Select Committee on Education and Employment Minutes of Evidence

Examination of Witnesses (Questions 300 - 318)



  300. In fairness, we have to say that the same man, for whom I have the greatest respect, was Chairman of the Task Force and said that much that passes for skills gaps in the market place is really poor recruitment practice on the part of employers. Can the Employment Service do anything about that? Is it part of your function to assist employers to improve their recruitment practice?
  (Tessa Jowell) Yes. The Employment Service can help with that and provide advice to employers, and already does so, advice on practices which may be directly or indirectly discriminatory, taking vacancies that pay the national minimum wage and so forth. The sort of thing he is talking about is an employer who may be a small employer who has got a vacancy and is not particularly clear about the sort of person that they are looking for. They may have a large number of people therefore coming through their door for interview, none of whom is right. Had they had the opportunity for a discussion with somebody at the job centre before they embarked on the recruitment process they could have perhaps been more focused about what they regarded as the key attributes.
  (Mr Tollyfield) There is quite a lot that we do in terms of checking that our vacancies do comply in terms of registration. For example, just something very simple: our job centre managers do a regular board check where they check the range of vacancies that they have on display in their offices and obviously we will update that in terms of how we do it as we move into more advanced mechanisms. We also take written assurances from employers that they make appropriate checks on successful candidates where there is work with vulnerable groups. It has moved to the extent where, for example, Tesco in Seacroft in Leighds really have done a lot of work with us on their recruitment processes so that they can take in people who are unemployed from the local community and develop their recruitment practices to make them more open.

Mr Pearson

  301. Can I explore the area of the role of employers in the Employment Service in the local strategic partnerships and the role of employers in the direct delivery of the New Deal? What I want to get at is, are you satisfied with the current level and range of employer involvement? What lessons have you learned from involving employers in local delivery of the New Deal and, given that TECs have often filled their representational role in local partnerships, what implications do you see from the abolition of TECs and their replacement by the Learning and Skills Councils for employers being involved in these partnerships?
  (Tessa Jowell) First, in relation to the replacement of TECs by Learning and Skills Councils where 60 per cent of the members of the board will be from local business, therefore will be representative of employer interests, I think it is strong evidence of our determination to focus training and learning on what the local labour market needs and getting a much closer alignment between the needs of the local labour market now and in the medium term and the training opportunities extended to job seekers. The new structure is intended to deal with precisely the importance of meeting local labour needs.

  302. Can I take you up on that? At the moment it tends to be in a number of areas the local TEC person or the CCTE person who sits as the employer representative on a local regeneration partnership or any other local strategic partnership. With TECs and CCTEs going I do not see that necessarily the Learning and Skills Council is going to have an employer representative that will fill exactly the same role because it would normally take a full time person on the board which you are talking about and obviously they would be people in a non-executive capacity.
  (Tessa Jowell) I still think that if you want the representation of a range of employer interests it is very hard in most parts of the country to identify a single employer who will have the capacity to represent the range of public/private not-for-profit interests in a local labour market. That is why the proposals which will strengthen and give greater scope for diversity through the Learning and Skills Council will do better by local employer needs.

  303. Are you satisfied with the current level of employer involvement at the moment in the delivery of the New Deal?
  (Tessa Jowell) Let me say a word about the employer coalitions which we have operating in 11 big cities. We would like to see more employer coalitions. They have been a highly successful way of doing two things: first of all, providing a short line between the delivery of the New Deal and what employers need but also providing very high level employer sponsorship of the benefits of New Deal. What I always say about New Deal employer involvement is that we have moved beyond the early days when a lot of employers signed up because it was an expression of altruism. This is about hard nosed competitiveness, about recruitment in a tight labour market and making sure that your business benefits from at the moment an untapped pool of talent. Two weeks ago I presented the awards at the London Employment Association ceremony and what you had was probably 20 awards for real innovation and commitment from businesses large and small. It was a tremendously uplifting event and was a very good example of the way the partnership works at its best. Wherever I travel round the country and I talk to people who are involved in employer coalitions they are prepared to give their time, give their effort. They have been heavily involved in discussions about the continuous improvement and development of the New Deal and we value that. As I say, we have 11 up and running and we would like to see there being more in other parts of the country.

