Examination of Witnesses (Questions 60
WEDNESDAY 13 MARCH 2002
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 centin fact slightly lesshave
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
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
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
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
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.
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
(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
(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.