House of Commons - Education and Employment

Select Committee on Education and Employment Eighth Report

EIGHTH REPORT

The Education and Employment Committee has agreed to the following Report:—

NEW DEAL FOR YOUNG PEOPLE: TWO YEARS ON

1. The New Deal for Young People (NDYP) was launched in 12 Pathfinder areas in January 1998. It has now been operating nationally for two years. Prior to its introduction, we carried out an in-depth inquiry into the design of the programme and we have been conscious of our responsibility periodically to monitor its progress.[1] So central is NDYP to the Government's labour market policy, that its development and impact have been themes which have permeated much of the work of the Employment Sub-committee in this Parliament.[2] To mark the second anniversary of the programme, the Employment Sub-committee took evidence on 17 May 2000 from Rt Hon Tessa Jowell MP, Minister for Employment, Welfare-to-Work and Equal Opportunities.[3] This report highlights some of the issues that were raised in the evidence session. The Employment Sub-committee intends to undertake a full inquiry into NDYP in the Autumn and this will provide an opportunity to examine in more detail the issues raised in this Report.[4]

Expenditure on NDYP

2. The NDYP has been funded, along with other New Deal programmes, from the Windfall Tax, which has raised a total of £5,200 million. Expenditure on NDYP has been much less than was originally envisaged. In March 1998, the Government estimated that the total expenditure on NDYP for the years 1997-2002 would be £2,620 million.[5] To date, £611 million has been spent on NDYP[6] and the Government's latest estimate is that total expenditure on the programme to March 2002 will be £1,480 million.[7] The Minister told us that there were a number of reasons for the lower than expected expenditure:

unemployment was lower than had been expected;

a greater proportion of NDYP participants were leaving the programme during the Gateway than had been estimated in the original planning assumptions; and

the NDYP options had turned out to be cheaper than expected.[8]

One of the consequences of the reduced cost of the programme is that the unallocated portion of the Windfall Tax now stands at £900 million.[9]

NDYP outcomes

3. The Government is committed to achieving 250,000 job placements through NDYP in this Parliament. By the end of April 2000, 470,000 young people had started on NDYP and of those, approximately 330,000 had left the programme. Just over 215,000 NDYP participants have found work, and 162,000 young people have obtained jobs which lasted for more than 13 weeks. Of these, 139,000 were sustained, unsubsidised jobs. [10] The Minister acknowledged that the buoyant labour market had had a favourable impact on NDYP outcomes, particularly in accounting for the larger than expected proportion of participants who had been able to enter employment from the Gateway.[11]

The cost of NDYP outcomes

4. The Minister told us that the average cost of each job outcome was just under £4,000.[12] In establishing this figure the Government appears to have included jobs which have lasted for fewer than 13 weeks and subsidised jobs. Further, the estimate does not take into account the level of deadweight,[13] which could be as high as 60 per cent.[14] 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. The Minister pointed to research by the National Institute of Economic and Social Research (NIESR) which suggests that when other factors, such as the reduction in benefit payments and increased tax income, are taken into account, the NDYP will be almost self-financing.[15] We welcome the Government's commitment to achieving value for money in the NDYP programme.[16] This is a complex area and one in which independent analysis is essential. We look forward therefore to the further assessment of the macroeconomic impact of the programme by NIESR[17] and to the National Audit Office (NAO) value for money study of NDYP.[18]

5. The average cost of job outcomes in the private sector-led NDYP Units of Delivery is higher than in the public sector-led Units.[19] The Minister told us that the private sector-led Units of Delivery were more expensive because the contracts under which they operate are based on the planning assumptions that prevailed at the inception of NDYP.[20] We expect that the NAO's forthcoming value for money assessment of NDYP will want to examine the reasons for the inflexible nature of the contracts under which the private sector led NDYP Units of Delivery have operated and the cost of this inflexibility.