Mr Twigg

  304. Can I move us on to an issue that has come up with a number of the witnesses that have come before us in this inquiry? In your memorandum it states that the Employment Service "sees employers as critically important customers". Others have argued to us that we should go further than that and see employers as the main customer of the Employment Service. What are your views on this, Minister?
  (Tessa Jowell) I think the Employment Service has two customers, the job seeker and the employer, and success is measured by putting them together, getting the right person into the right job, filling the vacancy that the employer has.

  Mr Twigg: I agree.

Mr Allan

  305. Can I move back to the issue of private agencies which you referred to earlier, saying that you did want to build on productive partnerships with them. I am just wondering how easy you think this is going to be given that effectively what you have got is a free service trying to work with what could be seen as their competitors, people who make their living by offering recruitment functions in an increasingly confused market often. We used the Dixons example earlier. A company like that coming into a new area could go to the Employment Service to do its recruitment, it could have in-house recruiters, it could have a contractual relationship with a large company like Reed which does their recruitment for them. This is quite a complex scenario. My understanding is that there was a pilot scheme to co-locate the Employment Service and Reed in Woking which broke down because of these competitive issues. How well do you think you are able to work through some of that to get the Employment Service to work with private agencies?
  (Tessa Jowell) A word about Reed in Woking. That was exploring and piloting a view about a particular potential extension of the Employment Service's role in relation to the placement of people already in work. It was a pilot, the experience of which showed that there was not a major need for this particular kind of service, so it was discontinued. We have relationships with Reed who are our private sector partners in running the New Deal for young people in other parts of the country, Hackney particularly. Ten per cent of the units of delivery for the New Deal for young people are private sector led. A higher proportion, about a third, of the delivery of New Deal for 25-plus is delivered by the private sector. We see enormous benefits in tapping into the potential for greater innovation, greater flexibility with the private sector and we feel that there is a lot to learn from that diversity but the relationship is still at an early stage and I think that what is harder to give you is some firm real evidence of experienced based conclusions about the difference of approach between the Employment Service and the private sector. We are working on it and perhaps if I come back in a few months' time we will be closer to being able to elaborate on those distinctive gains.

  306. I look forward to that. Can I ask about a related issue, how far you are prepared to place a level playing field? In your memorandum you talked about offering employers financial support to take on unemployed people, which is potentially part of your strategy and you said that you believe that subsidies can have a role to play in fair recruitment by causing employers to use the Employment Service or job broking agencies in the private and voluntary sectors. Is the implication of that that if you were to offer subsidised employment options these would not be exclusively the preserve of the Employment Service but they could be offered through other agencies as well and that an individual could choose which they went to, the client would choose whether to go to an agency or the Employment Service, and if they qualified the job subsidies would be available generally?
  (Tessa Jowell) There are two things there. I do want to place on the record as an example of public/private sector partnership in delivering Employment Service Working Links which is perhaps an example of how we dissolve the boundary between the public and the private sector, which is running nine of our links services as a private/public sector partnership combining the Employment Service, Ernst & Young and Manpower. All the early indications are that that is enjoying great success in getting some long term unemployed people into work. Turning to your question about subsidies, the subsidised employment option, to take it at its most generic, is a feature of three of the New Deals, New Deal for young people, New Deal for 25-plus, and a slightly different employee subsidy for the New Deal 50-plus. We have some evaluation evidence in relation to the effectiveness of the subsidy in relation to the New Deal for young people. What is interesting there is that employers did not see this as a major incentive for taking the young person on. It is a welcome extra to focus on the lower level of effectiveness that we would expect a young previously unemployed person to operate at in the early weeks and months of their involvement with a new employer, so the subsidy is intended to compensate for that, linked to a training allowance. I think that as the New Deal develops and as the existence of the New Deal begins to change the labour market, particularly as research has shown that it generates a labour market which is operating at a higher level of skill, two things are clear: first of all, the importance of young people, or indeed older people, having the essential work readiness skills as a key determinant of the likelihood of their staying in work, and secondly, remembering that none of the New Deals, but particularly the New Deal for long term unemployed people, is about simply getting people into an entry level job. It is about getting them into a job with the ambition that they then stay in work and they progress: a job, a better job, a career. The combination of work experience and employer subsidy and training is one of the ways in which we believe that we can underpin the essential components of the work readiness curriculum if you like. That is why we in the months to come intend to focus much more heavily on subsidised work experience as a first step linked to in-work training for people who already have the essential basic skills which are a prerequisite of long term employment.

