TUESDAY 6 FEBRUARY 2001 _________ Members present: Mr Derek Foster, in the Chair Ms Candy Atherton Judy Mallaber Mr Patrick Nicholls Mr Stephen Twigg _________ MEMORANDUM SUBMITTED BY THE DEPARTMENT FOR EDUCATION AND EMPLOYMENT EXAMINATION OF WITNESSES RT HON TESSA JOWELL, a Member of the House, Minister for Employment, Welfare to Work and Equal Opportunities, Department for Education and Employment, MR LEIGH LEWIS, Chief Executive, Employment Service, examined. Chairman 179. Minister and Leigh, you are very welcome. You have no objection to us calling you Tessa and Leigh, have you? (Tessa Jowell) Certainly not. 180. I begin to think that so frequently do we meet we shall have to continue meeting like this. (Tessa Jowell) It is a pleasure for me. 181. Would you like the opportunity to make a statement to begin with? (Tessa Jowell) I should indeed. Thank you very much. Before I begin, however, may I just introduce my colleague, Leigh Lewis, who is known to many of you. Leigh is the Chief Executive of the Employment Service and also Chief Executive designate of the new Working Age Agency. We shall between us do our best to answer your questions. 182. Would you like our congratulations or commiserations? (Mr Lewis) I will stick to congratulations, but thank you very much. (Tessa Jowell) Thank you very much indeed, we are very pleased to be here today to give evidence to your inquiry on the evaluation of the New Deal for Young People programme. One of the key features of the New Deal for Young People has been the transparency of the evaluation and I hope that is something which has become clear to you in the course of the inquiry. Perhaps as importantly, the part that evaluation has played in the continuous improvement and development of the programme since it became a national programme in April 1998. That is all part of our aim to ensure that the programme is grounded in the best available evidence of what works. Evaluation so far has proved that the New Deal for Young People has made a tangible difference to the lives of young people, to the recruitment patterns and satisfaction levels of employers and to the efficiency of the labour market and the national balance sheet. Last November we met our pledge of helping 250,000 young unemployed people move from welfare into work, helped by the New Deal. We have for the first time the prospect of an end to long- term unemployment among young people with now only 33,600 people who have been unemployed for more than six months, the lowest level for over 25 years and fewer than 5,000 unemployed for a year or more, which is the lowest level for 30 years. This 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. The National Institute for Economic and Social Research, who gave evidence to you just before Christmas, showed in their report, that the New Deal for Young People has both cut unemployment and raised employment, some of its key findings being 25,000 more young people in work because of the New Deal, total youth unemployment down by 40,000 due to the New Deal, half as many young people unemployed for six months or more, due to the New Deal. They also estimate that the overall economy is richer by œ500 million a year thanks to the net investment of œ150 million a year by the Government in the New Deal for Young People programme. In overall economic terms, the New Deal has easily paid for itself and it has proved in turn a good deal for the country. These positive results are only the early results of what a programme building on long-term investment and with long-term ambitions will show. What the New Deal aims to achieve is 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. There is also good evidence to show that people who do return to unemployment are leaving at least as quickly as short-term unemployed people. Even people who have been on the New Deal, who lose their jobs, who return to unemployment, are less disadvantaged than they would have been had they not had the benefit of the New Deal programme. The evaluation has also confirmed that the basic model is the right one for helping long-term unemployed people. The key elements which are now entrenched in our labour market policy comprise personal advisers and unprecedented levels of individual help in the first gateway period, the something-for-something approach embodied in the delivery of a programme which offers no fifth option of a life continuing on benefit, and flexibility in the light of local labour markets and individual need. These lessons have been translated in a slightly different form to the strengthened and intensified New Deal for Older Unemployed People, which will be becoming a national programme with effect from the beginning of April this year. The evaluation has also identified where we need to do more and improve the programme still further. I am sure you will want to cover some of these areas in this session. All that we do to develop the New Deal is based on evidence from the evaluation and the evidence has been shared widely and that evidence is indisputable. Evidence that there are now fewer than 5,000 on benefits for a year or more, compared to 300,000 in the mid-1980s. Against the background of our discussion about quantitative and qualitative evidence, the impact of deadweight, additionality and all the other ways in which we examine and apply tests to judge the effectiveness of labour market programmes, I think that some of the most compelling evidence comes from young people themselves. Over the past few weeks, I have had the opportunity to meet hundreds and hundreds of young people on the New Deal and the vast majority of them are absolutely clear that it has been the experience of the New Deal, the relationship with their personal adviser, that has enabled them to make the journey from unemployment often for the first time into work. 183. When we embarked upon this study, which was really entitled the New Deal Two Years On, we agreed that the New Deal, certainly for the 18 to 24-year-olds has been the most well-resourced and comprehensively evaluated programme, certainly in my political lifetime. We certainly value the continuous improvement philosophy that the Employment Service has been employing. You would not expect us to let you escape without some fairly probing questions about the evaluations and also about the future direction of the New Deal. Let me begin. Is your current estimate of the total cost of the New Deal programmes to March 2002 significantly different to the œ1.5 billion that you estimated last time you gave evidence to us in May 2000? If so, why has the estimate changed? (Tessa Jowell) I am just looking for my schedule of costs. The short answer is no, the estimate of cost for the programme is not significantly different. We anticipate the estimate of the total cost for the programme to 2001 to be œ1 billion for 18 to 24-year-olds, one quarter of that for 25+. Looking retrospectively, the cost of the programme, as you will know, has been less than anticipated for two and a half principle reasons. The first reason is that the fall in unemployment has been faster and more substantial than expected. The second is that when the programme was originally designed, the expectation was that about 40 per cent of young people would leave at the gateway stage within the first four months and 60 per cent would go onto the more expensive training options. In practice that ratio of proportion has been revised and about 60 per cent of young people now leave the programme within the gateway period; only 40 per cent then go on to the options. The options themselves have turned out to be rather cheaper than we expected. We shall want to watch these costs very carefully indeed because all the evidence is that young people coming onto the programme now are significantly more disadvantaged than