Examination of witnesses (Questions 179
TUESDAY 6 FEBRUARY 2001
and MR LEIGH
179. Minister and Leigh, you are very welcome.
You have no objection to us calling you Tessa and Leigh, have
(Tessa Jowell) Certainly not.
180. I begin to think that so frequently do
we meet we shall have to continue meeting like this.
(Tessa Jowell) It is a pleasure for me.
181. Would you like the opportunity to make
a statement to begin with?
(Tessa Jowell) I should indeed. Thank you very much.
Before I begin, however, may I just introduce my colleague, Leigh
Lewis, who is known to many of you. Leigh is the Chief Executive
of the Employment Service and also Chief Executive designate of
the new Working Age Agency. We shall between us do our best to
answer your questions.
182. Would you like our congratulations or commiserations?
(Mr Lewis) I will stick to congratulations, but thank
you very much.
(Tessa Jowell) Thank you very much indeed, we are
very pleased to be here today to give evidence to your inquiry
on the evaluation of the New Deal for Young People programme.
One of the key features of the New Deal for Young People has been
the transparency of the evaluation and I hope that is something
which has become clear to you in the course of the inquiry. Perhaps
as importantly, the part that evaluation has played in the continuous
improvement and development of the programme since it became a
national programme in April 1998. That is all part of our aim
to ensure that the programme is grounded in the best available
evidence of what works. Evaluation so far has proved that the
New Deal for Young People has made a tangible difference to the
lives of young people, to the recruitment patterns and satisfaction
levels of employers and to the efficiency of the labour market
and the national balance sheet. Last November we met our pledge
of helping 250,000 young unemployed people move from welfare into
work, helped by the New Deal. We have for the first time the prospect
of an end to long-term unemployment among young people with now
only 33,600 people who have been unemployed for more than six
months, the lowest level for over 25 years and fewer than 5,000
unemployed for a year or more, which is the lowest level for 30
years. This improvement in the young people's labour market has
been due to a combination of economic stability and the New Deal:
not one or the other but the two together. The National Institute
for Economic and Social Research, who gave evidence to you just
before Christmas, showed in their report, that the New Deal for
Young People has both cut unemployment and raised employment,
some of its key findings being 25,000 more young people in work
because of the New Deal, total youth unemployment down by 40,000
due to the New Deal, half as many young people unemployed for
six months or more, due to the New Deal. They also estimate that
the overall economy is richer by £500 million a year thanks
to the net investment of £150 million a year by the Government
in the New Deal for Young People programme. In overall economic
terms, the New Deal has easily paid for itself and it has proved
in turn a good deal for the country. These positive results are
only the early results of what a programme building on long-term
investment and with long-term ambitions will show. What the New
Deal aims to achieve is radical improvement in the employability
of young people, giving them the necessary skills which in turn
become personal assets, not just to get a job but to stay in work
for the rest of their lives. There is also good evidence to show
that people who do return to unemployment are leaving at least
as quickly as short-term unemployed people. Even people who have
been on the New Deal, who lose their jobs, who return to unemployment,
are less disadvantaged than they would have been had they not
had the benefit of the New Deal programme. The evaluation has
also confirmed that the basic model is the right one for helping
long-term unemployed people. The key elements which are now entrenched
in our labour market policy comprise personal advisers and unprecedented
levels of individual help in the first gateway period, the something-for-something
approach embodied in the delivery of a programme which offers
no fifth option of a life continuing on benefit, and flexibility
in the light of local labour markets and individual need. These
lessons have been translated in a slightly different form to the
strengthened and intensified New Deal for Older Unemployed People,
which will be becoming a national programme with effect from the
beginning of April this year. The evaluation has also identified
where we need to do more and improve the programme still further.
I am sure you will want to cover some of these areas in this session.
All that we do to develop the New Deal is based on evidence from
the evaluation and the evidence has been shared widely and that
evidence is indisputable. Evidence that there are now fewer than
5,000 on benefits for a year or more, compared to 300,000 in the
mid-1980s. Against the background of our discussion about quantitative
and qualitative evidence, the impact of deadweight, additionality
and all the other ways in which we examine and apply tests to
judge the effectiveness of labour market programmes, I think that
some of the most compelling evidence comes from young people themselves.