Mr Nicholls

  307. I want to ask you something about what the Government is expecting to see out of the Innovation Fund. The sort of things I have in mind is how you are going to be able to judge the success of the initiative, will you expect to have enough high quality bids under the Innovation Fund to justify expenditure of £9.5 million? Will additional funding be made available if the Fund is over-subscribed, has any estimate been made of the Fund's impact on the recruitment of unemployed people, and perhaps what plans you might have to extend this model across other labour market initiatives. It is really a question of how you see that whole area of the Innovation Fund and its success.
  (Tessa Jowell) We see the Innovation Fund as being very much the venture capital for the New Deal to help us test new approaches ahead of where we are with the delivery of the mainstream programme at the moment. As you will probably be aware, we see the Innovation Fund as having a particular role to play in helping us to identify the nature of the most intractable obstacles to employment for the most disadvantaged and then also to understand more about successful strategies to remove those barriers to their long term unemployment. We are also very keen to explore the scope for more flexible local approaches that reflect directly the needs and nature of the local labour market. That is the context. The £9.5 million to which you rightly refer is funding for the Innovation Fund over three years and we are at the moment considering the second and third stages of the Innovation Fund for which £4.5 million will be available. The first stage of the Innovation Fund, £5 million over three years, was allocated for the development of intermediaries in the 11 areas of the country that I referred to a little while ago which are covered by New Deal employer coalitions and the remaining £4.5 million is intended to apply similar test bedding to other parts of the country which are not at the moment covered by employer coalitions. In this second stage we are very keen to focus on raising our sights in terms of the kinds of jobs, and secondly on retention. We see the intermediaries as in a sense offering us a kind of fast forward view of the film where we might be in two or three years' time depending on the success of these small scale value for money local innovations.

  308. Are you saying anything to us yet about the success of them or otherwise?
  (Tessa Jowell) I think it really is too early to say. We expect the full evaluation of the first wave to be available in the spring and I will obviously be very happy to supply the Committee with the results of that when the time comes.


  309. It has been very remiss of me. I should have apologised for our colleague Judy Mallaber who was very disappointed that she could not be here today but she has had an announcement of rather a lot of redundancies in the textile industry in her constituency. I raise it at this moment because Judy and I went to see one of these demand-led programmes at NEWTEC in Newham and also the Strive elsewhere. We have seen these things in the States, those of us who went to the States, and we were rather struck with the effectiveness of these two particular organisations as an example of the kind of innovative way that the Government are trying to work in getting closer to employers. One of the problems that we discovered was whether it was possible to transfer what was successful in the United States even elsewhere within the States, but particularly in relation to what is happening in this country. Are you fairly confident that we can translate some of those successful programmes?
  (Tessa Jowell) That is why we are interested in funding some local pilots through the Innovation Fund. As you will know (because you have seen it) the numbers so far being placed into work through NEWTEC are small, less than ten, but what they are doing and what they are being successful in doing is getting people into jobs paying over £20,000 a year. That is a huge success for people who previously were so heavily disadvantaged and had been out of work for such a long time. The other thing which is very encouraging is that almost all the trainees that move from NEWTEC into jobs with Morgan Stanley are from the Bangladeshi community in Tower Hamlets, moving into an organisation with a very small proportion of people from ethnic minorities. I would also add to that that KPMG is another organisation with whom NEWTEC are working who are just about to take their second wave of young people on the New Deal. To go back to my earlier point about increasing competitiveness being the message for employers rather than just social responsibility and altruism, the message that I have from the partner at KPMG who was managing the New Deal programme was that they saw this as a way of increasing diversity in their own workforce which, as he said, their clients look to see when they walk through the door. I think that is very good, hard nosed evidence of the competitive benefit that employers can gain by recruiting in this way. NEWTEC is a very early embryonic example of something that we hope might work more generally. Finally, on the point about transferability of lessons from other countries, the Committee is probably more widely travelled in this respect than I am but I visited America earlier this year and indeed this time last year and I think that as our Welfare to Work programmes develop we are becoming much clearer about what is transferable and what is not. That will always be the case. I think that there is a lot that we can share with our European partners but we also need to maintain a very clear focus on what is distinctive in our own national circumstances and which is therefore a limit to transferability.

