Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 60 - 79)



  60. You obviously agreed the Report, so you accept what has been said. It seems to me that if I had been in your position I would not have agreed the Report. I would have said that here we were with 120,000 unemployed, increasing 15,000 to 20,000 a month, so it was getting bigger, yet the NAO are saying these people would have got jobs. The numbers were increasing. I would have said I just do not agree with that.
  (Ms Lomax) It goes back to the answer I was trying to give to the Chairman right at the beginning. It does not mean that the scheme has had no impact. It does not mean that it has not improved the employability of these people. That was what the scheme was really about. It was about developing young people so that they can participate in a more meaningful way in the labour market. All employment programmes have the feature that short term you can say people would have found work anyhow. This scheme relative to other employment programmes has been very successful. `Deadweight', as they call it in the trade, has been rather low.

  61. I am on your side.
  (Ms Lomax) Yes, but I wanted the opportunity to say this. Compared with previous schemes we have run in this country, compared with previous schemes of this sort, though this is a bit sui generis, compared with other employment programmes which people run in other countries, this has been very successful. Even the figures quoted here as a bit of a disappointment are good. They are very good. In Workstart, to take a previous scheme, `deadweight' was something like 90 per cent of those who were moved into work. `Deadweight' there was 90 per cent. We are talking here about 50 or 80 per cent which is a good record.

  62. Good, that is great. What I have been trying to get you to say is that the NAO are wrong. In my constituency youth unemployment is down something like 60 per cent and that is a fantastic achievement in anybody's terms.
  (Ms Lomax) Yes.

  63. Why did you accept the statement that they could have got jobs anyway, because I do not think they could have got jobs anyway?
  (Ms Lomax) Some of the people could never have got jobs anyway; possibly some of the people in your constituency are in that category. This scheme has been remarkably successful in virtually eliminating long-term unemployment among young people.

  64. Good; that is what I wanted you to say. That is what I have been trying to get you to say.
  (Ms Lomax) Young people who are unemployed for more than two years just do not exist any more. Even in 1997 we were talking about 16,000 in this category; if we go back to 1985 we are talking 169,000. It has just completely cracked a problem which was a serious problem.
  (Mr Lewis) In many ways I want to agree with you because our staff out there, our personal advisers believe and have every right to believe that they have done a tremendous job over the last four or five years in delivering the New Deal and 90 per cent of young people say that and say they have hugely valued their relationship with their personal adviser. What we have to remember is that when you move into the realms of economic analysis, if you have a number of unemployed people on one day and you may have the same number of unemployed people on another day, they are not going to be the same individuals because some of them will have got jobs the day before, other people will have become unemployed on the next day. As everyone has said, the NAO Report, NIESR, etcetera, it is very hard, it is a seriously difficult task to know what would have happened anyway. What every personal adviser would say is that they believe there are very few people who have entered the New Deal who, even if they might have got a job anyway had the New Deal not existed, have not left the New Deal better off than they joined it with more advantages in the long term as a result of their participation.

  65. When I walked round the streets in Durham in 1997 canvassing I was not talking about the economic results of New Deal, I was saying to people that if they elected us, we would put 250,000 youngsters to work within five years. So that was my aim as I walked round the streets. What do you believe is the most important aim of this particular scheme? Was it or is it to get 250,000 youngsters off the dole and into jobs or was it the aim basically to create more jobs or to have an impact on the macro-economy? What was the actual aim of the scheme?
  (Ms Lomax) I think it was about getting 250,000 people off benefit and into work. Why? Because that was going to drive other benefits, some of the things we have been talking about. It is bad for people to be out of work. If you want to make people more employable it is a good idea to put them in work as the first step and there are some long-term benefits about moving people off benefit into work. Getting them into jobs is not the end of the matter, but it is the beginning of a lot of things that matter a great deal. We do not need to be complicated about this. It was about getting 250,000 off benefit into work. That is what the Employment Service focused on and that is what it achieved by September 2000 with an enormous effort.

