Examination of Witnesses (Questions 1
WEDNESDAY 13 MARCH 2002
1. Order, order, welcome to the Committee of
Public Accounts. First of all may I apologise for the slightly
delayed start? We do pride ourselves that we always start on time
in this Committee but as members of the public and witnesses will
appreciate, the Government decided to announce its response to
the Sharman inquiry today; there was a statement before the House
and a number of us felt it was very important we were there. May
I thank you, Ms Lomax, for your patience in waiting for us to
come back from the Chamber? May I thank you and your colleagues
also for coming to answer our questions today about the New Deal
for Young People, a very important subject? Would you like to
start by introducing your colleagues?
(Ms Lomax) Certainly. Starting from my
left, Mr Bill Wells, who is our Labour Market Economist. Leigh
Lewis is the Chief Executive of the Employment Service, Chief
Executive of Jobcentre Plus and the additional Accounting Officer
for this programme. Matthew Nicholas, is Head of the Jobseeker
Division in the Employment Service.
2. May I start by referring you to page 2, paragraph
7, which is a point which is also repeated in the main body of
the Report in paragraph 2.4? It makes the obvious point that "The
Employment Service has invested considerable resources in monitoring
and evaluating the New Deal for Young People, and has closely
monitored progress against the published objectives, which have
included targets for helping young unemployed people into jobs.
Targets were not set for the programme's other objectives".
If targets were not set for the programme's other objectives how
can you claim that overall the programme has been a success?
(Ms Lomax) The Government published an objective monitoring
and evaluation paper in early 1998, setting out the various ways
in which it was going to evaluate the success of the New Deal
against the objectives which were set and making it clear then
that no single measure was going to measure overall success adequately.
The evaluation strategy really had three elements to it involving
a variety of studies, both looking at the micro-economic impact
of the scheme, the macro-economic impact and also the cost-effectiveness
and quality of the delivery of the objectives. An enormous amount
of time and money has gone into different kinds of evaluations
under these headings; an awful lot of it has been contracted from
outside providers, but in-house we have had about 15 people, statisticians
and other professionals, working on the New Deal, evaluating it
against various criteria. It has been a multi-faceted evaluation
3. Mr Lewis, may I ask you to refer, please,
to page 8, paragraph 1.6? You will see there that "The fundamental
justification for them", that is the New Deal programmes,
"is the failure of the open market to reconcile the interests
and vocational skills of individuals who are without jobs with
the skills needs of employers". To what extent do you feel
that the New Deal for Young People has filled gaps in the economy?
(Mr Lewis) I certainly think it has. It is simply
an inevitable fact of life that when employers come to make recruitment
decisions they tend to want to recruit people who are most immediately
job ready and have the obvious skills and attributes they need
for the vacant jobs they have available. It is undoubtedly the
case that manynot all but very manyof the participants
who have come through the New Deal for Young Peopleare
not immediately job ready in the sense that on the very first
day that they join the programme they would not be people whom
employers would always in every case want to take on straightaway.
That has been why one of the challenges and one of the successes
of the programme has been to help young people come to a position
where they are job ready and where they appear to employers to
be well-qualified and suitable candidates for their vacancies.
4. One criticism which could perhaps be made
of you is that you should have spent more than the £1.2 billion
you spent on the scheme on the young people who had the most difficulties,
the young people who are furthest away from productive employment.
Is that a fair criticism?
(Mr Lewis) It is certainly fair to say that we have
tried throughout the life of the scheme increasingly to differentiate
the resource and the effort we put into the New Deal so that where
young people come onto the New Deal needing only a relatively
limited amount of help through the Gateway process to get to the
point where they are seriously good candidates for employment,
we have sought increasingly to make Gateway operate more effectively
so that young people can and indeed have moved into employment
quickly. We have recognised, particularly as the programme has
gone on, that there is a group of people who have more serious
barriers to employment and who are going to need a greater amount
of help. One of the developments of the programme over the time
that it has been in existence, has been to increase the amount
of specialist support and help both in the Gateway and in the
options for those young people with more serious barriers to employment.
5. Directly following that point, if you turn
back to page 7 and look at Figure 1 you will see listed there
in a very easy way to understand examples of barriers to employment
experienced by participants who are harder to help into employment.
How successful do you think these programmes have been in helping
young people with the multiple barriers into employment?