  310. What was very impressive in the States was where we found people who had been on benefit for two or three years being recruited by these high powered organisations in Wall Street to salaries of around the $25,000 mark, staying for two or three years and making progress within their careers, whereas previously the company had assumed that they really needed young graduates. They were clear that there was a hard nosed business case for recruiting people from benefits rather than recruiting young graduates which really was quite striking. This of course I think fits in very nicely with the Government's wish to see those who are without jobs taking the vacancies which may be rather close to what all of us will want to see, that certainly disadvantaged people should have a better chance of getting those well placed jobs.
  (Tessa Jowell) I saw a very similar example, again this time last year, when I talked with staff at Mission College in Silicon Valley where there is an acute skill shortage for people who are needed as computer engineers and technicians and what the major ICT companies are doing is going into Mission College, training people who are on welfare to work programmes to become computer technicians and then hiring them at $50,000 a year. We are in very early discussion with major IT companies in this country about a programme similar to the NEWTEC model to create the opportunity of these high value jobs for people who have been unemployed but who also help to address the skill shortage in this way.

Mr Pearson

  311. It seems to me that at the moment the Innovation Fund is helping to try out new ideas. It is clear to me that some of these ideas are based on the research facilities and the successes of the New Deal and lessons learned from the previous programmes. What I would like to explore is the policy envelope which you set for the Innovation Fund. I have four quick questions. Why did you decide that you wanted a 50 per cent output related funding limit that some schemes have? Some schemes had other limits, some even had 100 per cent output related funding that TECs have operated, some have been less. Why did you want to use a 26-week period for retention as opposed to some other period, perhaps a year, perhaps some over 26 weeks, some over a year, being spread in that way? Why did you want to have a minimum salary level which attracts output-related funding and why did you choose £15,000 to be the maximum cover?
  (Tessa Jowell) Let me deal first of all with the retention period set at six months. Each of these measures is a measure which has been piloted for the reasons that I hope I have made clear. We want to move on, be more ambitious and to look at how far we can go. You will know that as of now this Government's measurement for the sustained job is 13 weeks. It was the same more or less under the previous Government. There is evidence that the longer you stay in a job the better you do. Once you have been in a job for six months you have access to training opportunities, opportunities for promotion and so forth. This package has been constructed to try to raise the sights of the New Deal, getting people into higher level jobs above simply entry level and looking at what support is necessary to keep them there for longer. Let me just underline why this is so important. About a month ago we had a New Deal forum to which we invited a hundred young people who had been on the New Deal, some of whom were still on the New Deal and some were not, and some 40 personal advisers. All of the things that we heard over the course of the day about what they liked about the New Deal and what they did not like about the New Deal we could learn from them. What really struck me was the scale of their ambition and that these were not young people, even though all of them had been unemployed for the six months before they got on the programme, who were going to be satisfied with entry level jobs which would class them as being in work. The very process of getting into work, off unemployment, had raised their sights for themselves. We believe very strongly indeed that the New Deal's long term sustainability is highly dependent on it being an aspirational programme that captures the ambition of the unemployed people who are on it. That is why it is six months. Secondly, why is 50 per cent output-related funding? Again, that is a measure that we have taken that we think in terms of designing structure of the output-related funding is about right. We may vary it if it proves to be overly ambitious or not ambitious enough. The third point was in relation to £15,000 as the starting salary for a job. Obviously £15,000 in London is much easier to get, there are more jobs that pay that than in Dudley, though I would swap my claim count for your claim count in Dudley. My claim count in Dulwich is almost nought. There are labour market differences. It is clear that in the light of experience if it becomes unrealistic then of course we will vary it. But this is all about piloting, this is about trying to see what the effect is, and this is how we learn. The bottom line here is about ambition and about the aspiration of the New Deal to get people into a first job from which they progress to a better job, from which they move on to a career.