those who joined the programme at the beginning. Certainly the training period is therefore having to help young people with acute and unless they are remedied insuperable obstacles in many cases to their being able to hold down sustained jobs. 184. In the 2000 Spending Review, it was announced that New Deal would become a permanent feature of Government policy. It is going to be funded by the creation of an Employment Opportunities Fund. What effect do you think the creation of this Employment Opportunities Fund will have on the delivery of the programme? Will it be available for groups such as the economically inactive rather than giving priority to those registered job seekers? What resources, other than remaining windfall tax receipts are being channelled into the Employment Opportunities Fund? (Tessa Jowell) The Chancellor in the Pre-Budget Report indicated that over the next three years the allocation to the Employment Opportunities Fund will be œ1,040,000,000 in 2001-02, over the CSR period, œ1,390,000,000 in 2002-03 and œ1,370,000,000 in 2003-04. There is also a small remaining underspend from the windfall levy which is in the process of being bid against as part of the budget process. In response to your two questions: what difference will the Employment Opportunities Fund make? It is important to be clear that the fund provides the money to deliver the policies which I hope are pretty clear. Yes, I think that in the second stage of the New Deal programmes, there will be a major emphasis on two areas: first of all, reaching out more to those who are presently inactive; secondly increasing support and help for the most disadvantaged. We are at the moment in discussion with the Treasury about a number of proposals to strengthen both the New Deal for Young People, the New Deal for People over 25 in order to meet what we see as the emerging needs. I think that last time I came to give evidence to you, I made clear our view that the New Deal needs, in order to meet the sustainability test - breaking the cycle of unemployment, or no employment, that many unemployed people come onto the programme with - to focus on the skills which are described as work readiness or employability skills. All the evidence shows that unless you are numerate, literate and increasingly have a measure of IT competence, have the sort of soft skills which increasingly a service-dominated labour market requires and you have had some work experience, then the likelihood of being able to learn and then progress in work or to stay in work is substantially diminished. We are increasing the focus on ensuring that unemployed people have the opportunity to acquire these skills. We are also concerned about those young people who are at the moment beyond the reach of the New Deal. They do not necessarily meet the labour market conditions which mean they are eligible for the Jobseekers' Allowance, but we believe that we must do more to bring them to a point where they are close to the labour market, close to meeting the labour market conditions of JSA and in a position where they can benefit from the New Deal. This will be a real challenge for joined-up government, because the New Deal is not a drug treatment agency, it is not a mental health service, it is not a housing department but these are young people who need the help of the programme and whose lifetime prospects will be greatly enhanced if they can get a job, and getting a job for them means sorting out many of the other problems in their lives as well. That is the shape of the future and the future will be driven much more by policy than the renaming or the replacement of the windfall tax by the Employment Opportunities Fund. 185. From the figures you gave us, annual figures, I think you said œ875 in the first year going up to œ1.4 billion in 2003-04, the œ875 is round about œ200 million more than we are currently spending. That is interesting that you should be allocating œ200 million more than we are currently spending. Can you explain why that is thought to be necessary? (Tessa Jowell) For the 18-24 programme the estimate for 2001-02 is œ420 million, that being the single year cost. The figures I gave you were cumulative figures to cover the spend on all the New Deals but also including other labour market programmes like action teams for jobs, the proposed job transition service, one pilots, modernising ES. This is the total welfare to work spend which will be included in the Employment Opportunities Fund. 186. So really the amount of money you are spending on the New Deal for the 18-24s currently is about the budget you are building in for future years. (Tessa Jowell) It is about the same; we shall expect to see the numbers fall but the clients of the programme need more intensive care. We may spend broadly the same amount of money but I would expect, all the signs are this, that the level of spend per individual may well rise. 187. Because we have allocated another œ400 for the intensive gateway. (Tessa Jowell) The gateway to work course is more than that. From memory the gateway to work courses are costing œ700 per person, but already the early indications are, and these are early indications, that we are seeing a faster rate of young people moving into work as a result of the gateway to work courses than was the case beforehand. We shall also want to look at the impact on retention of the improved gateway training. You will remember that these were programmes which were established very much in direct response to the demands employers were making of the programme. (Mr Lewis) We are also resourcing the personal adviser service more richly. We are taking account of the fact that overall numbers have dropped, so on average each person tends to face more barriers, tends to need a more supportive environment, more help from more skilled advisers. 188. Your employment forecasts lead you to believe that we shall be needing more intensive support beyond the next election. As the last two ILO figures began to rise, certain people were forecasting that the USA recession might impact here. Are we still expecting that we shall be mainly dealing with those most disadvantaged? (Tessa Jowell) We do not formally forecast employment or unemployment. We put in place a range of measures to provide the assistance which is deemed to be necessary. Our intelligence about the prospective demands on the programme come from three sources: from employers, from the experience of personal advisers and the Employment Service and from the impact of evaluation. As we have discussed in this Committee before, also, the evidence is that the pattern of unemployment may well change. We are seeing high unemployment on a region by region basis, but very marked contrasts in employment rates within regions, which is why the efforts of the New Deal have been fortified both by employment zones and very particularly by action teams for jobs, which are addressing on a very local basis the obstacles that people in the districts in the country with the lowest employment rate are facing to getting into jobs. Mr Nicholls 189. As we understand it something like 22 per cent of all moves into jobs from the New Deal for Young People actually last for less than 13 weeks. Of those who are counted as having entered sustained employment, can you tell us what proportion are still in employment after six months? (Tessa Jowell) We estimate that about three quarters are still in work after three months and 80 per cent are not back on benefit after six months. These were figures which were identified in the National Institute's report which looked at the macro-economic impact of the programme. 