The sustainability of jobs obtained through NDYP

6. The Government defines sustained employment as jobs which last for more than 13 weeks. In the headline figures for job outcomes, a New Deal participant is only ever counted once as entering employment. Of those people who have entered employment through NDYP, approximately 75 per cent have had at least one job which has lasted for 13 weeks or more.[21] This still leaves a sizeable minority of people who have entered employment through the programme (25 per cent), but who have not obtained a sustained job. The Government also collects and publishes data on the total number of moves into jobs and on this basis over 40 per cent are unsustained.[22] The Unemployment Unit and Youthaid have expressed concern at this high level of precarious employment.[23] The Government has said little about these "false starts", although the Minister told us that "lots of jobs in our labour market now are very short-term jobs, and for many of these young people getting a short-term job is a very good thing for them, because it means that they start being in work, they stop being on benefit".[24] We are concerned by the relatively high level of moves into unsustained jobs and this is an issue that we will return to in our inquiry into NDYP.

Changes to the design of NDYP

7. One of the hallmarks of NDYP has been the commitment to continuous improvement, which has resulted in a number of significant changes to the design of the programme, particularly the Gateway period. From July 1999, the fourth month of the Gateway was made more intensive for all young people who reach that stage of NDYP. In addition, the 1999 Budget allocated funds for 12 Intensive Gateway pilots which began in August 1999. These provided more intensive assistance with job search and programmes to help with 'soft' skills, such as punctuality, team working and communication skills.[25] The Intensive Gateway has now been expanded nationwide. New NDYP participants will be required to attend a two-week course, which begins in the fifth week of the programme, and which aims to ensure that all job seekers can present themselves properly to employers. We welcome the Government's commitment to improving the provision in the Gateway. In our inquiry into recruiting unemployed people we will be examining the role of intermediaries in strengthening this provision. The Minister told us that the Department for Education and Employment had put forward further proposals to strengthen the NDYP, which are being considered by the Treasury as part of the Comprehensive Spending Review. It is not our intention in this Report to set out detailed recommendations for the re-design of NDYP.

Assisting the most disadvantaged people

8. Future developments of NDYP must be aimed at improving its performance in helping the most disadvantaged participants and participants from non-white ethnic minority groups to obtain sustained jobs. A national survey of NDYP participants has found that people from the most disadvantaged groups, such as the multiply disadvantaged, ex-offenders, the unqualified and drug/alcohol users were least likely to say that NDYP had helped increase their employability.[26] The Minister thought that NDYP was becoming better at focusing on the particular needs of these young people.[27] Proposals have been but forward as part of the Comprehensive Spending Review aimed at helping the most disadvantaged clients, who represent an increasing proportion of the shrinking cohort of eligible participants. The Minister told us that part of the expected additional funding would be used to provide a pre-NDYP programme for some of the most disadvantaged young people, particularly in the 16-18 age group, who "do not meet the labour market requirements for the New Deal".[28]

Delivering enhanced numeracy and literacy

9. The Minister told us that 40 per cent of the people on NDYP Gateway are functionally illiterate.[29] The Minister told us that all new participants are now automatically screened on entering the Gateway, in order that their basic skills can be assessed. In addition, 1,000 personal advisers are to be trained by the Basic Skills Agency in how to identify basic skills gaps and how to handle this issue with sensitivity.[30] The Minister told us that the intensification of the Gateway would cost an additional £400 per participant and that most of this money would be used to raise the level of basic skills.[31] We welcome the Minister's personal commitment to ensuring that nobody leaves NDYP illiterate or innumerate. We also welcome the use of additional funds to enhance the Gateway programme and to help train personal advisers in the identification of basic skills gaps.

Participants from nonwhite ethnic minority groups

10. Fewer participants from nonwhite ethnic minorities have been successful in finding jobs through the NDYP than white participants. The programme has been particularly ineffective in getting young Black Caribbeans into work.[32] The Minister acknowledged that this was the position and told us that the most important obstacle to employment was not discrimination by employers but a combination of: a lack of basic skills; a lack of confidence; and a lack of aspiration.[33] Others have argued that racism in the labour market is still a major problem for black job seekers. This is what we were told by the Black Community Agency for Regeneration and Development when we visited them in Sheffield earlier this year.[34] The Minister reminded us that the Government was committed to achieving parity of outcome between different groups of NDYP participants and outlined the role that intermediary organisations would play in achieving this outcome.[35]

Fulltime Education and Training (FTET) Option

11. Fewer than 20 per cent of participants on the Full-time Education and Training option appear to leave NDYP with the qualification for which they aimed.[36] Providers point to high drop-out rates, which they have blamed on a failure of personal advisers accurately to assess clients and refer them to appropriate courses.[37] It has also been suggested that the introduction of the Core Performance indicators in August 1998 re-emphasised the need to focus on job outcomes at the expense of clients gaining qualifications.[38] The Minister told us that the FTET option should not become "an excuse for not getting a job",[39] but that she knew of no evidence that personal advisers were pressurising people to get a job early, rather than qualify.[40] We recommend that the Government should publish data on the number of moves into jobs from the FTET option that are sustained for more than 13 weeks and for more than 26 weeks.

