House of Commons - Education and Employment

Select Committee on Education and Employment Minutes of Evidence

Memorandum submitted by the Local Government Association

INTRODUCTION

1. The Local Government Association (LGA) is the representative body for all local authorities in England and Wales. The LGA is committed to working closely with its member authorities to support reform and improvement in local government. The Association welcomes the announcement by the Employment Sub Committee of the Education and Employment Select Committee, that it is to carry out an inquiry into Employability and Jobs. The LGA has invited and encouraged all local authorities to comment and this response combines the key issues made within all responses received. Individual local authority responses are available on request.

2. On a national level, the overall rates of unemployment and long term unemployment are falling. Government figures[1] from the summer of 1999 revealed that employment was at its highest level ever, at 27.4 million. Unemployment on the claimant count measure has also gone down and is at the lowest level since May 1980. However, these figures do not reveal the significant local patterns in employment—there are clearly still areas of the country with pockets of persistent high long term unemployment and inter and intra-regional differences. In the most deprived areas, high unemployment is accompanied by widespread economic inactivity.

3. A "jobs gap" is created when there are more unemployed people than job vacancies—an imbalance between labour supply and demand. The gap appears to be a geographical phenomenon, varying more between local areas within regions than from region to region and arguably having a profound effect on a number of UK cities and conurbations. In more deprived areas of the country, the jobs gap is noticeably larger.

4. Increasing the employability of local people is one of the broad objectives of current labour market policies. The term is used in a variety of contexts with a range of meanings but broadly, it focuses on a person's ability to be employed—ie what can be done by a person and through external measures to improve his/her attractiveness to potential employers. Clearly though, if there are no jobs, then however employable a person may be, their efforts will not be rewarded. The opportunity to work is critical to increasing employability and increased employability is key because inevitably it produces a more flexible and potentially active labour market. Efforts to increase employability should include an examination of the needs of individuals and help for them to address personal barriers to employment.

5. However, tackling unemployment is not just about getting people into jobs, there are wider benefits to increasing employability and creating jobs such as promoting social justice and increasing social inclusion. Tackling the problems of social exclusion should mean making work and independence possible for everyone by empowering individuals, families and communities to find the work they seek.

6. Local authorities can make a significant contribution to the stimulation of economic growth through their many and varied roles in local communities. The recent Audit Commission Review of Economic Development[2] revealed that local authorities in England and Wales spend £322 million on economic development each year and also manage billions of pounds of domestic and European regeneration funds. Attracting jobs into an area and getting local people into jobs are key priorities for most local authorities especially in areas of high unemployment. But just as unemployment rates vary across the country, communities in the UK are different and local authorities need the freedom to tackle unemployment in appropriate ways—no single approach to unemployment will suit all. Some of the numerous roles which local authorities play in employment are:

7. As bodies accountable to the local electorate, local authorities are in a unique position and have experience of community leadership, strategy development, co-ordination and consultation. They are therefore in a strong position to represent the interests of their communities and successfully deliver employment schemes in partnership with other organisations and unemployed people.

8. Local authorities in England and Wales have very different tasks ahead of them in terms of tackling unemployment and increasing employability, depending on the history and nature of their workforce and the supply of local employment. Persistent long term unemployment may be a sign of a structural jobs gap in the local economy and may not be solved by merely increasing the employability of the workforce. Special efforts will also be needed to increase opportunities for employment, including concerted effort to attract inward investment and encourage "common ownership" with enterprise and partnership-working amongst existing local enterprise. These efforts should ideally occur alongside steps to increase local employability so that needs of employers and potential employees are effectively matched.

THE EXTENT AND CAUSES OF ANY GEOGRAPHICAL JOBS GAP—WHICH GROUPS MIGHT BE AFFECTED

9. The LGA supports the view that there is currently a jobs gap in the UK. It has occurred because there are more unemployed people than vacancies within all stages of the economic cycle. The gap varies geographically in the UK and is particularly apparent in areas of high deprivation where there is high long term unemployment. Geographical disparities can operate at a variety of scales—the gap is less marked at national and regional level and is plainest to see at the local level. It is particularly evident in those areas of the country which, historically, have been dominated by heavy industries which are no longer viable or sustainable eg closure of mines, decline of the textile industry. Once the industries close, local people must diversify their skills if they wish to remain employed, but this is not always possible. The Social Exclusion Unit's Policy Action Teams (PATs) are currently in the process of making their recommendations on tackling various aspects of deprivation in poor neighbourhoods—the findings of PAT 1, looking at jobs in deprived neighbourhoods, is awaited.

