Examination of Witnesses (Questions 100
WEDNESDAY 13 MARCH 2002
100. When I asked the NAO why an analysis was
not done of the unit cost to measure against outputs because we
have used measures or outputs rather than the cost of outputs,
the NAO's response seemed to be that they did not look at it on
the understanding that there was not a great deal of variation.
It now appears that there is some variation. I then tried to ask
you whether there was a great variation in the £5,000 to
£8,000 and £4,000 to £7,000 and you said no. My
further questioning seemed to be eliciting a slightly different
response. I am not quite clear now whether you are stonewalling
me or not. Could you indicate to me in a few words what you believe
the variations are in cost?
(Mr Wells) May I mention the difference between gross
and net costs? The gross costs, the costs of dealing with each
individual young person, will be greater for the reasons Mr Lewis
has given. The numbers you mentioned of £5,000 to £8,000
are actually the effect of everything going through.
101. If you do not mind me interrupting you,
I think you are on the wrong track there. What I am trying to
do is get a gauge of two things: one is that the governance of
this whole scheme depends crucially on our capacity to get the
most difficult people back into work and therefore one would have
thought that somewhere along the line someone would make a decision
to put more money into those areas where there are multiple problems
relative to other areas. I am afraid you are not really giving
me a very straightforward answer.
(Ms Lomax) Is it worth mentioning that this is not
the beginning and the end of all the welfare to work provision
there is for deprived areas? We have not talked about Action Teams
for Jobs, we have not talked about Progress to Work, we have not
talked about Step Up. There is an enormous number of other schemes
which areas like your constituency will benefit disproportionately
from, which are targeted on exactly those hard to help. Just looking
at this sort of data at the back is not giving you a measure of
the help which is available.
102. It is data which you have provided.
(Ms Lomax) Yes, but we are just taking a slice of
what is going on here. It is not the whole story.
103. If we are saying that the efficacy of the
New Deal depends on all kinds of other hidden projects, that is
a very significant statement. What I want to be able to do is
to judge the performance as a constituency Member of Parliament
first of all but then as a member of this Committee, to judge
the efficacy in expenditure terms of my own units of delivery
and to measure it against the average and the expectations which
you have and then to see whether or not any financial judgement
is made as to the efficacy of the units of delivery. The only
information you have provided for us is what is in front of us
which you say in any event is misleading. I think I have made
the point but it would be useful, if other members of the Committee
are interested, because it is a significant discussion, to see
some note which specifies the amounts of variation per output
across the units of delivery. Is that okay?
(Mr Lewis) Yes.
(Ms Lomax) Yes; certainly.
104. May I just move on to another question
about units of delivery? I see that you privatised ten units of
delivery. Can you tell us the circumstances which lay behind the
privatisation since they do not seem to be working any better
or any worse than the public sector providers?
(Mr Lewis) Ministers concluded that it would not be
right to see a single delivery model, so they took a decision
early on in the life of the New Deal that in ten areas private
or voluntary sector organisations would be invited to lead the
delivery of New Deal. You are right to say that we have done a
good deal of evaluation which suggests that while there are individual
variations, overall the performance of the private sector led
New Deal areas and public sector led New Deal areas has been similar.
105. I am interested in the distribution of
finance, since I think that is the core to everything. I should
just say that it is surprising that is not in this Report. In
terms of the private providers, how have you decided how much
money they should receive per unit of output or per number of
people unemployed in the area?
(Mr Nicholas) We contracted them with some incentives
to increase the number of young people going to work. So if they
get more young people into work they receive more money as a result.
Broadly the costs available to them are the same as those available
across the country as a whole.
106. Have we ever bothered to measure, since
we have not bothered to tell the Committee, whether or not they
are performing as well financially as the public sector comparators?
Is that something we have ever measured?
(Mr Nicholas) Yes, our understanding is that the cost
is slightly higher per job in the private sector ones, but broadly
107. But slightly higher.
(Mr Nicholas) That is my understanding.
