Examination of Witness (Questions 100-117)
MR KEITH
FAULKNER
WEDNESDAY 8 MAY 2002
Rob Marris
100. We might be interested in seeing your Spanish
operation if that comes off. You focus on the long-term unemployed
through employment zones, so you are associated with areas of
the country both urban and rural and inner city where unemployment
is unacceptably high. Are there any common factors which you discern
which lead to unemployment being stubbornly high in those areas,
given they are geographically and agriculturally diverse as well?
(Mr Faulkner) The diversity between the areas in which
we operate is what lies behind the original loss of employment
opportunity in those areas. The thing that is absolutely common
is that unemployment is an issue at an individual level. One of
the difficulties we see, for instance in the design and delivery
of New Deal, is an attempt to categorise reasons for unemployment
into ethnic origin, lone parents, disability. When you work closely
at an individual level, you often find that for the headline grouping
you are dealing with, say a lone parent, the real issue is something
quite different. It may be a lack of skills. It may be other social
factors which are really getting in the way. Our view is that
whether we are working in a rural area, as we have just taken
over this week in North West Wales as an employment zone, or in
an intense urban area like Southwark or Brent, the way we have
to tackle it is to come right back and with each individual who
walks through the door make no assumptions about the reasons for
unemployment and tackle that on a one-by-one basis. That is actually
the real secret of the success of Working Links: that the whole
business has been set up that way rather than by making any assumptions
about the nature of the area we are working or the nature of groups
of candidates we are addressing.
101. You just take them one by one and tailor
them.
(Mr Faulkner) Yes. Each of our clients has a permanent
consultant. It is another difference between us and the traditional
way of dealing with it within the public service, where of necessity,
when you visit you see whoever is available to be seen. We make
a very real effort to say you have a dedicated consultant who
will stay with you for as many months as we are engaged together.
102. Paragraph 8 of your memorandum is rather
bleak. You talk about large numbers of people bouncing along at
the bottom of the labour market because of lack of skills and
unimaginative employers who focus on productivity or whatever.
In light of what you said about the tailored approach and in light
of what we found when we went to the Netherlands, where they categorise
people who are unemployed in terms of their distance from the
labour market, or as phase 4, as they categorise it, people who
need help to get back into work, do you think the Government are
engaging enough in these issues?
(Mr Faulkner) The Government are not sufficiently
engaged in this issue of people who are often not categorised
as long-term unemployed, the people I am referring to as bouncing
along the bottom of the labour market, who are frequently in and
out of it without anything being added. The difficulty is that
the present remit for Jobcentre Plus does not give them much scope
to intervene and support those people. Employers in the main,
with some very honourable exceptions, have shown little willingness
to invest in those groups and build an organisation which accepts
attrition and works on the principle of minimum input, maximum
output, change staff, use that as a way of maintaining productivity.
Some active intervention in that area is very important. The difficulty
we face is that as you categorise and focus, one of the difficulties
is that there is a wide number of Government initiatives and even
within New Deal a whole variety of initiatives are already indicated
and sometimes not sufficient clarity about how all the agencies
that operate in this field and how all the various areas of Government
policy that influence it can be joined together. It is exactly
the same problem we have with a major commercial business. How
do you make people down there in the lower levels of organisation
understand what the overall aims are and act in a way that is
consistent with it? Some of us operating in the field sometimes
see Government policy that way. This is not a strong criticism
because it is almost inevitable. Progress is being made: we should
just like the progress to continue.
103. Staying at the macro level, you cite in
your memorandum the situation in the United States where they
have had a pretty strong economy for a number of years, arguably
since Greenspan came in in 1987, yet they have had widening poverty.
What are they doing in terms of active intervention through effective
labour market policies, if anything, at that macro level?
