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Mr. Duncan Smith: I am glad that the right hon. Lady stands by that, and I shall question her later about other things she stands by. That promise at the beginning of the manifesto was then quietly dropped from the rhetoric of her right hon. Friend the Chancellor.
As my right hon. Friends the Leader of the Opposition and the shadow Chancellor have said, the Conservative party supports the aim of getting young people off welfare and into work. Of course we do--that was the position before the election and it remains the position now. It was one of our most fundamental objectives, and, I believe, the one in which we were most successful.
Let us be absolutely clear: the Government will want to claim the credit for reducing unemployment, but the work has already been done through our policies of
reducing burdens on business and creating new benefits, such as the jobseeker's allowance, which combines carrot and stick, and achieving sustainable economic growth. We therefore now need to define what the Government will need to do to succeed over and above that. In other words, we need to put a floor underneath the Government's expectations and claims, so that we may judge them over the course of the next few years.
Unemployment among the under-25s has fallen by 100,000 a year for the past four years--from 800,000 to 400,000--a fact that is often repeated, but worth doing so again. A similar steep trend has emerged in the number of those who have been unemployed for more than six months. It has fallen from more than 400,000 to less than 200,000--I believe about 178,000--in the past four years. That was done without a windfall tax, a tax on prices or a tax on pension funds. Britain's percentage of unemployment is among the lowest in the major European Union countries. Obviously, therefore, we support the Government's aim.
However, today and in the coming months and years we must ask ourselves, will the measures succeed as the Government wish, and will the proposals that they intend to implement not destroy jobs but create employment, which is the priority that the Government have set themselves? I am worried about that, and I believe that we have a right to be worried.
Our experience of government suggests to us--and, it appears, to most other commentators--that the Government's proposals are more than likely to create only temporary jobs, and are not, in the long run, the best way to remedy unemployment. Unfortunately, make-work schemes always cost more than they save. We know that; we have been around this loop before; the argument has been repeated when Labour was in opposition and now, when we are in opposition. Job-destroying taxation also costs more than it saves.
When the Government were in opposition, they embarked on a sort of Robin Cook's tour of the world, studying all the programmes that existed. They were followed by a team of economists, which eventually caught up with them and summarised all the programmes that they had considered. It was National Economic Research Associates which tried to find any make-work scheme that saved money as the Government claimed. It considered 17 schemes in 10 countries, and decided that they had all failed. None saved money in real terms. The reasons that NERA stated are obvious, and worth repeating.
First, money is spent on people who are likely to have obtained jobs anyway. NERA has estimated that up to 50 per cent. of wage subsidies go to people who do not need them.
Secondly, money is spent on "creating" jobs that are not "created" at all. Employers are simply destroying the jobs of people who are not eligible for the £60 subsidy--or whatever subsidy is given elsewhere--to employ people who are. The Economist has estimated that Labour's proposed scheme will destroy as many jobs as it creates, and NERA has estimated that only two out of every five jobs will be "really created".
Thirdly, money is spent on creating jobs that turn out to be temporary. Many business men have admitted that they could easily use the scheme to take on the
unemployed, employ them for as long as the subsidy exists and then replace them with another round of subsidised employees--the revolving door concept.
What checks, what elements of stricture, will the Government introduce to prevent that happening? The Minister for Welfare Reform knows that I have raised that matter in a roundabout way in relation to abuse of the system, but this obviously has an impact on young people's aspirations. If they find that their colleagues and friends are going through that process, many others will be deterred from taking advantage of the scheme. That is a very important aspect, which needs to be tackled.
The Minister for Welfare Reform (Mr. Frank Field):
How does the hon. Gentleman square what he has just said with NERA's overall finding that the Right to Work Bill would save money?
Mr. Duncan Smith:
I accept that NERA did say that, but I am considering the proposals that have been presented today and in the Budget. NERA studied similar schemes worldwide--the proposed scheme is largely based on what has been seen elsewhere and thought to work, especially the jobs, education and training scheme in Australia. Let us remember that it was said that the scheme would, net, save money. My question is, will it save money? I feel--as did NERA--that it will not do so. The jury is still out on the broader question whether it will, and the right hon. Gentleman knows that that is not yet proven.
Mr. Field:
"The right to work proposals" was a collective title. Under that title were included programmes such as those that the hon. Gentleman is now discussing.
I repeat my question: if NERA came up with an overall finding that such an approach would save money in the long run for the Exchequer and taxpayers, as well as doing an enormous amount of social good to the individuals involved, why does not the hon. Gentleman take that as his starting point instead of considering the individual parts of the programme, as he is doing?
Mr. Duncan Smith:
Whether or not the right hon. Gentleman is, I am a great believer in working from the bottom up, not from the top down, and I believe that the secret of the success or failure of these programmes lies in the detail of their implementation. If the scheme does not work, NERA's general conclusions will be irrelevant.
I have difficulty in understanding how NERA reached the general conclusions of its report. I do not wholly agree that that will necessarily be the outcome. I believe that the problem lies in the details, and I believe that I have a legitimate right to test the Government on those. We shall continue to do so in the next weeks or months.