Over the past few weeks, I have had the opportunity to meet hundreds
and hundreds of young people on the New Deal and the vast majority
of them are absolutely clear that it has been the experience of
the New Deal, the relationship with their personal adviser, that
has enabled them to make the journey from unemployment often for
the first time into work.
183. When we embarked upon this study, which
was really entitled the New Deal Two Years On, we agreed that
the New Deal, certainly for the 18 to 24-year-olds has been the
most well-resourced and comprehensively evaluated programme, certainly
in my political lifetime. We certainly value the continuous improvement
philosophy that the Employment Service has been employing. You
would not expect us to let you escape without some fairly probing
questions about the evaluations and also about the future direction
of the New Deal. Let me begin. Is your current estimate of the
total cost of the New Deal programmes to March 2002 significantly
different to the £1.5 billion that you estimated last time
you gave evidence to us in May 2000? If so, why has the estimate
(Tessa Jowell) I am just looking for my schedule of
costs. The short answer is no, the estimate of cost for the programme
is not significantly different. We anticipate the estimate of
the total cost for the programme to 2001 to be £1 billion
for 18 to 24-year-olds, one quarter of that for 25+. Looking retrospectively,
the cost of the programme, as you will know, has been less than
anticipated for two and a half principle reasons. The first reason
is that the fall in unemployment has been faster and more substantial
than expected. The second is that when the programme was originally
designed, the expectation was that about 40 per cent of young
people would leave at the gateway stage within the first four
months and 60 per cent would go onto the more expensive training
options. In practice that ratio of proportion has been revised
and about 60 per cent of young people now leave the programme
within the gateway period; only 40 per cent then go on to the
options. The options themselves have turned out to be rather cheaper
than we expected. We shall want to watch these costs very carefully
indeed because all the evidence is that young people coming onto
the programme now are significantly more disadvantaged than those
who joined the programme at the beginning. Certainly the training
period is therefore having to help young people with acute and
unless they are remedied insuperable obstacles in many cases to
their being able to hold down sustained jobs.
184. In the 2000 Spending Review, it was announced
that New Deal would become a permanent feature of Government policy.
It is going to be funded by the creation of an Employment Opportunities
Fund. What effect do you think the creation of this Employment
Opportunities Fund will have on the delivery of the programme?
Will it be available for groups such as the economically inactive
rather than giving priority to those registered job seekers? What
resources, other than remaining windfall tax receipts are being
channelled into the Employment Opportunities Fund?
(Tessa Jowell) The Chancellor in the Pre-Budget Report
indicated that over the next three years the allocation to the
Employment Opportunities Fund will be £1,040,000,000 in 2001-02,
over the CSR period, £1,390,000,000 in 2002-03 and £1,370,000,000
in 2003-04. There is also a small remaining underspend from the
windfall levy which is in the process of being bid against as
part of the budget process. In response to your two questions:
what difference will the Employment Opportunities Fund make? It
is important to be clear that the fund provides the money to deliver
the policies which I hope are pretty clear. Yes, I think that
in the second stage of the New Deal programmes, there will be
a major emphasis on two areas: first of all, reaching out more
to those who are presently inactive; secondly increasing support
and help for the most disadvantaged. We are at the moment in discussion
with the Treasury about a number of proposals to strengthen both
the New Deal for Young People, the New Deal for People over 25
in order to meet what we see as the emerging needs. I think that
last time I came to give evidence to you, I made clear our view
that the New Deal needs, in order to meet the sustainability testbreaking
the cycle of unemployment, or no employment, that many unemployed
people come onto the programme withto focus on the skills
which are described as work readiness or employability skills.
All the evidence shows that unless you are numerate, literate
and increasingly have a measure of IT competence, have the sort
of soft skills which increasingly a service-dominated labour market
requires and you have had some work experience, then the likelihood
of being able to learn and then progress in work or to stay in
work is substantially diminished. We are increasing the focus
on ensuring that unemployed people have the opportunity to acquire
these skills. We are also concerned about those young people who
are at the moment beyond the reach of the New Deal. They do not
necessarily meet the labour market conditions which mean they
are eligible for the Jobseekers' Allowance, but we believe that
we must do more to bring them to a point where they are close
to the labour market, close to meeting the labour market conditions
of JSA and in a position where they can benefit from the New Deal.
