NINTH SPECIAL REPORT
The Education and Employment Committee has agreed
to the following Special Report:
GOVERNMENT'S RESPONSE TO THE FIFTH REPORT
FROM THE EDUCATION AND EMPLOYMENT COMMITTEE, SESSION 2000-01
NEW DEAL: AN EVALUATION
The Education and Employment Committee reported to
the House on New Deal: An Evaluation in its Fifth Report of Session
2000-01, published on 20 March 2001 as HC 58. The Government's
response to that Report was received on 9 May 2001. The response
is reproduced as an Annex to this Special Report.
RESPONSE FROM THE DEPARTMENT FOR EDUCATION
1. We welcome the Government's acceptance and
implementation of our earlier recommendation that evaluation reports
and summaries should be published in the New Deal Website but
stress the need to ensure that the website is comprehensive and
kept up to date (paragraph 14).
The Government will ensure that evaluation reports
are available on the website and that the website is kept up to
2. We accept that the overall target for New Deal
is not to make participants job ready but to help them into sustained
employment. The evaluation programme also needs to take into account
improvements in employability which result from participation
in the programme but which may not result in employment in the
short term (paragraph 17).
Within the programme of evaluation, the quantitative
survey of participants and the qualitative research with participants
both took account of increased employability over time.
Evidence from the qualitative research conducted
by the National Centre for Social Research suggests that the New
Deal has a significant impact on young people's employability.
It can do so by providing new occupational or basic skills, through
the acquisition of qualifications, by gaining work experience
and references, by enhancing job search skills, by changing or
refining occupational choices, and by helping to strengthen confidence,
motivation and interest.
The Policy Studies Institute examined the issue of
employability in the quantitative survey with participants on
NDYP. They estimate that participation in an Option contributed
substantially more to gains in employability than staying on Gateway
beyond the usual four months.
3. We have noted in an earlier Report that assessing
cost per job is a complex area and one which merits independent
analysis. We welcome the National Institute for Economic and Social
Research's (NIESR) Reports on macroeconomic implications of NDYP
and look forward to the results of the NAO's forthcoming value
for money study. Over-emphasis on the assessment of NDYP on a
basis of cost per job obscures the wider purpose of New Deal
The Government agrees that over-emphasis on assessing
New Deal on a cost per job basis obscures its wider purpose. The
New Deal for Young People aims to reduce youth unemployment and
to improve the long-term employability of its participants. The
success of the New Deal should be judged by the impact it has
in reducing unemployment and raising employment. Its cost should
be judged by the net effect it has on the economy. The research
published by NIESR in December 2000 concluded that national income
is around £500 million higher each year as a result of the
programme. The Government looks forward to the results of the
4. We recommend that the Government should monitor
closely the impact of New Deal on wage pressures
We have and will continue to monitor the impact of
the New Deal on wage pressures. It was one of the elements considered
in the evaluation of NDYP, and, in particular, by NIESR. Their
analysis shows that the New Deal has reduced the average duration
of unemployment, which would be expected to reduce wage pressure.
NIESR also suggest that the New Deal has increased jobsearch activity
and employability and improved the functioning of the labour market.
The New Deal is likely, therefore, to have helped reduce wage
pressure and thus enabled not just youth employment but total
employment to riseindeed, NIESR estimate that overall employment
has increased as a result of NDYP over and above the rise in youth
5. We recommend that the Government should monitor
closely the extent to which costs per client increases as NDYP
evolves and those with multiple barriers to employment become
an increasingly large proportion of the total number of NDYP clients
The Government agrees that the cost per client of
NDYP should be monitored closely, and will continue to do so.
6. We recommend that the Government should continue
to monitor substitution under NDYP closely
The analysis conducted by NIESR found little evidence
of substitution within NDYP. The work of NIESR is coming to an
end, but substitution is still being monitored through an analysis
of off-flows by the Department and by the continuing work of the
Policy Studies Institute as part of the overall macroeconomic
evaluation of the programme (to report in 2002).