(Mr Faulkner) The structure of the United States is
different to the extent that much less is done at a national level
and much more is done on a state by state basis. Certainly in
my other company, Manpower, we operate very strongly in the States,
we sit, we have a representative on the National Labour Board,
so we are fairly familiar with what happens there. There is a
lot of variation between States. There is more engagement with
the private sector, there are many more private sector companies
involved in working with heavily disadvantaged people within the
community. In terms of the overall policy, there is still a feeling
in the United States of a free market in labour. One of the views
I have tried to bring through strongly here is that you cannot
afford with employment as such a key component in overall economic
and social policy to leave it to the free market. It is one of
the areas where policy intervention is very important. The difficulty
in the United States is that at the macro level there is insufficient
policy intervention and this is what has led to this widening
poverty gap. The policy is to encourage those who can access work,
who can be economically successful: there is not sufficient willingness
to do other than to tackle after the event the problems of those
left out rather than go back to roots and try to introduce more
prevention. This was the initial success of the New Deal, that
in focusing initially on the 18-24-year olds, it was a very good
example of getting as close to the root as we can and building
from there.
James Purnell
104. You said in your memorandum that you would
like to see the Government continuing at an adequate level of
funding. Does that mean you think the current level of funding
is adequate? Do you think there are areas which should be expanded,
areas which should be cut back in the light of a successful programme?
(Mr Faulkner) I would not be willing to answer the
question: is the present level of funding adequate? It is very
difficult to put your arms around and say what the present level
of funding is. I sit on the Central London Learning and Skills
Council, so I am fairly familiar with the Learning and Skills
Council. It has a massive budget nationally, which at first sight
is a very substantial investment. When you sit on a local Learning
and Skills Council and you realise the amount of that money that
is already committed to support established institutions that
require maintenance, when you look at the targets which are set
and have to be responded to, the amount of free money which is
actually available to support innovation, to support new local
initiatives that are being developed, is actually very small.
My answer to your question is: almost certainly the total level
of funding is likely to be sufficient without being able to put
my own arms around it and be quite sure about that. The amount
that is available to do new things, to encourage people with good
ideas, to bring them forward and develop them in a supportive
environment, is inadequate at present.
105. May we just dig into that? Just for the
moment talking about the Jobcentre Plus/New Deal area of the money
and employment zones and action teams for jobs, if the money is
following customers, will it reflect the level of demand in the
sense of the number of people coming through the door? Does that
work well, having the money following customers in that sense?
Could we move more in that way or should there be more money earmarked
for innovation?
(Mr Faulkner) Those two do not contradict each other.
As has been said in other submissions which you will be tackling
later this morning, if the Government identifies that organisations
are truly producing the right outputs, they are not just delivering
services they are producing sustainable employees and those organisations
are supported, then the money following the individual will also
encourage and support innovation. It has to be managed effectively
and this is true across wide areas of Government activity. The
Government needs—and again it is no different to private
sector management—to give more freedom to those who are
close to the ground to develop solutions, but to be stronger in
managing the outputs and demanding of those organisations that
what goes into original bids actually gets delivered two years
down the line.
106. How closely does the current situation
conform to that? With all these different schemes is the money
going along the model you have just described or if we were interested
in upscaling the model and spreading the idea, more devolution
of funding, more freedom for local areas, does the current funding
system allow that, or would we need to change that radically?
(Mr Faulkner) The employment zones and action teams
are models that work extremely well. They have considerable flexibility
in them and they do not define the solution. New Deal—and
we are currently going through a round of bidding on a new round
of private-sector-led New Deal, there is still excessive definition
of how the funding will be directed. Although there is funding
there, there is also a strong definition of the processes that
clients must go through and that is restricting the ability of
the people delivering, to do what in our case we would really
like to do with those clients.
107. Later in the inquiry we have a number of
Government Departments to give evidence to us, particularly round
the area of co-ordination of Government initiatives. Are there
any things you would like us to ask them in particular?