190. Why did you use a different definition of sustainability for the Innovation Fund? Is there not a case for still using the 26-week definition more widely? (Tessa Jowell) We discussed this at some length last time I appeared before you when I indicated that taking a 26-week period for the Innovation Fund was part of piloting a longer period. The standard measure of sustainability under this Government and previous Governments has been 13 weeks. We are placing increasing importance on retention and people not just getting into a job but staying in work and that is why, as part of the piloting and the experimentation of the Innovation Fund, we are looking at a longer sustainability period or retention period. 191. I ask that question because it seemed to me it flowed neatly on from what you were saying in your opening statement, which I think I could characterise as really making two essential points. One of them was that you felt the whole of the New Deal programme had been good value for money and that secondly it had made a real difference. Would that be a fair way of describing the two key points of your initial statement? You thought it had been good value for money on the one hand and had done the job on the other? (Tessa Jowell) Yes. 192. What I find some difficulty with is actually squaring that with some of the other facts we have already had put to us. You will be aware that we produced a short report some little while ago and in that report we said, amongst other things, that we noted the average cost of unsubsidised, sustained jobs, which the New Deal participants would not have obtained without the help of the programme, would be much higher than œ4,000. So although we would not be ad idem, I have to tell you, and you will not be surprised, on both sides of the Committee about precisely what the cost would be, there was a general view it would be higher than œ4,000. I just wondered whether, in the light of the exchange which we had last year, you would want to revise that figure or whether you still think it does amount to simply œ4,000. (Tessa Jowell) The most recent confirmation of that figure came from the National Institute report, which concluded that if you include the voluntary sector and the Environmental Task Force work experience programmes, the cost per job is about œ4,000; œ7,000 if you exclude those. It is important to be clear that as a Government or as Employment Ministers, there has been consistency about the way in which the cost per job for the programme has been calculated since the programme was launched, which is to take the spend on the programme and to divide it by the number of young people who get into jobs. It was made clear at the beginning that while we would count all jobs and sustained jobs as a figure within the jobs total, the New Deal programme is about getting young people into work. That does not mean we are not also concerned to maximise the numbers that get into a job and stay in work and do hit the sustained job target. The fact is that that is how we calculate it. We have made it clear to this Committee, we have made it clear to Parliament in Parliamentary Answers. I am sure there are all sorts of way of calculating it to produce higher or even lower figures, but those are the rules of engagement that the Government has set. 193. I should certainly be interested - I say that with all the insincerity I can command, which is considerable, Chairman, I am grateful for your support - in a calculation which would get at lower than œ4,000; that would be remarkable. However, one does not really have to work too hard to find it might be substantially above that. Anyone can appreciate this; I think it would be common ground between us. If someone is only in a job for a very short period of time the fact that they have been in that job will hopefully have done something for them which they would not have got had they not been in that job. The fact is, using figures which you gave us when you appeared before us before, you said on one occasion that you thought something like œ800,000 had been spent on NDYP. That would in fact mean that you then assumed 60 per cent deadweighting - and I shall come back to how I substantiate that figure in a moment. We would then be looking at a cost per job of something in the region of œ17,873. I know this has been the subject of correspondence between us before and in due course the Committee will doubtless come to a view on these things. I really would press you on this. I really do not think you are going to be able to find a figure which is less than œ4,000. You may not want to come up with œ17,873, but I need to know and I am sure the Committee do, whether it is your last offer that it really does come out at about œ4,000 per job. (Tessa Jowell) On the basis of the calculation, which is the agreed basis on which we calculate the cost per job, yes. I would add to that that the Opposition, in a press release publishing their Britain Works proposals last July, conceded precisely the same point. They said in notes to editors that they estimated that Britain Works would cost about œ3,000 per person, that is about œ1,000 less than the New Deal. So there appears to be a broad agreement about cost per job. I would only reiterate that the basis on which we calculate it is the simplest one available and that is the sum we get. Chairman: I think this is something of a blue herring, if I may say so, as opposed to a red herring which would come from our side. This is very interesting and we have trawled all over this before. The authoritative statement from the National Institute, which is independent of Government said œ4,000 on one basis œ7,000 on another and frankly going beyond that is not all that relevant, if I may say so. I am more than happy to let you continue with questions but that particular line is a bit unfruitful. Mr Nicholls: With respect, you may find it unfruitful, but I find it relevant and after all there are two sides to this Committee even if my side happens to be in something of a minority just at the moment. I do not want to throw blue herrings too far but there is just one further point, if I may crave your indulgence. Chairman: One further point. Mr Nicholls 194. Which may have to be subdivided into two. You mentioned a moment or two ago, I am sure in a way which was designed to be helpful, the National Institute for Economic and Social Research and indeed the Minister herself referred to that a few moments ago as well. I detect an assumption underlining this that every time jobs come down and the New Deal is in operation, the assumption is easily made by Government that one thing must have caused the other. The fact is that in information published by the Department themselves, 12 July 2000, the National Institute for Economic and Social Research concluded that 60 per cent of the jobs created would have been created anyway. Is that simply wrong or irrelevant? (Tessa Jowell) First of all, the New Deal is not and has never claimed to be a job creation programme. When the New Deal is judged against the extent to which it has created jobs, I frankly discount that. The report published just before Christmas showed an additionality of about 15,000 jobs. That is a macro-economic calculation which I suspect has more to do with macro-economic calculation than real life. The fact is that what the National Institute report did show was that young people through the programme were leaving benefit more quickly, over 200,000 leaving benefit more quickly, that the labour market generally was benefiting from a higher level of skill from which employers could recruit and that long term unemployment among young people would be double its present rate were it not for the programme. As I made clear in my opening remarks, it is the combination of economic stability which has generated more jobs and the New Deal which is equipping previously unemployed people to take those jobs which is the essence of the success. Just before we move from this, I was challenged a moment or two ago by Patrick Nicholls as to whether or not the figure of œ4,000 per job might be reduced. At last count 269,210 young people had moved from benefit into work. Those were the latest figures we published. We also published, and you may have seen this last week, a survey we conducted into what are called unknown destinations, about 30 per cent of young people leaving the New Deal go into unknown destinations, and we are as concerned and interested to find out what happens to them as I suspect you are. What the survey has shown is that we have almost certainly undercounted the number going into jobs by about 75,000. Of those who go into unknown destinations, about 56 per cent, the same proportion as from the main programme, go into work. 195. Are you saying that therefore accounts for the fact --- (Tessa Jowell) That is arithmetically how you get to below œ4,000. 