7. We agree that there is benefit in providing
young people with short-term work experience. Nevertheless, we
remain concerned that the proportion of moves into unsustained
employment remains as high as 40 per cent. As the Minister has
told us on more than one occasion, young people on New Deal are
ambitious and aspirational and that New Deal must be aspirational
for them. Those aspirations will not be met by a cycle of continual
short-term employment in entry level jobs, registered unemployment
and participation in New Deal (paragraph
While 40 per cent of the jobs New Dealers move into
may be unsustained, 76 per cent of those individuals who got a
job through the New Deal got a sustained job. For the minority
of young people who move into an unsustained job, the work experience
obtained through the New Deal can substantially improve their
future employability. This is particularly important for the many
young people without any experience of work prior to joining the
New Deal. It should also be remembered that young people tend
to be inexperienced in the labour market and often try out different
opportunities whilst learning where their long term goals lie.
The New Deal ensures that if a young person tries out a job that
does not last, they can continue to benefit from help from the
programme. Internal analysis by Employment Service suggests that
re-entrants to the New Deal are more likely to get a job, and
to do so more quickly, than those on the New Deal for the first
8. We welcome the increasing emphasis on helping
young people into sustainable employment. Job retention and career
progression should be built into future measures of achievement
for New Deal (paragraph 41).
A New Deal core performance measure has been used
since Autumn 1999 to monitor retention. Following a pilot in two
regions in 1999-2000, the Employment Service Annual Performance
Agreement for 2001-02 includes a new national target based on
this core performance measure. The target measures the percentage
of long-term JSA clients, including young people participating
in New Deal, who remain off benefit 13 weeks after starting a
job. A target level of 75 per cent has been set for the operational
9. We recommend that the Government should collect
information on the length of employment retention to inform the
development of policy aimed at increasing employment retention
The Government has examined the issue of employment
retention through a survey of employers participating in the Employment
Option, and through the survey of leavers to unknown destinations.
We are continuing to explore ways of collecting this information
through better use of administrative data within the current legislative
boundaries and within reasonable cost limits.
A benchmark for retention in work was set in April
2001: that two-thirds of New Deal clients entering work following
an Option should still be in work after 13 weeks.
10. We welcome the range of additional measures
that have been introduced to help personal advisers identify those
NDYP participants with inadequate basic skills and to help participants
reach higher standards of numeracy and literacy. The drive towards
increasing the basic skills levels of job seekers will become
more important as the hardest to help become an increasingly large
proportion of the New Deal client group
Use of the Client Progress Kit is helping New Deal
Personal Advisers to identify young people who are likely to have
basic skills needs. In addition, over 1,000 New Deal Personal
Advisers will be trained to identify basic skills needs and provide
ongoing support. This will mean that there is an opportunity at
every intervention to identify basic skill needs. Help with basic
skills continues on New Deal Options, either integrated into vocational
training and work experience, or as a separate intensive course
for up to 20 weeks prior to vocational training.
11. The development of basic skills is important,
but it should be matched by a recognition of the diversity of
the New Deal client base and the need to develop higher skills
which may be required for job retention and career progression
The Government is testing new approaches which will
help young people to raise their skills, and enhance their long-term
employability. A demand-led approach within different industry
sectors is an effective way of doing so, because it uses employers'
hiring requirements as the standard of job readiness. Early evidence
indicates that this approach is particularly effective in opening
access to better paying jobs in sectors which have tended not
to recruit unemployed people. Ambition:IT, which is being piloted
for three years from Autumn 2001, will enable 5,000 long-term
unemployed people and lone parents to take up IT technician posts,
typically paying £15-20,000.
12. We welcome the introduction of the post of
Senior Adviser, which should help the Employment Service to retain
its best staff, train its junior personal advisers and minimise
the effect of promotion on the relationships between personal
advisers and their clients. The impact of Senior Advisers in these
areas should be closely monitored and other measures to increase
continuity should be brought forward if required
Noted. Senior Adviser posts provide more experienced
advisers a routeway for progression, while keeping them primarily
as New Deal personal advisers. Senior Advisers will be deployed
across all New Deal Units of Delivery over this operational year,
and will play a key role in strengthening the delivery of the
13. We believe that the model of general medical
practitioners for personal advisers is a valuable one. We recommend
that the Government should consider developing the role of personal
advisers on this basis (paragraph 49).
