NEW DEAL: AN EVALUATION
Evaluating New Deal
14. It is widely agreed that the evaluation of New
Deal has been "the most detailed and extensive Government
policy-related research programme carried out in the UK in recent
The total cost of the Government's evaluation programme to date
has been £4 million, representing some £7 per New Deal
participant, and over 30 reports have been published.
Other organisations, such as the Industrial Society, the Joseph
Rowntree Foundation and the Unemployment Unit and Youthaid, have
published further analysis. The reports resulting from this evaluation
process have been invaluable to our work. The Sub-committee has
drawn on their findings extensively. We welcome the Government's
acceptance and implementation of our earlier recommendation that
evaluation reports and summaries should be published in the New
Deal Website but stress the need to ensure that the web site is
comprehensive and kept up-to-date.
15. Two factors in particular complicate any evaluation
of New Deal. First, it is difficult to isolate the effects of
New Deal from other influences. The economy was growing before
the introduction of NDYP and has continued to expand since. Moreover,
New Deal has not operated in isolation but in the context of a
range of other welfare to work policies, some of which were in
place when NDYP was launched and others which have been implemented
subsequently. These include the National Child Care Strategy,
tax and benefit's changes designed to 'make work pay',
changes to employment regulations, the introduction of the National
Minimum Wage, and other employment policies, such as Employment
Zones and more recently New Deal for Communities which aims to
tackle deprivation in the poorest areas of the country.
Several studies have sought, for instance, to identify whether
the decline in youth unemployment is attributable to New Deal
for Young People or to the fact that the economy is growing. We
note the Minister's view that the "improvement in the young
people's labour market has been due to a combination of economic
stability and the New Deal: not one or the other but the two together".
16. Secondly, assessments of the impact of New Deal
rely to a large degree on assessments of the counterfactualwhat
would have happened if the programme had not been in place. As
Professor Millar of the University of Bath and author of the Joseph
Rowntree-commissioned report on New Deal, Keeping Track of
Welfare Reform: The New Deal Programmes, told the Sub-committee,
"this is far from straightforward".
She explained that there were difficulties inherent in the design
of experiments to evaluation the impact of national programmes,
not least because there was no comparative control group. She
told that Sub-committee that "the main focus has been on
comparisons across areas and that is probably the right way to
go about it because in terms of the schemes we have, it would
be difficult to adopt other methods. I think the results that
we have seen are probably as robust as it is possible to be, but
there are margins of errors attached".
This means, as Professor Patrick Minford pointed out, that evaluating
New Deal is "not at all easy".
17. The Minister stated that "What New Deal
aims to achieve is a radical improvement in the employability
of young people, giving them the necessary skills which in turn
become personal assets, not just to get a job but to stay in work
for the rest of their lives".
It is perhaps surprising then that much of the evaluation of NDYP
is centred around measuring decreases in youth unemployment and
increases in youth employment rather than measures which attempt
to assess increases in employability. We accept that the overall
target for New Deal is not to make participants job ready but
to help them into sustained employment. The evaluation programme
also needs to take into account improvements in employability
which result from participation in the programme but which may
not result in employment in the short term.
18. One apparently simpler method of evaluating New
Deal would be to analyse its costs and benefits. There has been
much heated debated over the 'cost per job' of NDYP in particular.
The Minister told us that the average cost per job was below £4,000".
A range of other figures has been put forward, some significantly
higher. Indeed in an earlier Report we ourselves noted that "The
Minister told us that the average cost of each job outcome was
just under £4,000 ... We note that the average cost of unsubsidised,
sustained jobs, which NDYP participants would not have obtained
without the help of the programme, will be much higher than £4,000.
A pamphlet for the Centre for Policy Studies suggested the correct
figure was £11,333 and could be as high as £37,000.
The variation would appear to result from not from differences
over the costs of NDYP but from different assumptions over what
factors should be included in the calculations.
19. The Minister's figure is based on calculations
which include in the jobs total, unsustained employment and those
participating in the Environmental Task Force and Voluntary Sector
options. If those on these two options were to be excluded, the
figure would be higher according to the National Institute
of Economic and Social Research it would be around £7,000.
The figure would be higher still if unsustained jobs were excluded
from the job total. It would be markedly higher again if an allowance
were made for deadweight.
Similarly, as the Minister suggested, the cost per job figure
would be lower than £4,000 if, using the Government's basis
for calculations, an allowance was made for those who leave NDYP
for unknown destinations who are estimated to have entered employment.
Professor Millar said that "cost per job is a nice headline
figure ... but it does not capture very much. There are lots of
different ways of calculating it that leave lots of scope for
Before the New Deal programme, the most expensive employment scheme,
the Training for Work Programme, cost about £4,617 per job.
20. Examination of overall achievements and value
for money is essential but there are other important considerations
which must also be taken into account. As the Minister told the
Sub-committee, NDYP is not a job creation scheme.
And as Manpower plc told the Sub-committee "Apart from the
direct, more visible savings on welfare payments, there are many
other social and economic benefits ... eg reduction in crime rates,
increased spending power, more demand for services as a result,
job creation to deliver those services ... It is the extent of
this overall market impact that is the real measure of New Deal".
NDYP's effect in reducing the opportunity for benefit fraud may
also have an impact on the tax and benefits balance sheet. It
is important to note that these benefits accompany other youth
training programme. We have noted in an earlier Report that
assessing the cost per job is a complex area and one which merits
We welcome the National Institute of Economic and Social Research's
Reports on macroeconomic implications of NDYP and look forward
to the results of the National Audit Office's forthcoming value
for money study.
Over-emphasis on the assessment of NDYP on a basis of cost per
job obscures the wider purpose of New Deal.
8 Millar J, Keeping Track of Welfare Reform: The
New Deal Programmes, 2000, p. 11. See also QQ. 1, 62
(Hereafter "Keeping Track of Welfare Reform");
New Deal for Young People: Two Years On, para 19. Back
Deal for Young People: Two Years On,
para 19; Eighth Special Report from the Education and Employment
Committee, Session 1999-2000, The Government's Response to
the Eighth Report from the Committee, Session 1999-2000, New Deal
for Young People: Two Years On, HC 969, Annex, para 16. Back
Fifth Report from the Treasury
Committee, Session 1999-2000, The 2000 Budget, HC 379,
paras 71-76 and the First Report from the Social Security Committee,
Session 1998-99, Tax and Benefits: Implementation of Tax Credits,
HC 29. Back
2; See also Keeping Track of Welfare Reform, pp. 8-9 for
a summary of wider welfare to work policies. Back
Track of Welfare Reform,
p. 13. Back
p. 68. Back
p. 56; Q. 193. Back
for Young People: Two Years On,
para. 4. Back
G and Whitely P, A Good Deal Better, The Industrial Society,
2000, p. 23. Back
192; Q. 120. Back
is the term used to denote those who have found employment through
New Deal but who would have found employment even in the absence
of the programme. See para 33 for a more detailed discussion
of the effects of deadweight. Back
p. 56. Back
p. 103. Back
Deal for Young People: Two Years On,
para. 4. Back
B, Riley R and Young G, The New Deal for Young People: First
Year Analysis of Implication for the Macroeconomy, ESR 33,
December 1999 (Hereafter "ESR 33"); Riley R and Young
G, The New Deal for Young People: Implications for Employment
and the Public Finances, ESR 62, December 2000 (Hereafter
"ESR 63"). The National Audit Office study is expected
to be completed in July 2001. Back