10. A recent Joseph Rowntree Foundation (JRF) study[3] which looked at Britain's 20 major cities, suggested that they had lost 0.5 million jobs since 1981 while the rest of Britain had gained 1.7 million jobs. Each case study told a different story but, for example, in Plymouth's case the gap was caused by defence cut backs resulting in a severe loss of full time, manual jobs. The decline of manufacturing jobs has particularly affected men and the JRF study claims it is responsible for the bulk of the decline in urban employment.

11. As well as a varying geography, the jobs gap has other characteristics. In addition to the number of jobs available locally, the types and quality of job available across the country also varies eg lack of hi-tech or specialist computer jobs in certain areas or lack of manufacturing employment. In some areas, dependent on a few key sectors such as agriculture and tourism, the majority of jobs available may be low waged, seasonal and often part time with little prospect of training or permanency. Special efforts need to be made, beyond increasing people's employability, towards providing a better range of opportunities in terms of training and employment.

12. The jobs gap cannot be explained by any one factor—its characteristics vary on a geographical and local level. The gap seems to be easily reinforced by elements such as unequal distribution of skills and aptitudes or the national trend toward greater income inequality. Some elements which may fuel a jobs gap in an area include:

13. Certain groups in society are likely to be more affected than others by a jobs gap for the simple reason that there are likely to be more barriers to them participating in employment. Those most affected may include:

14. In addition, in some areas men and women may be affected differently by the jobs gap. For instance, there may be a disparity in demand for men looking for work in construction or traditional local industries such as defence and women looking for service related work. There may also be a difference in the aspirations of the unemployed and the jobs actually available to them. Certain jobs in some areas of the UK are perceived as "proper jobs" eg manufacturing—particularly by men. This may make service sector vacancies difficult to fill for a number of reasons including a company's terms and conditions or its failure to invest in training.

15. In addition, transport difficulties and therefore the potential mobility of the unemployed, may restrict those living in certain parts of the country from taking work elsewhere. In this sense, there may be a "transport gap" in some areas of the UK that is a huge barrier for many seeking work—commuting to jobs may not therefore be an option, for example, for those in deprived neighbourhoods.

How successful the official measures, such as the claimant count area statistics and those provided by the Labour Force Survey, are at presenting the spatial disparity in UK unemployment;

16. There are different ways of defining unemployment and this clearly affects the way unemployment figures are determined. Increasingly, the International Labour Organisation (ILO) definition is used which broadly includes "those seeking work and available for work". Official national statistics for unemployment are used widely by many groups but their usefulness in presenting the spatial disparity of unemployment in the UK varies depending on the level of data recorded. Most authorities who responded through the LGA stated that official measures are poor at showing spatial disparity at local level. There is a need for more accurate local information about the delivery of labour market services and about employment and unemployment rates locally.

17. The claimant count is the unemployment count based on the number of people claiming benefits. It was the main source of such data until the Labour Force Survey (LFS) estimate became available on a quarterly basis in 1992. Administered by the DSS, the claimant count area statistics have been heavily criticised in the past as they exclude some sections of society eg large sectors of the community who consider themselves unemployed but do not claim benefit or those who are not working and also not claiming benefits.

18. The statistics may also hide the fact that a significant number of people have effectively withdrawn from the labour market and are not actively seeking work but would do so if job opportunities were available ie the fact that "hidden" unemployment exists. Self employment rates and underemployment are also excluded. However, the claimant count area statistics do allow useful comparisons to be made in terms of spatial disparities in unemployment within the UK.

