Select Committee on Education and Employment Appendices to the Minutes of Evidence


Memorandum from Rt Hon Tessa Jowell MP, Minister for Employment, Welfare to Work and Equal Opportunities

  At my recent appearance at the Employment Sub-Committee I offered to write to you with additional information on some of the points we discussed.


  I promised to let the committee have a regional breakdown of the national figure of 60 per cent of young people who leave the New Deal from the Gateway before taking up any of the options. The percentage for each region is as follows:

    Office for Scotland—53 per cent;

    Northern—46 per cent;

    North West—56 per cent;

    Yorkshire and the Humber—55 per cent;

    Office for Wales—52 per cent;

    West Midlands—63 per cent;

    East Midlands and Eastern—61 per cent;

    South West—59 per cent;

    London and South East—66 per cent.

    Great Britain—60 per cent.


  I offered to write to the Committee to provide an explanation of the "cost per person into job". I attach a copy of the letter I have subsequently received from Patrick Nicholls on this in case the Committee has not yet seen it. In the letter he makes the claim that the cost per New Deal job is £22,788. This figure is contrived by subtracting from the number of young people who have found work from the New Deal those young people who found a job that didn't last 13 weeks and those young people who have found a job through the New Deal employment option. He also takes off the number of young people who may or may not have found work without the New Deal. He then divides the total New Deal budget by this figure.

  This is wrong on a number of counts. Firstly, it implies that the only jobs worth counting are those that are unsubsidised and sustained work, which is plainly wrong. The point of the New Deal is that it finds real job opportunities for young people who have been out of the labour market for some time. Even though a job may not be sustained, it can still transform people's confidence, their ability to work, and their prospects of getting another job with recent work experience to show to their next employer. And for some young people, a subsidised job is their best chance of finding a way back into the labour market. It is unfair to young people to dismiss their jobs as in some way "not genuine": I can assure you that is not the way young people themselves feel about their work.

  Secondly, it is simply not sensible to discount those people who may or may not have found a job because we can't possibly know who these people are. No employment programmes in the past have done so, including those with which Patrick Nicholls was associated.

  Thirdly, it is a schoolboy howler for Patrick Nicholls to base his calculations on the total budget allocation rather than the actual spend for the two years the programme has been going, since the allocation of funding is for the lifetime of this Parliament. In the same way it is of course not sensible to include only some, rather than all the job outcomes from the New Deal. Of course, after two years of the programme we haven't spent the whole budget. At the end of March 2000 we had spent around £650 million and had helped 210,000 young people into work. We estimate that, on average, the amount spent on a young person in New Deal is £2,000. Over half of New Deal participants have found a job; the cost per job therefore is below £4,000.

  The "cost per job figure created by New Deal" approach is also flawed because it assumes the New Deal is a job creation scheme. New Deal is a supply side measure, not a demand side one. The issue in assessing the net impact of New Deal is its effect on the economy and the labour market. Independent research by the National Institute for Economic and Social Research (NIESR) has looked at precisely that point. In its report published last year it says quite clearly that the New Deal's impact is substantial—so much so that the New Deal is now close to paying for itself.


  Patrick Nicholls also claimed that "58 per cent of young people who started New Deal go back onto benefits". This claim is wrong as the following information from the Government Statistical Service shows:

  At the end of April 2000:

    Starts to New Deal—470,400;


    of which left benefits—264,900;


    unknown destinations—100,100;

      other known destinations not including JSA—25,700;

      remained on benefit—79,700.

  It is important to remember that what is being shown in this table are those young people who leave the New Deal. The figure for 139,100 young people leaving for employment therefore does not include the 24,800 young people who found work through the employment option (who are still on the New Deal) and the 52,300 young people who returned to the New Deal after taking a job that did not last for 13 weeks but benefited from useful work experience, and then returned to New Deal to receive further help and support to find employment.

  The table of leavers from New Deal shown above makes it clear that over three quarters of young people leave benefit. Included in those who have left benefits, as I explained in my evidence, are those young people who are put I the category of "unknown destination" because they have not told the Employment Service where they have gone. Although we do not know their destination, we do know that they are not claiming benefit or else, by definition, we would count them as a known destination. So far, surveys have shown that the majority of the young people who were recorded as leaving the New Deal for unknown destinations are going into employment.


  It was also claimed by Patrick Nicholls that the New Deal has had a negative effect on youth unemployment and that the fall in long term unemployment has actually slowed down since New Deal was introduced. The facts are that long term youth unemployment has fallen faster in the last three years than the previous three. This is true of both claimant count and International Labour Organisation (ILO) statistics.

  The following table shows the numbers in the client group for the New Deal for Young People—those aged 18-24 who are unemployed and have been on the claimant count for six months or more—from April 1994 to April 2000.

Claimant Count Unemployed
April 1994
April 1997
April 1998
April 2000

  The table shows that between 1997 and 2000 unemployment in the New Deal client group fell by 70 per cent and between 1998 and 2000, when the New Deal was in operation, by 56 per cent.

  This fall in the New Deal client group of 70 per cent over the past three years and 56 per cent over the past two years compares favourably with both the fall in overall claimant unemployment for 18-24 year olds (37 per cent and 23 per cent respectively) and the fall in claimant unemployment amongst those of all ages unemployed for six months or more (49 per cent and 26 per cent respectively). The fall in unemployment in the New Deal client group over the past three years is faster than the 52 per cent fall between 1994 and 1997.

  The more rapid fall in unemployment amongst the New Deal for Young People client group, on both claimant count and ILO measured unemployment, shows that the New Deal is making a difference. This finding complements the conclusions of the work by the National Institute of Economic and Social Research, as I told the Committee when we met.


  Finally, you asked for further information on my evidence that sickness rates were declining in the Employment Service. Statistics from Employment Service Personnel show that absence levels declined from an average of 3.4 days per person in the quarter January to March 1999 to 3.2 days from January to March this year.

  I hope this information is helpful to the Committee.

Rt Hon Tessa Jowell, MP

Minister for Employment, Welfare to Work and Equal Opportunities

July 2000

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