(Mr Lewis) Overall the programme has been very successful
in that respect. If you take account of the fact that almost 80
per cent of entrants to the programme have one or more labour
market disadvantage, one in three have never actually worked before
at the point where they come onto the programme, I think the fact
that such very large numbers of young people have gone into employment
and sustained that employment during the course of New Deal is
testimony to the success of the programme and, if I may say so,
to the quite remarkable efforts of personal advisers and of many
other partners of the New Deal to help young people with those
barriers to employment to overcome them to the point where they
have been able to go into employment and sustain that employment.
6. Just give us a flavour of the sort of work
you do do specifically to help these young people who suffer from
these multiple barriers to productive employment?
(Mr Lewis) The first stage is the Gateway where the
personal adviser is seeking with each young person to arrive at
an assessment of their particular circumstances, treating them
as an individual. We use a number of tools: one called the client
progress grid; then the actual Gateway to Work courses during
the course of the Gateway. The whole effort there is to try to
establish what in each individual case that young person is facing,
what those barriers are that are most the obstacle to that young
person going into employment. They can be relatively small-scale
problems which can be relatively easily overcome up at the other
end to major problems of addiction, complete lack of basic skills,
which are obviously going to take more effort and more time to
7. Thank you for that. May I now pursue this
a bit further by referring you to page 14? There you see from
Figure 6 that 18 per cent of the participants on these programmes
have been on the programme more than once. What is the point of
putting a young person back on a programme which has already failed
(Mr Lewis) If we were just to do that and no more,
then we would be failing that young person. Actually it is around
18 per cent of all the entrants onto the New Deal who re-enter
the programme a second time. To state the obvious, that means
that over 80 per cent do not. There is another characteristic
which is that we find people who have been through New Deal once,
even if they have not then been able to sustain employment, in
general exhibit the characteristics more of short-term unemployed
people rather than longer-term unemployed people. We have also,
in recognition that some of those people inevitably joining the
programme for a second time are amongst the hardest to help, as
the programme has gone on, developed the Gateway, developed the
Options and, through a number of announcements which the Government
made in its Green Paper last year such as the Step-Up Programme,
sought to ensure that if people do come onto the problem a second
time round then they are going to have an even more intensive
range of support and assistance available to them to try to ensure
that we do, on that second occasion, really get to the route of
those barriers if not to overcome them.
8. If it is so useful for them to come round
the course a second time, why do they have to wait six months
before you allow them to do so?
(Mr Lewis) Because there remains the point that when
someone has been through the entire New Deal programme on one
occasion, has been through the Gateway, has been through the Options,
it remains the case actually that within a relatively short time
of leaving the programme formally, significant numbers of young
people do go back into work. Because the New Deal programme is
inevitably a resource-intensive one, by leaving a period between
somebody ending their participation for the first time on that
programme and re-entering it a second time, we are trying to ensure
that before we offer that full panoply of support and assistance
again, a second time, we have allowed the programme's impact the
first time to take effect. It would be wrong to say that no support
is available in that intervening period. That would not be the
case. There is all the normal support which is available through
the Employment Service during that period.
9. Ms Lomax, may I now ask you a very important
question? Could you please turn to page 21 and look at paragraph
3.23? There we read, what we know, that ". . . the New Deal
for Young People was introduced in 1998 into a buoyant economy,
and the labour market has subsequently continued to improve. The
programme has therefore yet to be tested in deteriorating labour
market conditions, where job outcomes may be more difficult to
achieve". That leads one to the obvious question: how many
of these jobs would have been created anyway because you were
in the situation of a buoyant national economy? How are you going
to develop the programme when, as must happen sometime in the
future, the economy gets far more difficult?
(Ms Lomax) The New Deal is about a good deal more
than creating extra jobs, it is about improving employability
and about improving people's ability once they have a job to stay
in it and in the long term to thrive in the labour market. The
short-term impact of whether they would have moved into work in
a buoyant labour market is not an adequate measure of the effectiveness
of the programme. It is also highly uncertain exactly what would
have happened in the absence of the New Deal, as the NAO Report
makes extremely clear. Since it is about improving employability,
it is equally relevant when the labour market becomes less buoyant,
when the economy becomes difficult, the people who suffer most
are the long-term unemployed. Working with young people to maintain
their morale and their employability in the down-swing seems to
me to be a very worthwhile thing to be doing.