19. The LFS is a continuous survey carried out on behalf of Government by the Office for National Statistics. Results are reported quarterly and in each quarter, around 60,000 randomly selected households are interviewed, either face-to-face or by telephone. Questions cover a very wide range of topics concerning employment, training, qualifications, sickness and the demographic characteristics of respondents. The survey is used to derive estimates of unemployment based on the definition used by ILO and covers unemployed people other than benefit claimants. The ILO unemployment figures are therefore a better measure of unemployment than the claimant count area statistics—the main advantage is that they contain information not available from the official data sources on occupations and educational qualifications of the population. Unfortunately, the LFS figures are currently based on population figures from the 1991 census which undermines the quality of the data—use of mid-census figures might alleviate the problem.

20. Because of its sample size the LFS is insufficient for use at the local level. Deprivation is very often a local problem and although the LFS provides broad indicators which should be useful at the national level, ward level data is fundamental for tackling pockets of local deprivation. The lowest level data generally available is through the Employment Service District figures but these data are not always helpful. For example, Chester has recently revised its ward boundaries because a significant area of deprivation was hidden within two highly affluent wards—this has now been addressed by creating a specific ward. Sometimes figures can also be skewed by neighbouring authority statistics eg Calderdale and Kirklees. Unemployment may also be measured within local authority areas, through "Travel to Work Areas" which are based on commuting patterns from the 1991 census.

The impact of any jobs gap on the effectiveness of supply side policies, such as the New Deal, ONE and Employment Zones;

21. Over the last few years, a number of "supply side policies" have been introduced to counter high levels of unemployment and particularly long term unemployment. Under the ethos of the new Labour government, there has been a clear message that unemployed people have a responsibility to find work as much as they have a right to benefits. The current climate encourages testing of new approaches (eg Employment Zones) and the LGA would suggest that local innovation and flexibility should be the key to tackling local employment, working with local people to provide schemes appropriate to local needs.

22. Local authorities have had an important role in numerous employment initiatives, particularly as partners but very often as employers themselves. There is a willingness from local authorities to contribute towards making the national schemes a success as it is in the interests of all authorities to combat local unemployment as part of economic development strategies.

23. Recent supply side policies have undoubtedly helped thousands of people move into employment, but to be more successful in the future they will need to concentrate on stimulating more demand from potential employees and employers. The policies have different aims eg making work pay or helping people make the transition from welfare to work. The New Deal has generally been hailed as a success so far, employing its 100,000th New Dealer on its recent first year anniversary. Some of the related New Deal strands such as the New Deal for 18-24 and Long Term Unemployed have given more opportunities for claiming Job Seekers Allowance and other measures are widening participation in employment eg opportunities for disabled people, lone parents, partners of the unemployed and those over 50 on the New Deal. There are also a number of ONE pilots about to start operating and their impact remains to be seen. More intensive intervention with the clients together with the introduction of tax credits and other work pay initiatives, such as the recently launched Working Families Tax Credit, could have an impact on hard to fill vacancies.

24. Of course, there have been some difficulties in implementing the New Deal at the local level. Problems have included a mismatch between vacancies on display and those sought by New Deal clients. In addition, some authorities have highlighted that the Gateway is failing many clients, especially the young who may get "stuck" in the system. Employers are becoming more critical when looking for employees in terms of both quality and quantity, which obviously impacts on the success of the scheme. The co-ordinated multi-agency approach, which is needed to tackle the lack of support services, can be difficult with barriers to work including childcare, affordable transport and an inflexible benefits system. Also, a far larger percentage of clients than was forecast have significant personal barriers to overcome such as transport problems, basic skills problems, lack of work experience problems, drug/alcohol problems or health and disability problems. In terms of local authorities as New Deal employers themselves, some authorities, for example Knowsley MBC, have made outstanding efforts so far and the LGA is working closely with the New Deal Task Force in order to build on this good practice over the coming year

25. As part of a raft of Area Based Initiatives, the prototype Employment Zones (EZs) have aimed to tackle pockets of high long term unemployment and the fully fledged zones, due to begin next year, will continue this experiment. The prototypes have been in place since February 1998 and some, eg Plymouth EZ have been successful in placing clients in sectors such as leisure, tourism, retailing and call centres. However, these jobs are not always suited to all potential employees eg men made redundant from manufacturing and defence industries—many of the positions are casual and low paid. As a result of this, a number of the EZs have identified job creation as one of their key challenges.

