standards and is relevant to local labour market
needs. Government funded training should not substitute for skills
development that an employer is already prepared to pay for and
which is specific to that firm. Instead, Jobcentre Plus should
aim to develop more portable skills ("soft skills")
that are specific to the individual and will improve their progression
83. The Minister also accepted, when asked if there should not
be one overall, streamlined New Deal programme, that "there
may be a case for drawing some themes together".
However, he emphasised the Government's approach: that different
types of problem required a specific type of programme solution.
He argued that "the problems of a lone parent will be different
from those of a recovering drug addict or an ex-offender".
This begs the question that the same individuals may well have
a combination of different barriers to overcome. Mr Richardson
also insisted that a dividing line had to exist between two groups
of claimants - those on JSA who are subject to work conditionality
rules and those who are not. He assured the Committee that "there
is quite a lot of scope for streamlining and there will be some
advice reaching the Minister's desk very soon".
84. We hope that this advice to the Minister will be radical.
We recommend that the Government considers removing the different
options and pilot programmes within the various New Deals, and
instead allow advisers much more flexibility to design support
around the needs of the individual. In doing so, they should draw
on the more devolved models evident in our evidence on Employment
Zones, Action Teams and the US, as described below.
NAO report "The New Deal for Young People, Session 2001-2002,
HC 639 paras 13 & 18. Back
and "Evaluation of Action Teams for Jobs", DWP Working
Age Evaluation Division Report, WAE 114. Back
Riley, R. and Young, G. (2000) The New Deal for Young People:
Implications for Employment and the Public Finances, Research
and Development Report ESR62, Sheffield: Employment Service. Back
Cross Benefit Analysis, DWP. Back
Ev 149, para 21. Back
Ev 43, para 10. Back
Official Report, 28 Nov 2001, col. 974. Back
Q. 125. Back
DWP Press Notice, 4 July 2002: "Government reaches out to
'wasted talent' in Britain's ethnic minority communities". Back
Labour Force Survey, Winter, 2001-2. Back
DWP, Ev 150, para 28. Back
Q. 42. Back
Q. 106. Back
Q. 332. Back
See Chartered Institute of Personnel and Development, Ev 177,
paras 33 and 34. Back
See paras 106 and 107. Back
Q. 336. Back
Q. 336. Back
See paras 148 to 154. Back