10. I accept all that. What you said is all
obvious. But there will come a time when the job market is far
more difficult. My question was: how are you going to develop
these programmes, make them more sophisticated so that you have
almost as much success in the future as you have had in the past?
(Ms Lomax) One of the things we are doing at the moment,
for example, is the rapid response programme which is working
with people in situations of large-scale redundancies, before
they have actually been laid off. I saw one last week, for example,
in Xerox in the Forest of Dean. They are laying off about 1,000
people, and the Employment Service and the rapid response unit
are in there working with people before the redundancy actually
takes effect. The chances of people being able to take advantage
of what jobs there might be by retraining themselves before they
become unemployed, are greatly improved. That is the sort of thing.
There is about £9 million in that particular initiative.
There are other things we can do, but that is one particular thing
we are doing at the moment.
11. When New Deal was first set up there were
two arguments about it really: first of all whether it was a good
idea or not and that is a policy matter and we are not here to
discuss policy matters; the other was how it should be funded
and it was due to be funded out of the windfall tax. Is it still
being funded out of the windfall tax?
(Ms Lomax) It is being funded out of the employment
opportunities fund, which is the ring-fenced fund that the windfall
tax was paid into in the spending review 2000.
12. But it is now due to go on indefinitely.
Does that mean the windfall tax and this fund you are talking
about are going to run out and it will be forced to come to an
end just because there will be no funds?
(Ms Lomax) It has not run out yet.
13. But it is currently being funded out of
a fund which has a finite life. Is that what you are saying?
(Mr Wells) In the spending review 2002 a permanent
stream of funding was applied to the New Deal.
14. So it is not being funded out of this fund
which was set up out of the windfall tax, it is being funded out
of a new fund.
(Ms Lomax) The receipts of the windfall tax have not
yet been exhausted and they are in a ring-fenced fund called the
employment opportunities fund. What you are saying is that when
that is exhausted, is there a stream of funding beyond that? Is
(Mr Wells) Yes.
(Ms Lomax) But it has not been exhausted yet.
15. So currently it is being funded out of a
finite fund, but there is another fund which has been identified
within the spending review.
(Ms Lomax) Presumably it is being funded out of core
funding beyond that.
(Mr Lewis) I think that is right. Ministers have announced
that the New Deal is now seen as a permanent New Deal, a permanent
feature and thus in a sense it becomes a call on expenditure and
will be funded in the future to the extent that funding is clearly
needed out of general expenditure within the employment opportunities
fund that Ms Lomax has referred to.
16. So the Government has accepted that the
windfall tax is not going to last for ever, for as long as this
scheme is needed.
(Mr Lewis) That is right but it is the case, as the
NAO Report makes clear, that the gross cost of the programme is
much higher than the net cost once the returns in terms of higher
tax, national insurance and so on, are taken into account.
17. The other point which has been made, particularly
since this NAO Report came out, is that the programme has been
a bit of a waste of money in the sense that a lot of people have
got jobs who would have got jobs anyway. Your answer to that appeared
to be that that was not the point because half the point about
the whole programme is to improve employability.
(Ms Lomax) No. That is a point to be made about the
programme, but I would certainly not say it has been a waste of
money. It has paid for itself very easily. The figures in the
NAO Report make that perfectly clear.
18. Paid for itself in what sense? Perhaps I
was misreading the NAO Report.
(Ms Lomax) Paid for itself in the addition to national
income, which the NAO put at a minimum of £200 million. The
National Institute for Economic and Social Research put it at
19. And the cost of the programme to date?
(Ms Lomax) The cost of the programme in net terms,
taking account of estimated tax and social security flowback is
£140 million a year.
(Mr Wells) There is a difference between the effect
on the GDP and public finances.
(Ms Lomax) Let us go through that. The effect on public
finances net of tax and social security flowback is something
like £140 million a year according to the work which is here.
If you accept that extra jobs have been created within a margin
of error, as the National Institute and the IFS and almost anyone
else who has looked at this does, those extra jobs do have a value
as well which you need to add in. That is why you would say that
national income is higher as a result. I must have seen at least
four times in the NAO Report that there is no doubt that, although
figures are subject to a wide margin of error, the New Deal for
Young People has had a positive impact on the economy. It has
certainly not been a waste of money.