Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 1 - 19)




  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 strategy.

  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 many—not all but very many—of the participants who have come through the New Deal for Young People—are 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 resolve.

  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 them?
  (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.

Mr Rendel

  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 that correct?
  (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 £½ billion.

  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.

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