We recognise the potential value in such an approach
but will need carefully to consider the role of personal advisers
in the wider context of the new agency for people of working age,
14. We welcome the Employment Service's determination
to adopt an account management approach to its relationship with
employers. This is consistent with an earlier recommendation we
made that the Employment Service should continue its development
into a demand-led service and strengthen the service it provides
to employers. We accept, as does the Employment Service, that
it has not yet achieved its potential in terms of relations with
employers (paragraph 50).
The development of demand led practices and relationship
building with employers are central to the development of the
New Deal and of JobCentre Plus. In the coming year the Employment
Service will implement a number of sector based recruitment services
to employers and introduce the principles of local account management
more widely. Both initiatives will engage employers in the design
and delivery of these services and form part of the wider strategy
to develop a demand led approach, particularly developing the
relationship with small and medium sized enterprises.
15. We recommend that the Government should thoroughly
examine the impact of mandatory referrals on both the motivation
and subsequent success of participants, and on the effectiveness
of the options themselves (paragraph 53).
The Government will keep under review the impact
of mandatory referrals, but will maintain policy on the New Deal
options within a framework of rights and responsibilities. We
intend to pilot a modular approach in the Option period, to better
tailor provision to individual need.
16. Although the benefit sanction is infrequently
applied, it must be recognised as an important factor in encouraging
unemployed people back into the employment market. We recommend
that the Government should monitor closely the frequency with
which sanctions are imposed and examine the consequences of the
threat of sanctions (paragraph 54).
The Government has examined experiences of those
sanctioned in research conducted by the National Centre of Social
Research (NCSR). The research suggests that the threat of sanctions
has sometimes ensured that young people comply with the requirements
of the programme. The report indicates that sanctions may be less
effective where the young person has access to other forms of
financial support, such as from parents, or where their dissatisfaction
with the content of the programme is great. Further research is
being conducted on the impact of sanctions within NDYP and the
New Deal 25 plus.
17. We recommend that the Government should examine
the reasons for the regional variation in the frequency of sanction
imposition and should ensure that sanction criteria are applied
uniformly by the Employment Service (paragraph
The Government is aware of the regional variation
in the frequency of sanction imposition. The Employment Service
is currently working to establish the reasons for the variations
in the percentage of New Deal cases referred to the Sector Decision
Making teams. This research is still in its early stages and no
initial findings are yet available.
18. The Government should ensure that there is
not a single further instance income support sanctions affecting
the receipt of housing benefit. Being made homeless is too strong
a sanction for non-participation in New Deal
The Government agrees that young people should not
lose their housing benefit or accommodation because a sanction
has been placed on their benefit. As the Committee noted, we have
already issued further guidance to prevent this happening, and
we will be keeping a close watch on the situation to ensure that
there are no further occurrences.
19. While we acknowledge the commitment of the
DfEE and the Employment Service to the recruitment of New Deal
candidates, we remain extremely disappointed that other Government
Departments and agencies have remained so apparently unwilling
to recruit New Deal candidates, despite the efforts of the DfEE
to encourage them to do so. We recommend that the DfEE should
bring forward proposals indicating how the Government intends
to reach the two per cent target across the Civil Service
Civil Service participation is currently running
at 1.3 per cent of all New Deal starts across the public and private
sectors. Although there was never an official target, a 2 per
cent benchmark emerged, reflecting the Civil Service share of
the labour market. Total employment in the UK has since risen
faster than Civil Service numbers. Employment in the Civil Service
now accounts for 1.7 per cent of the national workforce.