This will be a real challenge for joined-up government, because
the New Deal is not a drug treatment agency, it is not a mental
health service, it is not a housing department but these are young
people who need the help of the programme and whose lifetime prospects
will be greatly enhanced if they can get a job, and getting a
job for them means sorting out many of the other problems in their
lives as well. That is the shape of the future and the future
will be driven much more by policy than the renaming or the replacement
of the windfall tax by the Employment Opportunities Fund.
185. From the figures you gave us, annual figures,
I think you said £875 in the first year going up to £1.4
billion in 2003-04, the £875 is round about £200 million
more than we are currently spending. That is interesting that
you should be allocating £200 million more than we are currently
spending. Can you explain why that is thought to be necessary?
(Tessa Jowell) For the 18-24 programme the estimate
for 2001-02 is £420 million, that being the single year cost.
The figures I gave you were cumulative figures to cover the spend
on all the New Deals but also including other labour market programmes
like action teams for jobs, the proposed job transition service,
one pilots, modernising ES. This is the total welfare to work
spend which will be included in the Employment Opportunities Fund.
186. So really the amount of money you are spending
on the New Deal for the 18-24s currently is about the budget you
are building in for future years.
(Tessa Jowell) It is about the same; we shall expect
to see the numbers fall but the clients of the programme need
more intensive care. We may spend broadly the same amount of money
but I would expect, all the signs are this, that the level of
spend per individual may well rise.
187. Because we have allocated another £400
for the intensive gateway.
(Tessa Jowell) The gateway to work course is more
than that. From memory the gateway to work courses are costing
£700 per person, but already the early indications are, and
these are early indications, that we are seeing a faster rate
of young people moving into work as a result of the gateway to
work courses than was the case beforehand. We shall also want
to look at the impact on retention of the improved gateway training.
You will remember that these were programmes which were established
very much in direct response to the demands employers were making
of the programme.
(Mr Lewis) We are also resourcing the personal adviser
service more richly. We are taking account of the fact that overall
numbers have dropped, so on average each person tends to face
more barriers, tends to need a more supportive environment, more
help from more skilled advisers.
188. Your employment forecasts lead you to believe
that we shall be needing more intensive support beyond the next
election. As the last two ILO figures began to rise, certain people
were forecasting that the USA recession might impact here. Are
we still expecting that we shall be mainly dealing with those
(Tessa Jowell) We do not formally forecast employment
or unemployment. We put in place a range of measures to provide
the assistance which is deemed to be necessary. Our intelligence
about the prospective demands on the programme come from three
sources: from employers, from the experience of personal advisers
and the Employment Service and from the impact of evaluation.
As we have discussed in this Committee before, also, the evidence
is that the pattern of unemployment may well change. We are seeing
high employment on a region by region basis, but very marked contrasts
in employment rates within regions, which is why the efforts of
the New Deal have been fortified both by employment zones and
very particularly by action teams for jobs, which are addressing
on a very local basis the obstacles that people in the districts
in the country with the lowest employment rate are facing to getting
189. As we understand it something like 22 per
cent of all moves into jobs from the New Deal for Young People
actually last for less than 13 weeks. Of those who are counted
as having entered sustained employment, can you tell us what proportion
are still in employment after six months?
(Tessa Jowell) We estimate that about three quarters
are still in work after three months and 80 per cent are not back
on benefit after six months. These were figures which were identified
in the National Institute's report which looked at the macro-economic
impact of the programme.
190. Why did you use a different definition
of sustainability for the Innovation Fund? Is there not a case
for still using the 26-week definition more widely?
(Tessa Jowell) We discussed this at some length last
time I appeared before you when I indicated that taking a 26-week
period for the Innovation Fund was part of piloting a longer period.
The standard measure of sustainability under this Government and
previous Governments has been 13 weeks. We are placing increasing
importance on retention and people not just getting into a job
but staying in work and that is why, as part of the piloting and
the experimentation of the Innovation Fund, we are looking at
a longer sustainability period or retention period.