196. Is that how you would also seek - and you raised this, I did not, I was mindful of the Chairman's strictures - to account for the fact that if you in fact refer to the Office of National Statistics, the known estate base, the UK youth unemployment 18 to 24-year olds claim account, if you actually look at what has happened, you can see that for a long time, with occasional seasonal blips, youth unemployment has been declining and in fact the rate of decline has tailored off during the time of New Deal. (Tessa Jowell) In 1986, if we take six-months-plus unemployment among young people, you can fall very fast if you have very high numbers and in 1986 you had very high numbers: more than half a million young people had been out of work for six months or more. In 1990, 176,000, in 1997, 169,000, in 2000, 33,500, a fall of 80 per cent. Ms Atherton 197. One of the fascinating parts of the New Deal is the role of the employer in recruiting young people. Some disappointment has been expressed by some employers that not enough of the New Dealers are job ready when they come for interview. As a Committee we were very, very impressed with some of the programmes like Wildcat in New York where a lot of work goes into getting a young person or an older person job ready. What action do you plan to take to tackle some of the criticisms which a few employers have raised that the young applicants are not job ready enough in some cases? (Tessa Jowell) As I indicated earlier, the gateway to work courses which were introduced in June last year, were introduced in direct response to the expressed view by a number of employers that young people were being referred who were not "work ready". Secondly, the focus on these core work readiness skills again is ensuring that young people have the generic employability skills that employers are looking for. As part of our performance monitoring we have judging how well the programme and indeed the Employment Service was doing, we have a target against which the Employment Service performs as measuring employer satisfaction. We have over 80,000 employers who have signed up to the New Deal and in 12 of our large cities we have employer coalitions which really do drive employer leadership of the programme. This is not a new development but over the last two years we have seen an increasingly what would be described as demand-led approach to the programme, which no doubt you have heard Wildcat talk about, and that essentially means identifying the needs of the local labour market and ensuring that unemployed people coming through the New Deal are trained in order to have the skills that those employers need to fill the jobs which are available. Let me just give you a couple of very specific examples. I have been travelling the country as part of the New Deal tour, meeting employers, meeting young New Dealers, meeting the community organisations which are involved in training them and job centre staff. Last week I was in Birmingham and visited the Birmingham City Hospital Trust who when they are recruiting entry level administrators always now have a New Dealer on their short lists. What they say is that New Dealers are work ready, trainable on the job, but highly motivated. That is the sort of endorsement of the New Deal that we want to see right across the piece. We are clarifying the sectoral approach within which New Deal operates. You have the development and the implementation of the work readiness programme, but then also the acquisition of further sector specific skills, working as Wildcat has been doing with the financial services sector, IT, in order to lock together the skill needs that employers have with the training that the New Deal can deliver. We see this as an enormously important part of the long-term sustainability of the programme. What I want to see employers saying about the programme is that there is a kitemark standard of quality which they can take for granted in young people they recruit and that the New Deal is a preferred programme for recruiting to their vacancies. Leigh is very close to the operational delivery of this and may want to add to what I have said. (Mr Lewis) Just to say of course that we have had the opportunity to discuss the efforts we have been making in the Employment Service to improve our service to employers. As you know, I am the person more than any other who is not satisfied and never satisfied that we are delivering as good a service yet as we can, though I do believe it is improving and we need to go on improving it further. It is worth saying that the evaluation evidence on New Deal has told us quite a bit about the responses of employers who have recruited through New Deal and a great deal of it is actually very positive. For example, around 85 per cent of employers who have recruited through New Deal said that the person they recruited met their job spec either fully or pretty well and that is not a bad level at all. It would be better if we can make it better, but it is not a bad level to be starting from. 198. In some ways Wildcat acts as a personal adviser to the employer as much as a personal adviser to the person looking for the job. Have you thought about actually saying to the employers, here is your personal adviser in this process? (Tessa Jowell) This is very much the relationship the Employment Service is now developing with employers which I shall ask Leigh to tell you about. (Mr Lewis) I do have great sympathy with the question. One of our four employer service commitments now is that every time an employer entrusts us with a vacancy - and I use the word "entrust" very deliberately - one of our standards is that there should be a named contact in the Jobcentre who stays in touch with that employer until that vacancy is filled to their satisfaction. That is in terms of the one-off vacancies which are our bread- and-butter business, day by day. At a national level we have moved to institute an account management function. So if the big major employers, the big organisations in this country want to deal not with 20, 30, 40 separate Jobcentres but want to deal with one person, their account manager, who can deal with their requirements literally from John O'Groats to Lands End that is a service we shall provide as well. We have to get yet better at doing that but in a way we are moving towards the equivalent of a personal adviser per employer. 