(Mr Faulkner) The area I have already touched on is
exactly how we can more effectively co-ordinate the efforts. I
should like to see more active engagement between those departments
and some of those organisations from which you are taking evidence
this morning have actually demonstrated capability. We have a
great deal of experience and I have already indicated that I believe
the Government's role is to provide the environment and the policy
framework to allow those who have the ground experience to develop
the solutions. I should like to see more of that done jointly.
I contributed under New Deal to the task force on lone parents
and on job retention. Those were the two areas on which I worked.
Those were very valuable exercises in bringing together Government
Departmental representatives who sat on those and a number of
organisations that could contribute in that area. I should like
to see more of that being done. I should also like to see more
effective use of the output, because, as often happens, a lot
of recommendations which came through from those reports still
sit in the reports rather than on the ground in delivery.
108. Given your position on the Learning and
Skills Council involved in delivery of employment programmes,
has the change in the organisation of the Department for Education
and Employment, into having skills in the Department for Education
and Skills and employment policy in the Department for Work and
Pensions, split the employment side from the skills development
side in an unhelpful way?
(Mr Faulkner) I must admit that in my own experience
I see no evidence of that at the moment. It is early days to make
that judgement, but in the main I would say it is more positive
than negative. We have seen more clarity now of role.
109. Would you like to see some freedom for
the Learning and Skills Councils? You say that a lot of the money
is already committed to sustaining institutions. Would you like
to see them having more flexibility to spread the money?
(Mr Faulkner) I should like to see them having more
flexibility and I should like to see, and there is some attempt
to do this, a change in the balance of control between the central
organisation in Coventry and the individual Learning and Skills
Councils. At the moment still too much is directed from the centre
as a matter of overall policy, which neglects the individual situation
that each of them faces. We have some excellent chairs and chief
executives around the new LSCs and strong potential organisations.
There is some frustration with some of them that they do not have
the freedom to put in place the solutions we have already identified
are needed in various areas where we operate.
110. In your memorandum you speak about the
need for companies to invest in training in periods of downturn
in particular. Is that likely to happen, given that in a period
of downturn people will be looking to cut cost? How can that be
encouraged perhaps through tax breaks? Could you tell us in particular
about the experience of Manpower with training IT workers in Glasgow
and whether that could be spread more widely?
(Mr Faulkner) If I take the first part of that, it
is extremely difficult and it is very hard to see how the Government
can intervene very much to persuade private businesses to behave
very differently. There is an inevitable temptation when a business's
profit is under pressure and the shareholders are shouting to
find areas to cut costs quickly. It has been a Manpower policy
to strengthen our training during downturn periods, because it
does bring competitive advantage at the end of it. My own experience
says that the Government trying to incentivise that does not make
a lot of difference. This is more a matter, particularly through
the DTI, of continuing to work with organisations like the CBI
to try to get that message across to management. It is more about
communication than fiscal incentive in that particular area. As
far as Manpower's activity is concerned, this is an interesting
illustration of exactly that challenge. We began a programme to
take long-term unemployed people and deliberately to take that
mix of people from a wide gender and racial base, whereas IT traditionally
has been white male, if you look at the statistics of employment
in that territory. When we began we were in a very buoyant economy
and we had a very, very high level of employer engagement from
a number of prominent IT companies. As we are moving now to conclusion
of that programme, we are finding it very difficult in the present
environment, because we all know the difficulties IT and telecom
are facing, to maintain that engagement. The simple fact that
most of the senior executives who originally sponsored the programmes
have now left those organisations is not very helpful. This again
brings me back to the point where Government providing the right
framework is critical because Government can provide a long-term
view and maintain a strategy. I am afraid the private sector will
ebb and flow in their commitment according to the economic environment
we are in. I do not know that there is a lot we can do to manage
that, other than to take organisations like Working Links, who
are working at ground level, to make sure that at least there
is some flow of funding to maintain activity at that level. We
can engage with employers. Every piece of evidence that is being
given this morning emphasises the importance of programmes being
employer led and organisations like ours being very close to employers.