Environmental Task Force (ETF) Option

12. Approximately one third of all leavers from the ETF option enter unsubsidised employment. This increases to over 60 per cent if leavers to unknown destinations are not considered.[41] The Minister told us that it was necessary to make the ETF option more work-focused and to improve its performance in getting young people into jobs. She acknowledged the importance of intermediate labour markets (ILMs), particularly in areas where there was a lack of demand, and indicated that the Government was in discussion with ETF providers to see how the best use could be made of ILMs. The Minister also told us that, following the new contracting round, 20 per cent of payments to providers would be dependent on ETF participants obtaining a job.[42] We welcome the Government's recognition that intermediate labour markets have been effective in increasing the proportion of young people going into work[43] and we look forward to their increased use in the options stage of NDYP.

Follow-through

13. Approximately 30 per cent of all leavers from the follow-through stage of NDYP enter employment. The Minister told us that the level of contact between the personal adviser and participants at that stage of the programme was insufficient and that the follow-through was not always effective in getting the most disadvantaged clients into work.[44] The Minister indicated that proposals put forward to the Treasury as part of the Comprehensive Spending Review would mean greater involvement of personal advisers in the follow-through stage of the programme.[45] Some people, who have not been able to find employment, are now going through the New Deal for the second time. This presents a major challenge to the New Deal. Changes to the follow-through stage of the New Deal must take into account the need to provide a fresh approach for those clients for whom the follow-through was ineffective the first time around. We welcome the Minister's indication that proposals have been forwarded to the Treasury to increase the involvement of personal advisers in the follow-through stage of NDYP.

Leavers to unknown destinations

14. The destinations of nearly 30 per cent of the young people who leave NDYP are unknown and the proportion of young people leaving for unknown destinations has increased in the two years since the inception of the New Deal.[46] The Minister highlighted a survey which showed that 57 per cent of those who left NDYP for unknown destinations had found jobs.[47] The Minister told us that the survey was not sufficiently refined to give information on what proportion of these jobs were sustained (lasting for more than 13 weeks). The study did reveal that only 29 per cent of those surveyed were in paid work at the time of the survey, suggesting that many of the jobs were not sustained.[48] We welcome the Minister's announcement that forthcoming survey data of leavers to unknown destinations will include details of job duration.[49]

The involvement of public sector employers

15. With the exception of the Department for Education and Employment (DfEE), the performance of Government Departments in employing people from NDYP has been poor, in some cases strikingly so. As at 1 October 1999, 675 NDYP participants were employed in the Civil Service. Of these 63 per cent were employed by the Department for Education and Employment.[50] The Minister was reluctant to set targets for Departments, arguing that special treatment in recruitment should not be extended to NDYP participants. The Minister told us that some of the obstacles which departments had faced in recruiting people from NDYP were now being tackled and that their performance would be kept under review.[51]

16. The performance of the public sector in general in providing subsidised jobs for NDYP participants has been poor.[52] The Minister told us that the recommendations of the New Deal Task Force Group on the Public Sector,[53] led by Sir John Harman, were now being implemented and that the Employment Service and the Local Government Association (LGA) had circulated a leaflet setting out the benefits that the New Deal could bring to the delivery of local authority services.[54] In our first report on the New Deal we welcomed the inclusion of public sector employers in the subsidised employment option of NDYP[55] and in a subsequent report on the New Deal Pathfinders we highlighted the lack of engagement with NDYP by the public sector and some of the reasons for this outcome.[56] We are very disappointed that, almost two years on, the public sector has not proved more willing to offer job opportunities to NDYP participants. We welcome the Government's commitment to improving the performance of the public sector, and we urge the Government to bring forward plans to explain how its expectations of raising, from 1.2 per cent to 2 per cent, the percentage of employees across the Civil Service who are recruited from NDYP shall be met.[57]