191. I ask that question because it seemed to
me it flowed neatly on from what you were saying in your opening
statement, which I think I could characterise as really making
two essential points. One of them was that you felt the whole
of the New Deal programme had been good value for money and that
secondly it had made a real difference. Would that be a fair way
of describing the two key points of your initial statement? You
thought it had been good value for money on the one hand and had
done the job on the other?
(Tessa Jowell) Yes.
192. What I find some difficulty with is actually
squaring that with some of the other facts we have already had
put to us. You will be aware that we produced a short report some
little while ago and in that report we said, amongst other things,
that we noted the average cost of unsubsidised, sustained jobs,
which the New Deal participants would not have obtained without
the help of the programme, would be much higher than £4,000.
So although we would not be ad idem, I have to tell you,
and you will not be surprised, on both sides of the Committee
about precisely what the cost would be, there was a general view
it would be higher than £4,000. I just wondered whether,
in the light of the exchange which we had last year, you would
want to revise that figure or whether you still think it does
amount to simply £4,000.
(Tessa Jowell) The most recent confirmation of that
figure came from the National Institute report, which concluded
that if you include the voluntary sector and the Environmental
Task Force work experience programmes, the cost per job is about
£4,000; £7,000 if you exclude those. It is important
to be clear that as a Government or as Employment Ministers, there
has been consistency about the way in which the cost per job for
the programme has been calculated since the programme was launched,
which is to take the spend on the programme and to divide it by
the number of young people who get into jobs. It was made clear
at the beginning that while we would count all jobs and sustained
jobs as a figure within the jobs total, the New Deal programme
is about getting young people into work. That does not mean we
are not also concerned to maximise the numbers that get into a
job and stay in work and do hit the sustained job target. The
fact is that that is how we calculate it. We have made it clear
to this Committee, we have made it clear to Parliament in Parliamentary
Answers. I am sure there are all sorts of way of calculating it
to produce higher or even lower figures, but those are the rules
of engagement that the Government has set.
193. I should certainly be interestedI
say that with all the insincerity I can command, which is considerable,
Chairman, I am grateful for your supportin a calculation
which would get at lower than £4,000; that would be remarkable.
However, one does not really have to work too hard to find it
might be substantially above that. Anyone can appreciate this;
I think it would be common ground between us. If someone is only
in a job for a very short period of time the fact that they have
been in that job will hopefully have done something for them which
they would not have got had they not been in that job. The fact
is, using figures which you gave us when you appeared before us
before, you said on one occasion that you thought something like
£800,000 had been spent on NDYP. That would in fact mean
that you then assumed 60 per cent deadweightingand I shall
come back to how I substantiate that figure in a moment. We would
then be looking at a cost per job of something in the region of
£17,873. I know this has been the subject of correspondence
between us before and in due course the Committee will doubtless
come to a view on these things. I really would press you on this.
I really do not think you are going to be able to find a figure
which is less than £4,000. You may not want to come up with
£17,873, but I need to know and I am sure the Committee do,
whether it is your last offer that it really does come out at
about £4,000 per job.
(Tessa Jowell) On the basis of the calculation, which
is the agreed basis on which we calculate the cost per job, yes.
I would add to that that the Opposition, in a press release publishing
their Britain Works proposals last July, conceded precisely the
same point. They said in notes to editors that they estimated
that Britain Works would cost about £3,000 per person, that
is about £1,000 less than the New Deal. So there appears
to be a broad agreement about cost per job. I would only reiterate
that the basis on which we calculate it is the simplest one available
and that is the sum we get.
Chairman: I think this is something of a blue
herring, if I may say so, as opposed to a red herring which would
come from our side. This is very interesting and we have trawled
all over this before. The authoritative statement from the National
Institute, which is independent of Government said £4,000
on one basis £7,000 on another and frankly going beyond that
is not all that relevant, if I may say so. I am more than happy
to let you continue with questions but that particular line is
a bit unfruitful.
Mr Nicholls: With respect, you may find it unfruitful,
but I find it relevant and after all there are two sides to this
Committee even if my side happens to be in something of a minority
just at the moment. I do not want to throw blue herrings too far
but there is just one further point, if I may crave your indulgence.