Amongst the measures being taken to increase New
Deal take-up in the Civil Service has been the development of
a customised job preparation programme to prepare New Deal candidates
for jobs in the Civil Service. This has recently been piloted
for MAFF and DTI. Following evaluation, further programmes will
be organised according to demand from departments and agencies.
The Employment Service is preparing a good practice brochure drawing
on a number of success stories to highlight the benefits of employing
New Deal candidates in the Civil Service. National Account Management
is offered to over 20 Departments and agencies through the ES
Large Organisation Unit, and a further dozen small agencies are
being provided with ad hoc consultation and advice.
20. There is a strong case for increasing the
spread of best practice in the provision of the FTET option
Dissemination of best practice is a key feature of
the Continuous Improvement Strategy for New Deal. Examples of
activity undertaken include the running of regular workshops on
all Options. Workshops focus on best practice and encourage providers
to network beyond their normal geographical area.
The Learning and Skills Council (LSC) allocated £500,000
of its Standards Fund to support identification and dissemination
of best practice among further education colleges. A steering
group which included Employment Service representation was established
and a contract was awarded to Learning and Skills Development
Agency (LSDA) in December 2000 to take this work forward.
21. We recommend that greater flexibility should
be permitted with the FTET option, to allow colleges to tailor
courses and learning programmes to individual student needs
The Green Paper, Towards Full Employment in a Modern
Society, demonstrated the Government's commitment to the development
of greater flexibility within the New Deal options. In the FTET
option, these proposals include the development of modular, intensive
courses with greater relevance to the local labour market.
22. We welcome the Government's decision to increase
the funding limits for FE colleges in respect of New Deal provision.
We recommend that consideration should be given to funding New
Deal participants on a par with those FE students supported by
the Learning and Skills Council (paragraph
The Employment Service and the LSC are working together
to introduce new, more coherent and transparent funding arrangements.
Through Formula Funding, national rates have been set for all
ES adult provision, and national rates will be set for Employment
Service Young People's provision (including FTET) over the coming
year. The Employment Service will be working closely with the
LSC to ensure that, where possible, coherent rates will be set
for similar provision across the LSC and the Employment Service.
23. We have previously called for the greater
use of intermediate labour markets within the provision of the
ETF in particular. We welcome the Government's commitment to achieving
this. We also welcome the fact that, following the last contracting
round, a proportion of the payments to providers will depend on
ETF participants gaining employment. The impact of this measure
on participants' job retention should be closely monitored and
the concept should be extended if it proves successful
The impact of the wide range of measures being taken
to improve the performance of the Options, including the piloting
of transitional employment programmes and changes to output related
funding, will be monitored and evaluated in a number of ways.
In addition to the regular information produced from the Evaluation
Database, job entry rates from the Options are monitored on a
monthly basis through Provider Performance Tables.
From April 2001, we have set a benchmark of 40 per
cent entry into work by all Option leavers. On this basis, all
Option providers have an individual target built into their contracts.
The complete set of national tables will be made available to
all contract holders from April and will be published from October
24. We welcome the Government's and the Employment
Service's efforts to determine the profile of destinations of
those who are recorded as leaving for unknown destinations
The Government is keen to reduce the proportion of
New Deal leavers who are recorded as leaving for unknown destinations
and to build on its knowledge of such clients. The Employment
Service is taking steps to improve the quality of recording and
will monitor the effectiveness of this.
25. We welcome the Government's intention to improve
the effectiveness of the follow-through period. We recommend that
this aspect of NDYP reform should be undertaken with some urgency
The Government is committed to identifying effective
support for the hardest to help, at follow-through and earlier
in the programme. The Employment Service is already working to
ensure that good practice is shared between local offices by twinning
offices within regions, and by disseminating guidance on good
26. NDYP should become flexible enough to be able
to respond to the needs of a diverse client group
Increased flexibility is a key element in proposals
currently being developed for New Deal in the next Parliament,
as outlined in the Towards Full Employment in a Modern Society
Green Paper. Proposals include the introduction of modular tailored
pathways in the Options period, and specific support for hardest
to help clients, for example, ex-prisoners will be guaranteed
employment help before they are released and clients with drug
problems will get improved mentoring and training support.