199. It has been argued that the increasing case loads of the New Deal for Young People might have compromised the effectiveness of some of the advisers. As more and more young people are involved and the New Deal has expanded it has been suggested that some of the personal advisers are effectively burning out like social workers and doctors. What strategies do you have in place to tackle this? (Tessa Jowell) First of all, there is no evidence that personal adviser case loads are increasing. We have also taken steps to offer greater opportunities for career advancement. Personal advisers are crucial to the success of the programme: what we do not want is for personal advisers to feel that the only way they can secure advancement is to move off into management and move away from working directly with young unemployed people, which is what most of them are so gifted at. (Mr Lewis) It is absolutely crucial, as you say, and if our personal advisers become overstretched or become overstressed, then of course they are less effective. We are very much concerned about ensuring that does not happen. One of the big advances we are making and introducing and rolling out now, is the role of what we are calling a senior adviser. One of the problems born of success is that our advisers have been so successful in many cases that they have secured promotion within the Employment Service and have ended up doing jobs other than as personal advisers. Great for them, not as good in a sense for New Deal. 200. Is that counted in turnover? (Mr Lewis) No, we do not count that as turnover. Turnover in our terms is when people actually leave the Employment Service, though in a sense it has the same result, the advisers are not in their job. One route we are using for that is to create a new role of senior adviser, one level up in our structure, so that there is a promotion route, an advancement opportunity for good advisers who will go on advising, they will still be advisers because they will still have their case loads. In addition they will take on an enhanced mentoring role towards less experienced and newer advisers. We have over 50 of those senior adviser posts already in place. We are going to be rolling them out nationally through the year and the ratio, certainly in the adult New Deal, of about one senior adviser post to seven adviser posts more generally. (Tessa Jowell) Some young people who have been on the programme come through and they are taken on by the Employment Service and they themselves become personal advisers. One of the really interesting bits of feedback which has come from the consultations we have been holding on the New Deal tour has been the appreciation of young people of that; those whose personal adviser has come through the same route as they have obviously acts as a good role model but also they feel that they are talking to somebody who really understands what it is like to be them. Mr Twigg 201. One of the things we have talked about when you have appeared on this subject before is the public sector's role as an employer in the New Deal programme. Can you tell us what sort of progress has been made in recent months in increasing the involvement of the public sector, in particular the involvement of Government Departments in New Deal? (Tessa Jowell) There are two strands in relation to that. The first is to say that eight per cent of young people on New Deal have gone into the public sector, but that is not in line with the public sector's share of the labour market as a whole. We should like to see that proportion increase. About 4,000 have gone into the Civil Service and the proportion now is 1.3 per cent. It is rising rather than falling. Perhaps most encouragingly and in line with what I told you about earlier, about 1,000 New Dealers are now working in the National Health Service. I think - and I give this as evidence from the feedback on the New Deal tour, that there is an increasing interest among public sector organisations about the potential benefits of involving New Dealers. The point is that it applies as much in the public sector as it does in the private sector. The motivation for employers should not be altruistic, it should be that this is a way of delivering services or seeing their business perform better. That is the sort of message which very slowly the public sector is beginning to absorb. Just before Christmas, I took part in a conference which was organised jointly with the Association for Local Government (ALG) where local authorities were engaged very directly in how to increase the participation of their members in the New Deal and to get out the message from those which were already using the New Deal quite extensively of its benefits. I think that if we move to develop more transitional labour markets as the programme moves to its next stage, we shall build more public sector collaboration as we have seen in the Environmental Task Force, the work of Groundwork for example, the ILM in Manchester where 300 young people are employed by the City Council as part of the City Ranger scheme; short-term transitional employment, working for the local authority but the performance in terms of those young people moving into jobs subsequently is very encouraging. We are very heavily engaged in this, but the good news is that local authorities are also engaged in this. There will be great benefits to be gained. 202. Most of the examples you gave there were local government examples. Are you satisfied that all central Government Departments are doing their best? (Tessa Jowell) We are seeing the numbers increase and we intend to continue to press Government Departments to do what they ought to be doing and to benefit from the employment of New Dealers. That is a process which will continue. We shall continue to chase, to harry, to persuade and also to provide the evidence of the benefits, benefits like those I referred to, that the Employment Service can show in the employment of New Dealers as personal advisers. (Mr Lewis) I am sure the Committee and certainly Ministers would expect the Employment Service as an employer to be an exemplar New Deal employer and we have sought to be so. We have taken on more than 500 New Dealers as employees of the Employment Service. The really good news is that well over 130 have already progressed through the procedures of fair and open competition to permanent employment with the Employment Service and that 30 of those have already been promoted through our normal procedures to at least one grade higher. I am delighted with that but we have not done it out of sentiment, we have done it because those people are really good and are helping us to deliver the pretty challenging targets and objectives we are set. That is the message I take with me to fellow colleagues elsewhere in central Government. Judy Mallaber 203. May I turn to gateway? The recent report by Professor Millar for the Joseph Roundtree Foundation found very varied perceptions of the gateway period among those people who were on it, either on the young people or the long-term unemployed New Deals. What is your view on this? Why are there those different perceptions? Do they just reflect differences between the individuals involved and their needs and abilities? Is it about levels of competence of the personal advisers? Why is it that people are experiencing the gateway period in such different ways? (Tessa Jowell) You would expect that. Generally the New Deal gets very good satisfaction ratings from young people who take part in it. One of the keys to the success or the reported success of being on the programme from young people is the relationship with their personal adviser. Where the young person gets on well with their personal adviser, they are likely to feel that this has been a success for them. If they do not get on well, they are less likely to feel positive about it. It is possible to overstate the degree of variation in experience and the fact that 60 per cent of young people are in work by the time they reach the end of the gateway, the end of the four-month period, is a pretty good reference for the effectiveness of that phase. Young people also like the gateway-to-work courses. We do not yet have any formal evaluation of the programme but certainly anecdotally - and it is no more than that - they are courses which are received very positively indeed. 