Examination of Witnesses (Questions 40
WEDNESDAY 13 MARCH 2002
40. Thank you very much. Has an estimate been
made of the job opportunity cost of the utility sector from the
£5 billion windfall tax which has led to a cutback in the
capital expenditure programme? When you assess whether this has
been a worthwhile programme, has any estimate been made of potential
job losses or opportunity costs of the tax?
(Mr Wells) It was not done either with DfEE or DWP.
I am not sure that it was done within the Treasury either. I am
not sure there is a figure.
41. How do we know as Members of Parliament,
in assessing whether this was a worthwhile thing to do, whether
it is a worthwhile thing to do?
(Mr Wells) Part of it is the way the evaluation of
the National Institute works which looks at the whole effect of
the New Deal moving through the economy and will include the effect
of raising the windfall tax. Their estimates are that overall
there was an increase in employment and also in GDP.
42. What were the two figures Ms Lomax gave
for the increase in GDP as a result of this programme? Was it
£200 million or £500 million? There were two figures.
The range is presumably between £200 million and £500
(Mr Wells) Those are the two estimates which have
43. What is the opportunity cost of £5.2
billion? What is the annual return which in business you might
be expected to achieve from investing £5.2 billion a year?
(Mr Wells) I am not sure that is the appropriate comparison
because the £5.2 billion will be built into the National
Institute model. The reduction in profits and various others things
will work their way through.
44. So the £200 million is already taken
(Mr Wells) Yes.
45. May I ask the Comptroller and Auditor General
whether that is right? Is it already taken out?
(Mr Jones) Yes.
(Ms Lomax) Yes.
46. What was the total youth unemployment figure
in May 1997? I am really referring to a comment on page 13 that
there was a commitment to get 250,000 under-25-year-olds off benefit
and into work and this has happened. What was the total youth
unemployment in May 1997, which was the starting point?
(Mr Wells) The total for unemployed 18 to 24-year-olds
47. In May 1997.
(Mr Wells) In 1997.
48. What was it by, say, June 2001 or the end
of the Parliament.
(Mr Wells) In January of this year it is 253,000.
49. So if I deduct 253,000 from 397,000 I get
134,000; so the reduction is 134,000.
(Mr Wells) There is a slight problem because these
figures are not seasonally adjusted and you should do year on
50. Can we have the seasonally adjusted year
on year figures then? I am just trying to understand, to get to
grips with it.
(Mr Wells) If you compare, for example, January 1997
with January 2002, to try to take account of seasonal adjustments,
then the January 1997 figure was 475,000.
51. And the January 2002 figure was . . .? That
was the 253,000.
(Mr Wells) Yes.
52. So that does come to 222,000.
(Mr Lewis) May I add one thing to what Mr Wells has
said, which is that those figures are for all 18 to 24-year-old
unemployed people of any duration of unemployment. The New Deal
normally begins when somebody has been out of work for six months.
53. I understand that.
(Mr Lewis) If you look at the figure for 18 to 24-year-olds
six-months-plus unemployment in 1997, it was around 178,000 and
the current figure is 38,600 and that is probably a more meaningful
figure to look at to see the impact of the New Deal.
54. I was really looking at this number here.
So if unemployment was 475,000, is that the starting point rather
than 397,000? There does seem to be a large difference between
a seasonally adjusted number and the actual number, 397,000 and
(Mr Wells) These are all seasonally unadjusted numbers
and January is a month when there are many unemployed people compared
with the rest of the year because of the seasonal pattern after
55. Why is it fair then to take a January 1997
figure when you say there are all these people coming onto the
lists for seasonal reasons rather than the May 1997 figure? Why
is one intellectually more objective than the other?
(Mr Wells) Because the figure you are comparing is
January 2002. You could compare May 1997 with May 2001, but that
is nearly a year old now. I could give you those figures.
56. Yes, please; that would be helpful. What
is the number now, the latest figure?
(Mr Wells) The number now is January 2002, 253,000.
57. Is that the latest figure?
(Mr Wells) Yes, that is the latest figure. The May
2001 figure is 233,000 and the May 1997 figure is 397,000.
58. It would be helpful if we could have a chart
with all those numbers on. As far as I am concerned they are the
May I turn to page 3, paragraph 9 and the numbers there? It says
the effect was to reduce youth unemployment between 25,000 to
45,000 and to increase youth employment between 8,000 to 20,000.
Why are those numbers different? I do not quite understand why
they are not exactly the same numbers on each line.
(Mr Wells) Not everybody who leaves unemployment
goes into work. Some of them go onto the programmes themselves,
the Options. In general, there is a range of other avenues as
well as employment for young people. The biggest is the number
of people who are on the Government's training programmes.
59. We were told in the Report that in January
1998 120,000 young people were long-term unemployed. We were told
that every month 15,000 to 20,000 young people became unemployed
adding to the numbers and within two and a half years of the scheme
being introduced, 250,000 youngsters had found work. That is fantastic.
That is great. Then the Report says, which is a bit of a downer,
that a lot of them would have found work anyway. What do you say
(Ms Lomax) I say that the fact that people will find
work anyhow is a feature of any employment programme. The evidence
of the evaluation is that people found work quicker. Some people
who would never have found work found work, but the employability
of those people who were helped into work may also have been improved.
So over a period of time they have been helped in a way which
will improve their longer term employment in a way which is not
captured by these short-term figures.
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