Chairman: One further point.
194. Which may have to be subdivided into two.
You mentioned a moment or two ago, I am sure in a way which was
designed to be helpful, the National Institute for Economic and
Social Research and indeed the Minister herself referred to that
a few moments ago as well. I detect an assumption underlining
this that every time jobs come down and the New Deal is in operation,
the assumption is easily made by Government that one thing must
have caused the other. The fact is that in information published
by the Department themselves, 12 July 2000, the National Institute
for Economic and Social Research concluded that 60 per cent of
the jobs created would have been created anyway. Is that simply
wrong or irrelevant?
(Tessa Jowell) First of all, the New Deal is not and
has never claimed to be a job creation programme. When the New
Deal is judged against the extent to which it has created jobs,
I frankly discount that. The report published just before Christmas
showed an additionality of about 15,000 jobs. That is a macro-economic
calculation which I suspect has more to do with macro-economic
calculation than real life. The fact is that what the National
Institute report did show was that young people through the programme
were leaving benefit more quickly, over 200,000 leaving benefit
more quickly, that the labour market generally was benefiting
from a higher level of skill from which employers could recruit
and that long term unemployment among young people would be double
its present rate were it not for the programme. As I made clear
in my opening remarks, it is the combination of economic stability
which has generated more jobs and the New Deal which is equipping
previously unemployed people to take those jobs which is the essence
of the success. Just before we move from this, I was challenged
a moment or two ago by Patrick Nicholls as to whether or not the
figure of £4,000 per job might be reduced. At last count
269,210 young people had moved from benefit into work. Those were
the latest figures we published. We also published, and you may
have seen this last week, a survey we conducted into what are
called unknown destinations, about 30 per cent of young people
leaving the New Deal go into unknown destinations, and we are
as concerned and interested to find out what happens to them as
I suspect you are. What the survey has shown is that we have almost
certainly undercounted the number going into jobs by about 75,000.
Of those who go into unknown destinations, about 56 per cent,
the same proportion as from the main programme, go into work.
195. Are you saying that therefore accounts
for the fact
(Tessa Jowell) That is arithmetically how you get
to below £4,000.
196. Is that how you would also seekand
you raised this, I did not, I was mindful of the Chairman's stricturesto
account for the fact that if you in fact refer to the Office for
National Statistics, the known estate base, the UK youth unemployment
18 to 24-year olds claim account, if you actually look at what
has happened, you can see that for a long time, with occasional
seasonal blips, youth unemployment has been declining and in fact
the rate of decline has tailored off during the time of New Deal.
(Tessa Jowell) In 1986, if we take six-months-plus
unemployment among young people, you can fall very fast if you
have very high numbers and in 1986 you had very high numbers:
more than half a million young people had been out of work for
six months or more. In 1990, 176,000, in 1997, 169,000, in 2000,
33,500, a fall of 80 per cent.
197. One of the fascinating parts of the New
Deal is the role of the employer in recruiting young people. Some
disappointment has been expressed by some employers that not enough
of the New Dealers are job ready when they come for interview.
As a Committee we were very, very impressed with some of the programmes
like Wildcat in New York where a lot of work goes into getting
a young person or an older person job ready. What action do you
plan to take to tackle some of the criticisms which a few employers
have raised that the young applicants are not job ready enough
in some cases?
(Tessa Jowell) As I indicated earlier, the gateway
to work courses which were introduced in June last year, were
introduced in direct response to the expressed view by a number
of employers that young people were being referred who were not
"work ready". Secondly, the focus on these core work
readiness skills again is ensuring that young people have the
generic employability skills that employers are looking for. As
part of our performance monitoring we have judging how well the
programme and indeed the Employment Service was doing, we have
a target against which the Employment Service performs as measuring
employer satisfaction. We have over 80,000 employers who have
signed up to the New Deal and in 12 of our large cities we have
employer coalitions which really do drive employer leadership
of the programme. This is not a new development but over the last
two years we have seen an increasingly what would be described
as demand-led approach to the programme, which no doubt you have
heard Wildcat talk about, and that essentially means identifying
the needs of the local labour market and ensuring that unemployed
people coming through the New Deal are trained in order to have
the skills that those employers need to fill the jobs which are
available. Let me just give you a couple of very specific examples.