26. Beyond national DfEE funded programmes, funding for initiatives from European Structural Funds and the Single Regeneration Budget (SRB) have continued—there are numerous examples of local authority owned schemes which are successfully employing local people through such funding streams—the advantage of these schemes for local authorities is that they allow the freedom to tailor-make schemes to local need.

27. At the local level, because of the numerous approaches available for delivering employment, there can inevitably sometimes be a lack of coherence due to:

28. It is clearly vital that the plethora of supply side policies and their relationships and objectives are "joined up" at the national level so that they make sense on the ground where employment is actually being delivered. Another important element of supply side policies is an effective and accurate evaluation and monitoring system which is operational right from the start and assessed in relation to other employment and regeneration initiatives.

The extent of local, national Government and European sponsored initiatives aimed at creating a better balance between the supply and demand for jobs at the local level and whether these are sufficient;

29. All employment schemes are delivered at the local level and are heavily reliant on the successful integration of policy at the national and European level, and increasingly in future, at the regional level. Although the new Regional Development Agencies (RDAs) have been given the task of producing a regional skills strategy and have a small budget for implementation of skills policies, there is a question over whether the agencies will be able to play a full co-ordinating role in this area as they lack control over key funding such as DfEE budgets for work based training formerly administered by Training and Enterprise Councils (TECs). Local, national and European funded initiatives have had varying success at bridging the supply and demand gaps in employment depending on the requirements and opportunities in the area they focus on.

30. Local labour market initiatives, predominantly funded through SRB, have had more success in tying demand and supply together through pre-recruitment training programmes in partnership with investors and linked to specific developments. There is a need to join-up programmes in order to expand eligibility, reduce "cherry picking" of participants and provide sustained support for those most distant from the labour market. There is a plethora of different programmes and cracks between them are emerging which do not help supply or demand. There also needs to be more support for the "supply" side of the employment equation. Small and Medium Enterprises (SMEs) often struggle to develop appropriate training programmes and they hold the potential to offer a number of jobs locally.

31. Effective partnership is therefore one key to the success of many employment initiatives. This approach has been particularly effective through Intermediate Labour Market schemes (ILMs) which have been developed by organisations committed to their local areas. Examples of local authorities involved with ILM schemes are provided in the appendix.

32. The recent Audit Commission Review of Economic Development activity revealed a number of problems in relation to employment delivery connected to local and national frameworks. The report identified a lot of good local practice but also found that fragmentation and duplication of effort hampered efforts to foster economic development. The basic problem lies in the short term approach to planning schemes which is not helped by the national framework which focuses on bidding for funds and administering a complex funding regime at the expense of long term goals. The key national employment policies also tend toward the supply side and increasingly deal with employability issues but they are not necessarily focusing closely on employer's needs and labour market changes.

33. The EU has made employment and the tackling of unemployment its number one priority for the coming year. All Member States have readily accepted the adoption of the Luxembourg process to implement the European Employment Strategy. The EU is now currently discussing the evolution of local employment action with new proposals awaiting agreement, for implementation from next year. The main initiative of the European Commission has been the Territorial Employment Pacts (TEPs). This initiative was designed to highlight the importance of locally based schemes to combat unemployment and to identify the difficulties encountered by local and regional players. The main characteristics of the TEPs were that projects adopted a bottom-up approach, were always delivered via a local partnership and that schemes were innovative.

34. The funding for the TEPs[4] is usually a mixture of public, private and European funding. The Cultural Industries Quarter (CIQ) initiated by Sheffield City Council is a good example of a public and private partnership in local regeneration. The City Council adopted a strategy to diversify the local economy and promote new labour markets. The CIQ has emerged as a lively and vibrant location for business, education and culture and is the home to over 100 media and science related business including a significant number of arts and music venues.