The performance of the private sector-led NDYP Units of Delivery

17. Ten of the NDYP Units of Delivery are private sector-led. To date, the performance of these Units has not been exceptional. In terms of moving people into jobs, which is the headline Core Performance Measure, the majority of private sector-led units of delivery have underperformed their public sector counterparts, when compared with the performance of other Units of Delivery in their respective cluster groups.[58] The Minister did not seem to accept this analysis and she told us that there was not a significant difference between the performance of the private sector Units of Delivery and the performance of the public sector Units.[59] She cited as evidence of her view the performance of the North Essex Unit of Delivery[60] and the improvement in the performance of the private sector-led Unit of Delivery in Hackney, but she acknowledged that this improvement had been from a low base.[61] The Government has announced that it intends to publish a qualitative study of the 10 private sector-led NDYP Units of Delivery which involved "interviews with key players about how the New Deal is being delivered".[62] Although we welcome this announcement, in our view, a full evaluation of the private sector-led Units of Delivery should be undertaken and published, which compares the performance of the private sector-led Units of Delivery with the performance of the other NDYP Units of Delivery. It would be useful to have such an evaluation in the public domain before the completion of the new contracting round.

Personal Advisers

18. There is a general consensus that personal advisers are pivotal to the success of the New Deal. Evaluations have found that increasing caseloads have led to personal advisers working less intensively with individuals; personal adviser support falls during the options period and during follow-through.[63] The Minister told us that the caseload of personal advisers varied between 40 and 90 clients and that the intensity of contact with the client was determined by the personal adviser's assessment of the individual's needs. In some areas, particularly in London, turnover rates for personal advisers can be as high as 27 per cent, while in other areas, particularly in the North, turnover rates can be as low as four per cent. The Minister announced that career opportunities for personal advisers were to be enhanced in an effort to reduce the level of turnover.[64] Turnover rates among personal advisers is a factor which will affect the effectiveness of the New Deal. We welcome the Minister's commitment to improving the career opportunities for personal advisers. Firm proposals to achieve this aim should be brought forward at the earliest opportunity and we recommend that the Government should consider introducing reduction in turnover targets for those areas where turnover is particularly high. In addition, we recommend that the Government should publish every year turnover rates for each Jobcentre.

The evaluation of NDYP

19. The evaluation of NDYP is the most comprehensive assessment of an employment programme undertaken in the UK. Qualitative assessments examine the experiences of programme participants and participating employers. Quantitative studies provide data on the outcomes of the programme overall, details of its impact by sex and ethnicity and its effectiveness at getting disabled young people into jobs.[65] We commend the Government for instituting such a comprehensive programme of evaluation. We recommend that summaries of the research reports should be posted on the New Deal web-site.

1 Second Report from the Education and Employment Committee, Session 1997-98, The New Deal, HC 263-I. Back

2 Eight Report from the Education and Employment Committee, Session 1997-98, The New Deal Pathfinders, HC 1059; First Report from the Education and Employment Committee, Session 1998-99, Active Labour Market Policies and their Delivery: Lessons from Australia, HC 163; Seventh Report from the Education and Employment Committee, Session 1998-99, The Performance and Future Role of the Employment Service, HC 197; Fourth Report from the Education and Employment Committee, Session 1999-2000, Employability and Jobs; Is There a Jobs Gap?, HC 60-I. Back

3 Hereafter referred to as "the Minister". Back

4 The terms of reference for the inquiry will be published in July. Back

5 Budget 1998: New Ambitions for Britain, HM Treasury, March 1998, HC 620, Table 3.1, p 43. Back

6 Q. 15 and footnote. Back

7 Budget 2000: Prudent for a Purpose: Working for a Stronger and Fairer Britain, HM Treasury, March 2000, HC 346, Table 4.1, p. 72. Back

8 Q. 3. Back

9 Budget 2000: Prudent for a Purpose: Working for a Stronger and Fairer Britain, HM Treasury, March 2000, HC 346, Table 4.1, p. 72. Back

10 Statistical First Release, SFR 27/2000, 29 June 2000. Back