204. What has been the impact of the introduction of the basic skills training in the intensified gateway? Do you think that is likely to have implications for how long people will be in the gateway when they are on New Deal, which is one of the continuing issues we have looked at? (Tessa Jowell) The basic skills screening is part of the first stage of the New Deal and basic skills deficiencies are grounds for early entry to the New Deal. I am keen that we ensure that we activate that entitlement for all the young people who need it. The delivery of basic skills training through the New Deal has been part of the programme since the beginning. As the focus on basic skills has intensified, we are looking to much more consistency in the early screening of young people, so that we can ensure that all those who do not have a level one qualification, cannot reach level one, in other words that they are above functional illiteracy, we are not talking about a very high level, are given the help they need. For some young people that is through short courses and that is sufficient. There is also, through the full-time training and education option, access to longer term courses but they are still a minority of the total courses which are provided as part of the full-time training and education option. My conclusion would be that delivering young people onto the labour market with the basic skills they need to remain in work is a key objective of the programme. What we have to ensure is that at every level the screening takes place, the support is provided to engage young people in the training which is available for them and the length of course is commensurate with their level of innumeracy or illiteracy. 205. I recall you making at a previous evidence session - I think your first one - the very brave statement that you did not want anyone coming out of New Deal illiterate and innumerate. (Tessa Jowell) Exactly. 206. What evidence do you have so far on the effectiveness of the training programmes within the gateway programmes. (Tessa Jowell) In relation to basic skills? 207. Yes. (Mr Lewis) We have to recognise that we are in here for a long haul. We are seeing increasing numbers of young people being successfully identified as having a basic skills need by their personal adviser. We have introduced what we call a client progress grid which is a much more systematic assessment tool to enable advisers to reach a judgement as to whether the young person sitting in front of them does or does not have, at least on the face of it, a basic skills need or basic skills deficiency. We are getting ever better at being able to refer those people to appropriate provision in the gateway phase of the programme. We have to get better still in truth. Anybody who has sat with an adviser for any length of time, as probably members of the Committee have, will know that where a young person has a really fundamental lack of numeracy or literacy, that is pretty easy to detect, but actually it is where their level of numeracy or literacy is above that but still leaves a great deal to be desired, that particularly by the time they have got into their early twenties young people have often found quite sophisticated coping strategies for not displaying that too outwardly. We have had to recognise that our advisers have needed more support and more skill and more training to help them assess where there is, at least on the face of it, a basic skills need. We are getting better at that and the numbers going into that kind of provision are increasing. (Tessa Jowell) The aim remains that young people leave the New Deal numerate and literate at a level that means they are capable of not just taking on an entry level job but staying in work and then being able to benefit from in-work training. There is a second point that we have learned in delivering basic skills training. That is that it is more acceptable to young people if the training is provided in work as part of work experience, as close to work as possible. The week before last when I was in the Wirral I met with a small group of young people on the New Deal, all of whom are undertaking basic skills training. These were 19, 20-year-olds, who had moved beyond the point where this was a guilty secret. I hope that next time I come before you I can provide you with some evidence on the degree of progress which we are making in this area, but you will be aware that the New Deal and the work we are doing on basic skills through the New Deal, is a small part of the Department's much broader basic skills strategy in which a very high level of investment is being made to deal with the level of illiteracy which affects seven million adults in this country. 208. Are you yet getting any feedback, or is it too early, from employers on whether this intensification of that skills training is making them have more job-ready applicants coming to them? (Mr Lewis) That was one of the key motivations behind the introduction of the gateway-to-work course in the gateway. It is the case that in the early days of New Deal we did have some employers saying that some of those young people referred to them did not have that basic level of skill which would enable them to be readily employable. That is one of the reasons why the gateway to work course is now a much more systematic system to ensure that young people who are referred to employers do meet their key skill requirements. That is also why of course we have been developing a number of sectoral gateways in industries such as construction, retail, security and so on, so that we can pin down much more definitely and clearly the minimum skill requirements which employers in that sector need, even for entry level jobs, and ensure that those young people referred to them do increasingly have those minimum skill requirements. This is of course in the end not a science; you cannot absolutely guarantee that you can achieve this with 100 per cent of young people on every single day, but I do absolutely believe that we are getting seriously better at this and that is reflected in the employer feedback we are getting. Mr Twigg 209. Has the Government made any assessment of the impact the programme has had on the employability of those young people who leave the programmes and do not go into unsubsidised employment? (Tessa Jowell) The evidence is that retention is actually higher among young people who go through the subsidised employment route. It tends to be higher but they also tend to be the less disadvantaged young people on the programme. This links back to what I was saying earlier about linking basic skills training or positioning it as close as possible to work. We are very, very keen to build on the subsidised employment route and to expand the extent to which the employability training I have described to you is built into work experience. All the evidence is that that is how you maximise participation and you strengthen the likelihood of retention. Judy Mallaber 210. May I go back over some other questions we have talked about on a number of occasions and specifically about the Environmental Task Force option, just go over an update on where you think we are on all those issues we have discussed before? First of all, why do you think that fewer people are entering employment from the Environmental Task Force option than from any other option? What progress has been made in developing the use of intermediate labour markets within the option and what are you now thinking about in relation to whether we could transfer that option and the voluntary option into intermediate labour market schemes providing participants with a wage? They are all issues we have discussed before, but maybe you could tell us how you are currently viewing those issues? (Tessa Jowell) In