If Labour Members believe, as they must, that reducing the cost of employing people by giving a subsidy of£60 a week will increase the number of jobs, they must accept that increasing the cost of employing people by introducing a minimum wage has the opposite effect. They are caught on the horns of a dilemma. Labour's welfare-to-work policy directly contradicts its industrial policy. On the one hand, the Department for Education and Employment will busily try to create jobs; on the other hand, the Department of Trade and Industry will be busy destroying them.
Worse still, the DFEE's make-work schemes could be temporary, and limited to a few hundred thousand jobs. If, as I and all my Conservative colleagues believe, the DTI's minimum wage comes into effect, it will negatively affect, not hundreds of thousands but millions of people. Obviously, that will depend on the level of the minimum wage.
Mr. Julian Brazier (Canterbury):
Before we leave the subject of subsidising work, were not the points that my hon. Friend has been making repeatedly made by Labour Front Benchers when we set up schemes such as the youth training scheme? That scheme had the narrow aim of providing work experience for young people. The much less restricted schemes that the Government are proposing--which apparently will be available to people of all ages who have been unemployed for a certain number of months--have none of the safeguards that the YTS has. Why do not Labour Members object to it?
Mr. Duncan Smith:
I am grateful to my hon. Friend; he makes his point powerfully. I shall speak about some of those contradictions in due course, and I hope and expect that the Government will be able to give an answer on one or two of them.
I am sure that the Deputy Prime Minister is bored and fed up with having it thrown back in his face, but he said of the minimum wage:
More specifically, however, let us turn to the changes to the responsibilities of the Department of Social Security. The next part of Labour's welfare-to-work proposals concerns lone parents, and I dare say that no one in the House has been more strongly identified with those than the Secretary of State for Social Security and Minister for Women has been for a while, so it is appropriate in many senses that she is at the Dispatch Box today, because that is a core part of the changes.
The Secretary of State has presented to the House proposals in three parts. The first part was to increase the maximum disregard for child care costs for those on family credit with more than one child from £60 to £100, and to increase the maximum age from 11 to 12. The second part was to train up to 50,000 young people to become child carers. The third part was to give up to 500,000 lone parents an interview to help them find a job. Those changes give rise to questions, and the detailed answers will hide or reveal the success or failure of the future programme.
I assume that, to increase the child care disregard beyond the £60 that the previous Government raised, the present Government--the Secretary of State especially--must have received evidence that there is no danger of the extra money being spent only on better-off lone parents. The right hon. Lady's predecessor in opposition as Labour spokesman on social security, the right hon. Member for Islington, South and Finsbury (Mr. Smith), strongly held the view that a disregard for lone parents mainly helped the better-off. He said:
I repeat my question to the Secretary of State--what evidence has she received to suggest that that will not be the case? The Government seem to have performed a volte-face, and I would like to know why.
The second strand of the programme will finance the training of 50,000 child care workers, and I have some concerns about that. The extra training clearly will not make it cheaper for lone parents to employ carers, because they will carry with them an extra amount of money because of the training. Having made trainers more costly, the Government will also ensure that they are paid the minimum wage--whatever it may be--which also increases costs.
The minimum wage will arguably render less-skilled child carers as expensive as more-skilled trainers are now, and more-skilled trainers will become even more expensive. Who will pay for their employment? If lone parents cannot afford a child carer--and the disregard will help only a small number, or else its help will be nugatory--what will happen to them?
Furthermore, the Secretary of State said that most of the carers to be trained will come from the ranks of young people who have been unemployed for more than six months. The figure we have is that they number 178,000, and she is suggesting that 50,000 of them will be trained as child carers--approaching one third of the group at whom she is aiming. Is that the case? If not, only some of the employers will receive the £60 subsidy, which will push up costs for those who are not part of the welfare-to-work scheme and for whom there will be no subsidy.
That raises bigger questions about training. One of the traditional problems with Government-sponsored training schemes is that, too often, they train people for inappropriate jobs. One of the schemes at which the Secretary of State and her hon. Friends will have looked is the JET scheme in Australia. One of the biggest criticisms of that scheme was that it ended up training many people as hairdressers. When they finished their training, they went back into unemployment, because no hairdressing jobs were available. [Interruption.] As the
Minister for Welfare Reform suggests, hairdressing is not something which concerns me. Perhaps, if more people were like me, we would not need hairdressers. Perhaps time will force him down that road also.
"any silly fool knows that"--
meaning that there would be a job shake-out. Apparently that is now not the case.
"many people in real need already receiving maximum family credit will not be able to benefit from the increase in the disregard."--[Official Report, 29 November 1995; Vol. 267, c. 1217.]
4 Jul 1997 : Column 527
That is how he attacked our original move on this. Some 310,000 lone parents are on family credit, and £10 million a year will be spent on them. Even if all the disregard went to lone parents--I understand that families where both parents work or where one is disabled will be eligible also--they would each receive only 62p a week. If all the 1 million-plus lone parents receiving Government assistance were to be eligible, they would each receive only 20p a week.
How will the Government escape from this problem? They must either promise that the programme will go over budget to provide all those people with a more significant amount, as clearly that is not enough, or they will have to accept that the disregard is likely to go to a small proportion of people--more than likely those who have child care now. After my right hon. Friend the Member for Hitchin and Harpenden created the£60 disregard on which the Government are building, there was a tendency for a large proportion of it to go to people already paying for child care. Those people, by definition, are more able to pay, so the new Government's measure will simply exacerbate the problem.
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