27. Voluntary sector organisations should not
be required to subsidise New Deal in order to make it effective.
Referral of NDYP clients from the Employment Service to voluntary
sector organisations should always be followed by adequate funding
The Government is aware that the voluntary sector
have raised issues around funding difficulties in their NDYP contracts.
The main difficulty has been shortfalls in referrals resulting
in lower cashflows than had been anticipated, which to an extent,
reflects the lower unemployment levels nationally.
The current NDYP contracts were contracted for by
competitive tender which included price. It is difficult, therefore,
for the Employment Service to pay more to any organisation which
has won a contract based on the tender and price they put forward.
However, the Employment Service is introducing 'Formula Funding'
for the current contracting round for the New Deal 25+ and Work-Based
Learning for Adults programmes. A set national price is agreed
for each type of provision and a competition is run based on the
provision offered by providers for the set price. This should
help to ensure that providers know how much the Employment Service
will pay them to deliver programmes.
The Employment Service is also actively exploring,
with voluntary sector led bodies, how financial risk can be shared
more equitably with the voluntary sector in order to enable them
to remain involved in delivering Government programmes.
28. We recommend that the future development of
NDYP should take account of the fact that those who are hardest
to help will form an increasingly large proportion of the programme's
client group. In Local and Regional Economic Development: Renegotiating
Power Under Labour, Professor Robert Bennett and Dr Diane Payne
argue that a high proportion of the 43 per cent of young people
and the 67 per cent of 25 year olds and over who leave the Gateway
without informing the Employment Service are the longest-term
unemployed, indicating the challenge for New Deal. The Employment
Service will need to pay increasing attention to this group of
clients. It should seek to identify quickly the particular barriers
which a participant faces and make appropriate referrals to specialist
organisations, many of which will be in the voluntary sector.
The Employment Service should build its capacity to recognise
difficulties and make appropriate referrals and its capacity to
collaborate with external organisations. It is not acceptable
for young unemployed people in the NDYP client group to be overlooked
Increasing attention is already being paid to this
group. In June 2000 we put in place arrangements to provide a
more intensive Gateway for young people in the New Deal. One key
goal of this is to improve the early assessment of young people
and ensure access to specialist help. From April 2001, all clients
on NDYP will be screened for basic skills needs and pilots in
six districts will explore the most effective means of identifying
and engaging learners, including through the use of financial
incentives. Pilots testing transitional employment approaches
will be aimed at the hardest to help and will provide a highly
supportive environment for people with multiple barriers to enable
them to become progressively independent during their time on
the programme. The Employment Service will be working closely
with partners in the voluntary and not-for-profit sector in all
these areas, in both design and delivery processes.
However, we recognise that even more needs to be
done. Help for the hardest to help was a key theme in the Green
Paper Towards Full Employment in a Modern Society which outlines
the additional support that will be available to clients with
drug problems and ex-offenders.
Building Employment Service capacity to recognise
the barriers faced by those with a range of difficulties which
prevent them finding and keeping employment is a key part of this
work, as well as strengthening links with key external organisations
at local and national levels.
29. The Minister said that the next phase of New
Deal would put an emphasis on reaching out to those who are currently
economically inactive. We welcome this and look forward to the
Government bringing appropriate proposals forward
Reaching those who are currently economically inactive
was a major theme of the Green Paper Towards Full Employment in
a Modern Society. The Paper outlined the steps the Government
is taking to help a much wider group of people who face particular
problems in getting work, for instance, lone parents, disabled
people and partners of those who are unemployed. The Government
is also extending Action Teams for Jobs provision to find innovative
ways of increasing employment rates in areas with high levels
of deprivation. The Action Teams, which allow a more flexible
use of resources to help people looking for work, have shown early
signs of success. Reaching out to the economically inactive is
also an important rationale for the establishment of JobCentre
Plus, which will deliver better and more integrated services for
everyone in receipt of a working age benefit.