relation to the Environmental Task Force, in the context of the Innovation Fund we have been involved in discussion with Groundwork particularly about the scope for the development of intermediate labour markets. There is also evidence that the young people who go onto the Environmental Task Force tend to be among the most disadvantaged and therefore may well be the young people who will benefit most from a longer period of paid work and training in the way that an intermediate labour market will provide. The evidence from intermediate labour markets is that the critics say they are expensive. However, in the absence of an enormous amount of evaluation of the evidence, if you look at the experience of intermediate labour markets on a case by case basis - I just want to check the figure for the Groundwork ILM - given that they are working with some of the most disadvantaged young people, they are securing into-work rates which I think are very encouraging: 40 per cent and higher. The figure is even better than that. Groundwork say that 60 per cent of participants at the end of their ILM are moving into full-time employment at the end of their placement and I think it is fair to say - and you can make these judgements, I am sure you have met young people on the Environmental Task Force, as I have - that these are young people who would not have got into work had they not had the benefit of this very intensive period of help and support. Just to give you some illustration of the sort of ILM programmes which are running, the projects range from regeneration and environmental work to the restoration of furniture and white goods for local people, specifically Groundwork projects include the renovation of a very rundown housing estate in Leeds, improving home energy insulation in Nottinghamshire and improving local parks and gardens in the Black Country. I referred earlier to the City Ranger programme which Manchester City Council run, where they act as city centre guides, they provide an alert when there are broken paving stones and street lights and so forth, being useful citizens and improving the quality of the environment. This is a range of programmes. The candidates for the Environmental Task Force will be beneficiaries of the more intensive focus on employability which I described earlier. 211. What has been the impact of making 20 per cent of the payments to Environmental Task Force providers dependent on participants obtaining employment? Is that likely to influence drop-out rates? (Tessa Jowell) This is a lesson we are applying across the board in tightening and focusing contracting. (Mr Lewis) We have certainly seen a substantial increase throughout 2000 month by month in the proportion of entrants to the Environmental Task Force who have been going into jobs, either directly on leaving the option or after a period on follow-through. That is pretty encouraging. It is not yet as high as we should like. Just to be absolutely clear, we want it higher and Ministers want it higher, I want it higher. It has gone up by approaching 50 per cent over the last year. When you consider that we are dealing inevitably with a group of people entering the Environmental Task Force who tend to have yet more barriers to employment on average than that group which enters the New Deal, 60 per cent of them leave the gateway-into-work, the Environmental Task Force tends to take on board some of the people who have some of the most severe disadvantages. The figures we are seeing are beginning to encourage us. We want to see them still higher, but we have seen a consistent movement over the last year in the right direction. To come to the heart of the question, one ingredient, not the only ingredient but one ingredient in that, has been to increase the degree of incentive for providers in terms of job outcomes. Chairman 212. What about the wage aspect? How important is that to the success? It was one of our recommendations two years ago that the Environmental Task Force and the voluntary sector option would benefit from something like a wage. (Mr Lewis) Yes. 213. Do you agree with that assessment? Do you have evidence that that is part of the more recent success you were quoting? (Mr Lewis) It has certainly been an option from the very outset as you know that both the environmental and voluntary sector options can be provided on a waged basis. It can make the options more expensive to deliver in individual cases but there is a lot of evidence that it also boosts participants' motivation and morale. I would not like to say off the cuff whether we have seen that as one of the key ingredients. It is certainly something we have always been very ready to encourage. 214. Let me turn briefly to the full-time education and training option. There seems to be a persistently high drop-out rate, well over 80 per cent in some areas. Why is this figure so high? Is it purely because of the nature of the client group or other problems with poor provision would you say? (Tessa Jowell) It is important to just get the figures clear about full- time training and education. About 40 per cent of young people on the programme go onto the full-time training and education option. The drop-out rates are certainly not at the level that some of the wilder claims have made, the point being that some young people do leave the programme while they are on it, they leave their course in order to get a job, but 45 per cent actually complete their course and of those a proportion, about 35 per cent, will get jobs while they are actually on the programme. That figure increases if you include the impact of the full-time education and training option with the impact of follow-through where the proportion going into work then rises to about 40 per cent. It is reasonable to assume that very few young people who leave university get a job on the day they graduate. By and large they will go on to do something before applying for jobs and so forth. Making a judgement about the effectiveness of the full-time training and education option at the moment at which a young person leaves, whether they step into work the day after the finish their course, is almost certainly not fair. All that said, I have expressed to you before my concern about the variation in the quality of the full-time training and education option. We are seeing a substantial improvement in the performance of the option already, the proportion going into jobs as evidence of this rising from 31 to 35 per cent, on the back of strenuous efforts to improve performance. We are proposing to publish performance league tables so that the contractors are aware of the performance. We are very keen to build on the leadership of colleges which become the kind of beacon that Lewisham College has become in its association with NewTech, where what you get is a college which is taking what employers want seriously and moulding and shaping their courses and their training to what the labour market needs and what employers want. That is the journey of change that we are on and that is where we want to get to. We shall withdraw contracts and I can certainly give you the figures already for contracts which have been withdrawn from full-time training and education providers which are simply not up to scratch and are not delivering to an acceptable standard. 