Select Committee on Education and Employment Fifth Report


Evaluating New Deal

14. It is widely agreed that the evaluation of New Deal has been "the most detailed and extensive Government policy-related research programme carried out in the UK in recent years".[8] The total cost of the Government's evaluation programme to date has been £4 million, representing some £7 per New Deal participant, and over 30 reports have been published.[9] Other organisations, such as the Industrial Society, the Joseph Rowntree Foundation and the Unemployment Unit and Youthaid, have published further analysis. The reports resulting from this evaluation process have been invaluable to our work. The Sub-committee has drawn on their findings extensively. 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 web site is comprehensive and kept up-to-date.[10]

15. Two factors in particular complicate any evaluation of New Deal. First, it is difficult to isolate the effects of New Deal from other influences. The economy was growing before the introduction of NDYP and has continued to expand since. Moreover, New Deal has not operated in isolation but in the context of a range of other welfare to work policies, some of which were in place when NDYP was launched and others which have been implemented subsequently. These include the National Child Care Strategy, tax and benefit's changes designed to 'make work pay',[11] changes to employment regulations, the introduction of the National Minimum Wage, and other employment policies, such as Employment Zones and more recently New Deal for Communities which aims to tackle deprivation in the poorest areas of the country.[12] Several studies have sought, for instance, to identify whether the decline in youth unemployment is attributable to New Deal for Young People or to the fact that the economy is growing. We note the Minister's view that the "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".[13]

16. Secondly, assessments of the impact of New Deal rely to a large degree on assessments of the counterfactual—what would have happened if the programme had not been in place. As Professor Millar of the University of Bath and author of the Joseph Rowntree-commissioned report on New Deal, Keeping Track of Welfare Reform: The New Deal Programmes, told the Sub-committee, "this is far from straightforward".[14] She explained that there were difficulties inherent in the design of experiments to evaluation the impact of national programmes, not least because there was no comparative control group. She told that Sub-committee that "the main focus has been on comparisons across areas and that is probably the right way to go about it because in terms of the schemes we have, it would be difficult to adopt other methods. I think the results that we have seen are probably as robust as it is possible to be, but there are margins of errors attached".[15] This means, as Professor Patrick Minford pointed out, that evaluating New Deal is "not at all easy".[16]

17. The Minister stated that "What New Deal aims to achieve is a 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".[17] It is perhaps surprising then that much of the evaluation of NDYP is centred around measuring decreases in youth unemployment and increases in youth employment rather than measures which attempt to assess increases in employability. 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.

18. One apparently simpler method of evaluating New Deal would be to analyse its costs and benefits. There has been much heated debated over the 'cost per job' of NDYP in particular. The Minister told us that the average cost per job was below £4,000".[18] A range of other figures has been put forward, some significantly higher. Indeed in an earlier Report we ourselves noted that "The Minister told us that the average cost of each job outcome was just under £4,000 ... We note that the average cost of unsubsidised, sustained jobs, which NDYP participants would not have obtained without the help of the programme, will be much higher than £4,000.[19] A pamphlet for the Centre for Policy Studies suggested the correct figure was £11,333 and could be as high as £37,000.[20] The variation would appear to result from not from differences over the costs of NDYP but from different assumptions over what factors should be included in the calculations.

19. The Minister's figure is based on calculations which include in the jobs total, unsustained employment and those participating in the Environmental Task Force and Voluntary Sector options. If those on these two options were to be excluded, the figure would be higher— according to the National Institute of Economic and Social Research it would be around £7,000.[21] The figure would be higher still if unsustained jobs were excluded from the job total. It would be markedly higher again if an allowance were made for deadweight.[22] Similarly, as the Minister suggested, the cost per job figure would be lower than £4,000 if, using the Government's basis for calculations, an allowance was made for those who leave NDYP for unknown destinations who are estimated to have entered employment.[23] Professor Millar said that "cost per job is a nice headline figure ... but it does not capture very much. There are lots of different ways of calculating it that leave lots of scope for argument".[24] Before the New Deal programme, the most expensive employment scheme, the Training for Work Programme, cost about £4,617 per job.

20. Examination of overall achievements and value for money is essential but there are other important considerations which must also be taken into account. As the Minister told the Sub-committee, NDYP is not a job creation scheme.[25] And as Manpower plc told the Sub-committee "Apart from the direct, more visible savings on welfare payments, there are many other social and economic benefits ... eg reduction in crime rates, increased spending power, more demand for services as a result, job creation to deliver those services ... It is the extent of this overall market impact that is the real measure of New Deal".[26] NDYP's effect in reducing the opportunity for benefit fraud may also have an impact on the tax and benefits balance sheet. It is important to note that these benefits accompany other youth training programme. We have noted in an earlier Report that assessing the cost per job is a complex area and one which merits independent analysis.[27] We welcome the National Institute of Economic and Social Research's Reports on macroeconomic implications of NDYP and look forward to the results of the National Audit Office's forthcoming value for money study.[28] Over-emphasis on the assessment of NDYP on a basis of cost per job obscures the wider purpose of New Deal.

8  Millar J, Keeping Track of Welfare Reform: The New Deal Programmes, 2000, p. 11. See also QQ. 1, 62 (Hereafter "Keeping Track of Welfare Reform"); New Deal for Young People: Two Years On, para 19. Back

9  Q. 219. Back

10  New Deal for Young People: Two Years On, para 19; Eighth Special Report from the Education and Employment Committee, Session 1999-2000, The Government's Response to the Eighth Report from the Committee, Session 1999-2000, New Deal for Young People: Two Years On, HC 969, Annex, para 16. Back

11  See Fifth Report from the Treasury Committee, Session 1999-2000, The 2000 Budget, HC 379, paras 71-76 and the First Report from the Social Security Committee, Session 1998-99, Tax and Benefits: Implementation of Tax Credits, HC 29. Back

12  Q. 2; See also Keeping Track of Welfare Reform, pp. 8-9 for a summary of wider welfare to work policies. Back

13  Q. 182. Back

14  Keeping Track of Welfare Reform, p. 13. Back

15  Q. 4. Back

16  Ev. p. 68. Back

17  Q. 181. Back

18  Ev. p. 56; Q. 193. Back

19  Deal for Young People: Two Years On, para. 4. Back

20  Sargeant G and Whitely P, A Good Deal Better, The Industrial Society, 2000, p. 23. Back

21  Q. 192; Q. 120. Back

22  Deadweight is the term used to denote those who have found employment through New Deal but who would have found employment even in the absence of the programme. See para 33 for a more detailed discussion of the effects of deadweight. Back

23  Q. 194. Back

24  Q. 24. Back

25  Ev. p. 56. Back

26  Ev. p. 103. Back

27  New Deal for Young People: Two Years On, para. 4. Back

28  Anderton B, Riley R and Young G, The New Deal for Young People: First Year Analysis of Implication for the Macroeconomy, ESR 33, December 1999 (Hereafter "ESR 33"); Riley R and Young G, The New Deal for Young People: Implications for Employment and the Public Finances, ESR 62, December 2000 (Hereafter "ESR 63"). The National Audit Office study is expected to be completed in July 2001. Back

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