  66. When I was canvassing I was also saying that we would use the windfall profits to do that and that there would be £5 billion of windfall profits to use. Then I read the Report and think to myself that it seems to have been very cost effective, because in fact the scheme has only cost £1.48 billion over the lifetime of Parliament and it was expected to cost £3.15 billion. Has it been cost effective?
  (Ms Lomax) Yes and the fact that the economy has been quite buoyant has been one reason why the money has gone further as well. Yes, it has been extremely cost effective. Sixty per cent of the gross cost of the scheme has come back in lower social security benefits and higher taxes, quite apart from the benefits to the earning capacity of the people who have gone through.
  (Mr Lewis) Inevitably, when we were constructing estimates at the very beginning of the programme one had no track record to go on in terms of how a programme like this would operate because there had not been a programme like this. We assumed at the beginning, for example, that of 100 per cent of people coming onto the programme, roughly 40 per cent, 40 out of every 100, would leave during the Gateway phase of the programme and that 60 per cent would go on into the Option phase, the Option phase being the more expensive phase inevitably because that is where there is more intensive assistance. In fact the figures have turned out to be almost the exact opposite. Sixty per cent have left New Deal during the Gateway phase and only 40 per cent—in fact slightly less—have needed to go into the Options. That again has been a tribute over time to the success of people who have worked on that programme, particularly the personal advisers, in establishing a real relationship with individuals.

  67. When all the factors are taken into consideration and paragraphs 3.19 and 3.20 tell us that for every £5 spent on the New Deal, £3 is returned to the Treasury, that does not look a bad deal. I also seem to remember reading somewhere that the cost per job has been something like £5,000 per job. Is that right or was I reading it wrongly?
  (Mr Wells) As there always is, there have been two estimates of this, one from the NAO and one from NIESR. They come out at roughly the same number, £5,000 to £8,000 and £4,000 to £7,000. I should stress though that that is the short-term increase in employment and is not the overall effect. It is likely if there is an increase in employability that those costs will fall over time.

  68. Have you compared your costs of creating a job with let us say Teeside Development Corporation who created a number of jobs?
  (Mr Wells) There is a difference in the type of programme. This was about helping the long-term unemployed into jobs. It was not a job creation programme of that type. The employability which was mentioned is actually quite important as well as the overall increase in employment. I am not sure they are directly comparable.

  69. You should say they are because yours has cost £7,000 and theirs cost £36,000 a job.
  (Ms Lomax) If we were doing it on a comparable basis, we would come out with a much lower number than £7,000 to £8,000 .

  70. I am trying to be really helpful here. For the first time in three years, I am trying to be really helpful. Let us move on to page 13, paragraph 2.7 and Figure 6. We see here that there are failures in the scheme, there are always failures in any scheme and that cannot be helped. We see that something like 600,000 youngsters participated and over 100,000 have not found work and that is a failure rate of something like 18 per cent. What happens to that 18 per cent?
  (Mr Lewis) They certainly do not simply go through a revolving door back into long-term unemployment without anyone seeking to help them further.

  71. Do they go back onto benefits?
  (Mr Lewis) Yes, they go back onto Jobseeker's Allowance if they leave a New Deal Option without going into work, assuming they meet the normal entitlement conditions. It is just worth saying in answering your question, again remembering that almost 80 per cent of people entering the New Deal have one or more labour market disadvantages, that it is a remarkable achievement that over 80 per cent of them do not go through the programme a second time. Where people do go through the programme a second time, as I was saying in answer to an earlier question, we try to take account of their experience, the benefits they have gained going through the programme the first time round. We try to ensure that we tailor even more the support that is available to their individual needs.

  72. Out of the 18 per cent how many are illiterate?
  (Mr Lewis) We think there are about seven million adults in Britain who have a basic skill deficiency of one kind or another and it is true to say that while I do not have instant figures in my head a significant number of the people who come onto New Deal lack basic skills.

  73. I was the head teacher of a special school a number of years ago and I always remember an incident when I was reading the report of a child we were admitting which came from a secondary school and said that this child was useless at French and did not participate properly. Then when I looked at his record, he had a reading age of about six, which meant he virtually could not read. So here were secondary school teachers trying to teach him French and he could not read English. It worries me that some of these youngsters are sent on these schemes and frankly they cannot read or write and they are bound to fail. What are we doing about that?
  (Mr Nicholas) That is why we put in place basic skills screening for everybody who comes onto New Deal to try to identify them right at the beginning. Then we can tailor provision for them, steer them towards provision which is heavily biased towards meeting their basic numeracy and literacy needs, so we can get those cracked first and try to strengthen that as we go through so more of them have those basic skills needs dealt with right at the beginning rather than going onto provision which is not suitable for them for just that reason.