35. There is clearly a need to "join up" the aims and aspirations of all the programmes, at whatever level they exist and encourage the community to get involved with designing the programmes to meet the needs of the individual area and its employment opportunities, No single agency is responsible for providing employment or increasing employability. Thus employment delivery is dependent on integration and effective partnership working and co-operation is important at all levels from development of schemes to monitoring their effectiveness. Efforts should be made to pull together local structures and good practice in a national framework. CLES[5] has recently suggested the formation of "Local Employability Partnerships" in areas of high unemployment where the partner agencies would retain their own budgets and expertise but all work within an agreed strategy. Jobs pools were also recommended as one solution to tackling unemployment, working by a sophisticated "matching process". Partnerships should identify the needs of the unemployed and the needs of employers and create plans to provide the right jobs needed in the specific area. The pools could be managed in a flexible way, responsive to needs and characteristics of the local labour market. These approaches would merit further investigation.

36. It is undoubtedly true that much more can be done to better integrate employment generation policy with labour market measures within current arrangements. The arrival of the RDAs would offer the opportunity for a more integrated approach to be taken at the regional level combining inward investment, enterprise support, skills, training and regeneration policy. However, the Government's current proposals for reforming the arrangements for Post 16 education and business support as part of the review of TECs, may have the opposite effect. It appears that current proposals will involve by-passing the regional level in favour of creating a new sub-regional tier of DfEE quangos or DTI franchisees. The decision to split the current enterprise/skills and training function of TECs may also lead to less integration of policy. In awarding the franchises to run DTI contracts for business support which are currently led by TECs, the LGA is arguing for the criteria to include the need to demonstrate integration with the RDA skills and economic strategies and with the local authority's economic development strategy.

EXAMPLES OF GOOD PRACTICE IN THIS AREA

37. There are numerous good practice examples of local authority involvement in employment initiatives across the country. A selection of examples are attached at Appendix 1. Further examples are available on request.

CONCLUDING POINTS

38. There is a jobs gap in the UK which is centred on a number of distinct geographical areas and caused by local barriers to employment. Although unemployment is generally falling across the country, aided by the wide range of national employment policies, there are still pockets of high long term unemployment which need to be tackled but which blanket measures may not be able to address alone, due to the range of barriers faced by people in these areas. The task of addressing these areas of high unemployment is made difficult at the local level by the absence of reliable local employment data.

39. It is therefore important to look again at expanding labour demand at the local level and provide tailor-made schemes for those who can work. Local authorities are clearly one of the key players in providing employment at the local level, through their various responsibilities and services provided to the community and their accountability to the local electorate. It is also important to go beyond focusing purely on job outcomes in terms of numbers and trying to understand why approaches work or do not work and what other benefits employment schemes may have had—eg social inclusion, training, regeneration etc.

40. The initiatives which seem to have been most successful have occurred when schemes have been devised locally and adapted for individual circumstances. The many advantages of localised employment policies include this adaptation to local circumstances, better targeting of vacancies and understanding of the needs of the long term unemployed and the opportunity to work with them and tackle problems, such as discrimination, at the root. The LGA would strongly argue then that what works best are locally defined solutions which have sufficient flexibility and autonomy to be responsive to local needs and conditions. Unmet needs may also be effectively addressed by the voluntary sector and third sector organisations such as co-operatives, community enterprises, mutuals and other social economy actors which are becoming increasingly important.

41. Offering individual solutions to the long term unemployed, to overcome their personal barriers, is one important element of employment schemes and where this has occurred, it has had significant success. This sort of good practice needs to be encouraged and spread. Reducing unemployment and increasing employability is a lengthy process which is linked to the opportunities available locally. Significant steps to reducing the jobs gap will only be achieved when an integrated approach is taken by carefully matching supply to demand at a local level, maintained by effective partnerships between local organisations, encouraging local innovation and involving and listening to the needs of the unemployed themselves.

1 DfEE press release (11 August 1999) Labour Force Survey figures. Back

2 Audit Commission (1999) "A life's work: Local authorities, economic development and economic regeneration." Back

3 Turok, I and Edge, N (1999)"The jobs gap in Britains rities: employment loss and labour market consequences". Back

4 Territorial Employment Pacts - example of good practice Eurpean Commission. Back

5 CLES (1999) Employability through work. Back



© Parliamentary copyright 2000	Prepared 19 January 2000