I have been travelling the country as part of the New Deal tour,
meeting employers, meeting young New Dealers, meeting the community
organisations which are involved in training them and job centre
staff. Last week I was in Birmingham and visited the Birmingham
City Hospital Trust who when they are recruiting entry level administrators
always now have a New Dealer on their short lists. What they say
is that New Dealers are work ready, trainable on the job, but
highly motivated. That is the sort of endorsement of the New Deal
that we want to see right across the piece. We are clarifying
the sectoral approach within which New Deal operates. You have
the development and the implementation of the work readiness programme,
but then also the acquisition of further sector specific skills,
working as Wildcat has been doing with the financial services
sector, IT, in order to lock together the skill needs that employers
have with the training that the New Deal can deliver. We see this
as an enormously important part of the long-term sustainability
of the programme. What I want to see employers saying about the
programme is that there is a kitemark standard of quality which
they can take for granted in young people they recruit and that
the New Deal is a preferred programme for recruiting to their
vacancies. Leigh is very close to the operational delivery of
this and may want to add to what I have said.
(Mr Lewis) Just to say of course that we have had
the opportunity to discuss the efforts we have been making in
the Employment Service to improve our service to employers. As
you know, I am the person more than any other who is not satisfied
and never satisfied that we are delivering as good a service yet
as we can, though I do believe it is improving and we need to
go on improving it further. It is worth saying that the evaluation
evidence on New Deal has told us quite a bit about the responses
of employers who have recruited through New Deal and a great deal
of it is actually very positive. For example, around 85 per cent
of employers who have recruited through New Deal said that the
person they recruited met their job spec either fully or pretty
well and that is not a bad level at all. It would be better if
we can make it better, but it is not a bad level to be starting
198. In some ways Wildcat acts as a personal
adviser to the employer as much as a personal adviser to the person
looking for the job. Have you thought about actually saying to
the employers, here is your personal adviser in this process?
(Tessa Jowell) This is very much the relationship
the Employment Service is now developing with employers which
I shall ask Leigh to tell you about.
(Mr Lewis) I do have great sympathy with the question.
One of our four employer service commitments now is that every
time an employer entrusts us with a vacancyand I use the
word "entrust" very deliberatelyone of our standards
is that there should be a named contact in the Jobcentre who stays
in touch with that employer until that vacancy is filled to their
satisfaction. That is in terms of the one-off vacancies which
are our bread-and-butter business, day by day. At a national level
we have moved to institute an account management function. So
if the big major employers, the big organisations in this country
want to deal not with 20, 30, 40 separate Jobcentres but want
to deal with one person, their account manager, who can deal with
their requirements literally from John O'Groats to Lands End that
is a service we shall provide as well. We have to get yet better
at doing that but in a way we are moving towards the equivalent
of a personal adviser per employer.
199. It has been argued that the increasing
case loads of the New Deal for Young People might have compromised
the effectiveness of some of the advisers. As more and more young
people are involved and the New Deal has expanded it has been
suggested that some of the personal advisers are effectively burning
out like social workers and doctors. What strategies do you have
in place to tackle this?
(Tessa Jowell) First of all, there is no evidence
that personal adviser case loads are increasing. We have also
taken steps to offer greater opportunities for career advancement.
Personal advisers are crucial to the success of the programme:
what we do not want is for personal advisers to feel that the
only way they can secure advancement is to move off into management
and move away from working directly with young unemployed people,
which is what most of them are so gifted at.
(Mr Lewis) It is absolutely crucial, as you say, and
if our personal advisers become overstretched or become overstressed,
then of course they are less effective. We are very much concerned
about ensuring that does not happen. One of the big advances we
are making and introducing and rolling out now, is the role of
what we are calling a senior adviser. One of the problems born
of success is that our advisers have been so successful in many
cases that they have secured promotion within the Employment Service
and have ended up doing jobs other than as personal advisers.
Great for them, not as good in a sense for New Deal.