Select Committee on Education and Employment Minutes of Evidence

Further memorandum from the Department for Education and Employment


  When I met with the Employment Sub-Committee on 12 December, in relation to your inquiry into Recruiting Unemployed People, I agreed to provide further information on the geographical distribution of the Expressions of Interest which were submitted by potential bidders for support from the New Deal Innovation Fund. This was in response to concerns, raised by Ian Pearson, regarding the need for bidding organisations to place people into jobs with a salary level of £15,000 or higher in order to receive an element of the output related funding. Achieving this objective attracts 10 per cent of the total payments available to successful bidders and Ian was concerned this may deter organisations from bidding in parts of the country where general wage rates are lower.

  The purpose behind fixing the salary level at £15,000 was to address the perception that unemployed people are only capable of filling low paid, entry level jobs. The American experience tells us this is not true and by setting such a level we were sending a signal that we wanted providers to be raising their expectations and those of their clients. Fixing 10 per cent of the payments to this objective is enough to signal our intent that we want people to be aiming high but not enough to deter people from bidding for the Innovation Fund, nor to seriously affect their cash flow.

  We shall be reviewing the level of salary which will attract this premium once we have firm evaluation evidence on its effect on performance and behaviour. This may result in reductions to the salary level which would trigger payments. Any such changes would not apply to the current round of Innovation Fund bids, but would take effect for subsequent bidding rounds.

  The two short listing exercises inviting initial Expressions of Interest to the funds are now complete and the attached annex provides a complete breakdown of the numbers received across Scotland, Wales and the Employment Service Regions. As we would expect, the greatest level of interest came from London and the South East which accounts for about one third of all Employment Service business. The spread of bids from elsewhere is also generally in line with what we would have expected and there are no indications that the issue of the £15,000 salary level has prevented organisations from bidding.

  You will appreciate that as we are still in the middle of this tendering exercise actual details of these organisations cannot be released for commercial reasons.

  I am happy to discuss this further if that would be helpful.

Department for Education and Employment

January 2001

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