  312. It strikes me that this Innovation Fund is piloting different parameters, and there is absolutely nothing wrong with that, but if you were to have genuine innovation why could you not say, "As a Government we can set out a vision of what we want to achieve". You could invite bids from organisations and say, "You tell us what percentage of output-related funding you want. You tell us how long you want to retain people for and how much you want to be paid for retaining them for that period. You tell us what starting salary you think you can achieve and what payment regime you want to base it on" and leave it to the bidders themselves to come up with ideas. Is that something that you might consider for future evidence, taking those rules off and letting people bid on that basis and you decide whether you want to accept the bids or not?
  (Tessa Jowell) If you look at a parallel programme of the Employment Service you will see that degree of liberalisation and almost unfettered flexibility for using the allowance dowry that is available for each unemployed person to buy their training, buy whatever they need basically within the amount available to get them into work. We have already working a model close to the complete flexibility that you identify. What we are very keen to explore here, and you are right: it is within parameters, is two things. It is what more we have to do to drill down to the level of the labour market that we are at in many parts of the country where we are working with people with multiple disadvantage, what we have to do to get them into work, what is the role of organisations which can act as intermediary, what is the role of an intermediate labour market and how do we link that to the second level which is how do we get more people into better jobs in which they stay for longer.

Mr Allan

  313. Just returning briefly to the £15,000 salary level issue, which is a real issue: in London it is a year's rent, in Sheffield it buys you a house in a lot of places, it really is very significant, I just wonder whether, as well as reviewing whether or not the project is successful, whether or not people are putting in bids because of it, because I can imagine organisations in somewhere like Sheffield saying, "We are never going to be able to meet that target. We will not even bother putting in a bid." I wonder if you are looking at whether or not it has been a disincentive in some parts of the country for people putting in bids in the first place.
  (Tessa Jowell) I do not think that there has been any evidence that it has been a disincentive to the submission of bids.
  (Mr Tollyfield) I am sorry. I have no information on that.
  (Tessa Jowell) If the Committee can take it that it has not been a disincentive, and certainly I have no evidence that it has, if I subsequently discover that this has been an issue I will of course let you know.

Mr Pearson

  314. Would it be possible to provide us with a breakdown by geographical region of the origin of the bidders?
  (Tessa Jowell) Sure, certainly.


  315. If I may finish off the session, the Government is very keen to experiment with the use of the private and not-for-profit organisations. We have got some evidence again from the States that there are emerging some stories of the inappropriate use of public money by private organisations and by not-for-profit organisations. It seems to be a conflict between innovation and public accountability. Do you think there are any issues arising here in our own country of the extended use of private organisations or not-for-profit organisations albeit in partnership with the public service?
  (Tessa Jowell) The Accounting Officer is obviously responsible for making sure that public money is properly used. We take all the steps that we consider to be necessary in order to make sure that money is properly used. I would obviously be deeply concerned if there were any evidence of misuse or abuse but we have in place proper auditing procedures and a very clear line of accountability.

  316. Can you give us a bit more detail about the auditing procedures for those successful in the Innovation Fund?
  (Mr Tollyfield) I cannot give you specific information, Chairman, but what I can say is that we are guided by the National Audit Office in the way in which we monitor and audit all of the Employment Service's programmes and spending. Therefore, it is always in terms of the National Audit Office guidance that we work.

  317. There are some who suspect that all of the euphemisms which we presently use, working in partnership with the private sector and with the voluntary sector, really are hiding the fact that the public Employment Service is unable to be sufficiently innovative for what the Government wants and that really what you are about is privatisation by stealth.
  (Tessa Jowell) That is nonsense.

  Mr Nicholls: Then it is true, Minister!


  318. The denial confirms the truth.
  (Tessa Jowell) That is absolute nonsense. We have a public Employment Service for which there is a very clear role which is highly successful, as I hope I have made clear this afternoon, and a public Employment Service which works in partnership with a range of providers, hundreds and hundreds of providers up and down the country, large and small, and a public Employment Service which took the initiative in establishing Working Links, one of the most exciting new developments which is leading through the employment programme activity in nine parts of the country and getting some of the most long term unemployed people into work and already the indications are that it is a success. Yesterday I was at the summit of Working Links' celebration of the 500th long term unemployed person into work. A lot of these people are my constituents so you can imagine my double pleasure at that. There is no hidden agenda. The only agenda is to drive towards full employment and recognising that the only way we will achieve in this country sustained full employment is also by ending long term unemployment. That is what we are focused upon achieving.

  Chairman: Thank you very much indeed on behalf of all my colleagues for your readiness to come and the frankness with which you have answered our questions.

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