215. That is a very clear statement which I welcome. May I put that perhaps a slightly different way? Could it be that the programme's emphasis on getting people into jobs actually conflicts with the ability to construct courses which have validity in educational and training terms in their own right? (Tessa Jowell) What we should like to see is more flexibility in the way in which courses are delivered. I do not think that a young person should be faced with a choice of taking a job or continuing with their course. Colleges which are really attuned to the reality of their local labour market will look at more flexible ways of delivering the teaching, in the evenings, Saturday classes, ways of continuing to engage those young people so it is not a choice between going into work and leaving the course half way through or giving up the opportunity now of going into work in order to finish the course. Chairman: I had another question on funding which we might correspond with you about. Mr Twigg 216. When you appeared on the subject before we talked about the impact of New Deal on disadvantaged clients. I do not want to go into all the areas we covered before but focus particularly on reaching homeless young people. I am interested in reading about and taking evidence on the Homeless Routeway to Employment Scheme. Could you tell us a little about the relationship between that scheme and the New Deal and how it might perhaps be able to reach some of the young homeless, rough sleepers in particular, that New Deal has not been able to reach? (Tessa Jowell) I actually launched this programme about four months ago. What it is intended to do is to provide specialist advice and help for young people who are not currently on the New Deal in order to increase their chances of being able to participate in the programme. It will be through community organisations and voluntary organisations that we are going to learn more and build more experience of how we reach these young people who are homeless or they are drifting - they may not be street homeless, they may be staying with friends, no fixed abode - getting hold of them and using the New Deal as one step in providing greater stability in their lives. As I indicated, the Homeless Routeway to Employment is just that, working with homeless organisations and the Camberwell Foyer who provide the accommodation to provide the help with employment. What the Employment Service cannot do is become a multi-purpose agency helping unemployed people. The key is to show flexibility and capacity to collaborate which I think the Homeless Routeway to Employment is beginning to show. Again, as with so many of the things we have talked about this afternoon, the drive on basic skills, help for the disadvantaged. We are still at an early stage. What I would ask you to remember is that these are all lessons that the New Deal itself has thrown up as part of the continued drive to do more, get to places where help has not been previously available and to engage some of the most disadvantaged young people who are at the moment beyond the reach of any agency at all. (Mr Lewis) One of the research reports published as part of the evaluation programme has been precisely on the degree to which New Deal has been able to reach out to homeless people, rough sleepers. It actually had quite a lot which should encourage us there because it suggested that where we can reach out, where we can make contact and establish contact and draw such young people into the programme, then you can really get some remarkable success stories. Perhaps as you would expect the hardest group though are those young people who, however it has happened, are entrenched homeless, they have been rough sleepers for a very long time. The most difficult problem is first of all to identify them and even bring them information about the programme. That is something the report made recommendations on and we are following up. There is some real encouragement there that once you can engage even young people in that precarious lifestyle with an adviser and on the programme you can achieve some remarkable success stories. 217. May I move back to an area we talked about earlier on people who leave for unknown destinations? You gave us some quite positive statistics on that. Nevertheless the proportion is still quite high. What proposals are there for reducing the number of people who leave for unknown destinations? Does the high level indicate some sort of wider problem with the records maintenance in ES? (Tessa Jowell) Let me ask Leigh to deal with the performance and operational aspects of recording people and improving our performance there. (Mr Lewis) There are two issues bound up in this question and they are both perennially frustrating ones. The first is a kind of absolute inherent part of our whole system of welfare as it has been for a very long time and that is that people can simply cease to make a claim for a benefit payment and they do not have to tell us or the state or Government in any way why they have done it. They can just cease to claim. That is terribly difficult when people simply stop making a claim and go away from you. That is something which it is very hard to influence. The other bit which is in essence more frustrating is that undoubtedly amongst that group of people whom we record as unknown destinations are people where our systems have simply not been good enough to capture information which actually someone somewhere has known about. Really somewhere in the system we do have some information about the destinations they have gone to; we simply have not managed to capture it in our systems. There in a whole set of ways we have been seeking to make improvements and to try to increase the proportion of people where we do have a known destination. We are making progress. We are beginning to whittle away the group for whom we do not have a known destination. There is no one magical cure-all for that. It is about in a whole host of different ways trying to keep our systems closer to the ground. 218. Is it right to say that in the most recent survey, which was last year, of those who left for unknown destinations getting on for two thirds told the survey that they had told the Employment Service? (Mr Lewis) Yes, indeed, absolutely; that in a sense is the frustration. They believe that they did tell us, whoever "us" is, something about what they were doing next, yet we failed to pick that up. No doubt in some cases, whether they actually told someone and what they told and who they told, you could investigate but there is no doubt that in some of those cases where we do record an unknown destination, nevertheless some piece of information has reached us, has reached a part of the system and what we have done is fail to capture it on our systems. That is what we are trying to improve. We are improving it but it is a long haul. (Tessa Jowell) The final key point on this is that the effect of the survey we published last week, which has looked unlike previous surveys at unknown destinations from every stage of the programme, is that we have certainly undercounted the number of young people going into work from the programme by about 75,000. The second point is that the proportion of those whose destination is recorded as unknown who go into work is about the same as the proportion on the programme as a whole. It is identical actually as a proportion on the programme as a whole. Chairman 219. I am sure we could keep you a good deal longer but I have one final question for you. We have said how comprehensively evaluated the New Deal has been. Do you know how much the evaluation programme has cost to date? (Tessa Jowell) Yes, the cost of the evaluation per person is œ7 per New Dealer, but the total cost to date has been œ4 million, which is less than one per cent of the total programme expenditure. We have seen on the strength of that about 31 published reports so far. I hope that what we have been able to convey to you this afternoon is the extent to which the evaluation has been fed back into the reshaping and the redesigning of the programme as it is delivered. Chairman: Thank you very much indeed on behalf of all of my colleagues for readily agreeing to come in front of us again and for the way in which you have both dealt with the questions. Thank you.