Mr Bacon

  74. You were talking about your multi-faceted evaluation strategy. I was listening with interest to your answers to Mr Rendel about measuring employability. I too found it odd and there are several references in the Report to the fact that a lot of things are not measured. Could you say what are the characteristics of employability?
  (Ms Lomax) The ability to hold a job, the ability to progress in a job, the qualifications, skills, the ability to earn more, the ability if unemployed or having lost a job to get another one quickly, a number of dimensions. The Policy Studies Institute evaluation to which I was referring actually also asked people questions and did have a basic scoring mechanism.
  (Mr Wells) In terms of employability there are really two parts: the first is that you stay in jobs longer over your working life; the second is that you earn more whilst you are in the jobs. Most of the estimates of employability that we have so far are in the very early part of this, the period during the New Deal. If the New Deal helps to provide a history of employment, it may be that over the rest of their working life there will be an improvement both in terms of the time they spend in work and the amount of earnings that they will receive.

  75. I have an open mind about whether the New Deal was a success or not, but I understand from what Ms Lomax was saying earlier, indeed from what Tessa Jowell when she was the Employment Minister said to the Employment Select Committee, published in the Fifth Report of the Education and Employment Committee, "What the New Deal aims to achieve is 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". That I understand to be the primary purpose and thrust of the New Deal. How are we as a Committee of Public Accounts to assess whether this has been good value for money or not when this central purpose was not the central focus of what you were measuring? It says in the Report on page 13, paragraph 2.4 , "The nature and quality of jobs achieved and the progress that young people have made within employment are not systematically monitored". In paragraph 2.5, "The Employment Service does not routinely gather and monitor data on improvements in employability, such as the number of qualifications gained". There are plainly some things you mentioned like the ability to hold down a job which are not easily measurable but I would have thought that the number of qualifications one has, levels of literacy, levels of numeracy, levels of IT skills and so on, are plainly perfectly measurable, but it does not sound from the NAO Report that measuring these things has been at the heart of your programme.
  (Mr Wells) Holding down a job is one of the things you can measure. The increase in employment is because more people have been in jobs for longer. Therefore the net effect in terms of employment is because more people have been in those jobs.

  76. What I am really asking is why more of these things which are relating to employability are not being measured?
  (Mr Wells) There is some consideration in things like the Policy Studies Institute Report to see whether there is an improvement during the period we were looking at it. The results of the PSI Report that there was an improvement in employability in the short run.

  77. It says in the NAO Report, "The Employment Service does not routinely gather and monitor data on improvements in employability"; that is what the NAO Report says.
  (Mr Lewis) That is because of the inherent difficulty of gathering data on things which are not routinely available. It is very hard to gather data routinely without imposing enormous burdens on employers on what has happened to every one of over one quarter of a million people who have been placed into a job.

  78. Do you accept that there is a range of measures of employability which you could be measuring but you are not measuring?
  (Mr Lewis) No, I do not accept that. As part of what has been a hugely comprehensive evaluation strategy, we have, through a whole range of measures, sought to evaluate whether those employability gains which are indeed a very clearly desired outcome of the programme have been made, indeed the NAO Report itself says that there is evidence to suggest that the long-term employability for most young people who have participated in the programme has improved. That evidence is primarily the evidence we have gathered ourselves through the evaluation programme. We have actually gone to considerable lengths, as part of a very, very major evaluation programme, to seek and find evidence as to whether people's longer term employability has or has not improved.

  79. I am not just making this up myself, although it is an opinion I am inclined to have from what I have read. The Report I referred to of the Education and Employment Committee itself concluded, paragraph 17 on page viii, of the Fifth Report, "It is perhaps surprising then", given what Tessa Jowell, the then Minister said about the fundamental aims of the New Deal, "that much of the evaluation of the New Deal for Young People 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 the 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".
  (Ms Lomax) The way in which we evaluate the New Deal and the way in which we measure employability is going to develop. I do not think that anybody is being defeatist about this. I referred earlier, in answering questions from Mr Rendel, to the Employment Bill which is going through Parliament at the moment. It has a clause in it which is designed to improve our ability to link Employment Service data with Inland Revenue data precisely to improve our ability to track people after they have gone into work, so that we can see what happens to their earnings record. We will improve our ability to follow people through, but what Mr Lewis says is relevant: we have to do it in a way which is reasonably focused and cost effective. Evaluating New Deal is already a huge industry, it really is and there are potential burdens on employers and everybody else in adding to it. We need to be convinced we are focusing on the right things.

  The Committee suspended from 17.27 pm to 17.37 pm for a division in the House.

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