108. Are the providers using different methodologies?
(Mr Nicholas) Yes, some of them do. They have different
combinations of the numbers of personal advisers, how much they
rely on training, how much they rely on job subsidies. They have
flexibility to put together the provision they see is right for
the clients in their area.
109. Do the public sector comparators have the
same capacity to be flexible?
(Mr Nicholas) There are areas of methodology where
the private sector ones have from the outset had greater flexibility.
We are learning from the way they use those flexibilities in things
like Action Teams in the public sector so that we can draw all
the more flexible models for staff throughout the organisation.
110. Notwithstanding the fact that there are
fewer regulatory impositions on the private sector and that they
have tried other methodologies, they are actually more expensive
and not producing any additional outputs relative to the public
sector. Is that a reasonable summary of what you have said?
(Mr Nicholas) The comparison is that they are broadly
in the same position as the public sector ones.
111. Notwithstanding the fact that they have
fewer impositions on them in terms of the regime which they must
use and notwithstanding the fact that they are more expensive
than the public sector. Is that also true?
(Mr Nicholas) Yes, that is broadly true.
112. May I first of all ask the NAO why it is
that we have no regional breakdown of the impact of the New Deal
in this Report?
(Sir John Bourn) I recognise that the Report could
usefully have been developed in such a way as to provide this.
113. Presumably the reason it is not in the
Report is that it was not asked for or was it because you did
not think to provide it?
(Ms Lomax) This is the NAO's Report.
114. The point I want to move to is that the
issue here is how many of these jobs would have been created anyway
by the economic upturn and the reality as we all know is that
there is enormous regional variation in levels of economic performance
and change and therefore in so far as there has been a relative
boom in the South East if we find an enormous proportion of these
jobs are there and not in the North, the real challenge for the
New Deal is the regional impact. Mr Wells, I understand you are
a bit of an expert in this area.
(Mr Wells) The growth in employment has been relatively
evenly spread across the country. Overall there has been roughly
the same growth in most areas of the country with the areas with
the lowest employment rates tending to do slightly better than
the other areas.
115. Might it be possible to provide the Committee
with some breakdown on that? I think people would be interested.
(Mr Wells) Yes; certainly.
116. I am very glad to hear that.
(Mr Wells) It is also true that the areas which appear
to do relatively badly in terms of the units of delivery tend
not to be geographically concentrated. They tend to be concentrated
in the middle of cities or urban areas with London as a particular
example of the tail of the graph we were talking about. It is
not actually the distribution across the country. The clusters
were chosen more to do with the types of the labour market.
117. Anyway you can provide the regional data
if we want it.
(Mr Wells) Yes.
118. Do not misunderstand me, I am very pleased
with what has happened in the New Deal and this Report and I think
you have done a wonderful job. I just want to ask some questions.
Something like 340,000 have participated in New Deal and we have
generated something in the order of 30,000 sustainable jobs. Is
that right? Have I got this wrong?
(Ms Lomax) Something like 700,000 people have participated
in the New Deal and about 340,000 young people have actually gone
119. I am confusing things. Something like 340,000
are doing this and the National Institute of Economic and Social
Research suggest these various figures for the marginal extra
jobs which have been created which would not have otherwise been
created. I hope therefore I cannot conclude that those people
who would have got a job anyway have inadvertently been stopped
from getting a job by being put in the New Deal but in fact what
we have done is put them in the New Deal, they would have got
a job otherwise and we have just lost a lot of tax.
(Mr Lewis) Not at all and indeed one of the findings
of the National Institute, and this was up to March 2001, was
a much higher figure of 60,000 young people leaving unemployment
for a job more quickly than they would otherwise have done.
(Ms Lomax) People still have to go on doing active
job search when they are on the New Deal. You do not get relieved
of the need to look for a job.
3 Ev 23, Appendix 1. Back
Ev 23-25, Appendix 1. Back