The only thing I regret from the evidence is that it is surprising
how little mention there is of Jobcentre Plus in that. I think
Jobcentre Plus has to be part of the vehicle for making that connection
with employers and we need to do more in that area.
Chairman
111. You seem to be embedded in the heart of
policy as it is developing. Do you feel in your own experience
that you are listened to by the people who are developing this
policy? The people in Jobcentre Plus, the people in Adelphi House
and folk of that nature? Do you feel that you are a voice that
is being heard at that level in the development of this policy?
(Mr Faulkner) We have a voice which is being heard.
I do not think it is being heard sufficiently clearly. The headlines
are coming through; there is not sufficient opportunity to contribute
actively to developing some of the detail.
Mr Goodman
112. How do you think you have managed to take
two private companies, elements of a departmental agency and put
them all together and make the whole thing work?
(Mr Faulkner) I have to be extremely honest about
this. This is nothing to do with organisations, it is to do with
individuals. You can put names on it. Leigh Lewis, as Chief Executive
of the Employment Service and now Jobcentre Plus was absolutely
committed to this concept and has championed throughout this model
of private and public sector working effectively together. Bill
Cook, who headed up the government division of Cap Gemini Ernst
and Young was the person who had led their policy of supporting
compulsory competitive tendering in-house teams. He really believed
strongly in what he was doing and I, as a senior director of Manpower,
had that same commitment. At that time I was holding a public
affairs brief. I had been very engaged with New Deal. You had
three people all at a senior board level—chief executive
in the case of Leigh Lewis—actually committed and sitting
around a table and saying "This you will do". Had it
been passed down as a contract opportunity to see whether we could
work together to produce a joint bid, if it had been done at the
next level I think it would have failed.
113. How have you prevented internal tensions
between the three elements?
(Mr Faulkner) To date we have managed internal tensions
effectively. You have to bear in mind that almost days before
Working Links was formed two years ago, Ernst and Young merged
with Cap Gemini and our partner there became a French owned business.
The French had some difficulty understanding the concept of a
public/private sector joint venture and why they had got involved
in it. Those sorts of tensions have arisen. The resilience is
that the model is a very strong one. As we have brought other
managers from the organisation into it, two years down the road
success does attract support. A lot of people are now very willing
to associate themselves with it, but I would say in the first
six to 12 months, any policy or development area really demands
this. You have to have real champions at the senior level and
we were fortunate in having that, people who had the weight to
push the decisions through.
114. What difficulties have you had in your
relationship with the Department and Jobcentre Plus?
(Mr Faulkner) We have had relatively few relationship
difficulties with Jobcentre Plus, although I would have to say
at a local level, some managers within Jobcentre Plus are uncertain
as to whether they see us as allies or enemies. Indeed, although
Working Links has an arrangement with PCS, we are unionised as
an organisation and we have developed our strategy alongside PCS,
because PCS policy is to oppose private sector engagement in employment
zones, there is that same tension: is this actually a threat to
the public service engagement long term in public service employment
or will it actually support it? Our very strong view is that it
does support it. There are views within both the union and some
of the middle management of Jobcentre Plus that it is the reverse:
it will eventually diminish public sector engagement in this area.
Not while I am Managing Director.
Chairman
115. Is sustainability important?
(Mr Faulkner) Sustainability is absolutely critical.
One of the difficulties we face is that there are no good mechanisms
available to us through our public sector partners in this for
measuring job sustainability beyond 13 weeks. That is too short
a period. One of the other pieces of evidence before you today
talks about sustainability after 12 months. We would have great
difficulty and would have to divert quite a lot of funding, which
we are not willing to do, to make that measure at present. There
are no Government figures available to us where we can readily
check it. We believe that is probably the critical period. If
we were to say we were truly successful, we would want to know
how many of those people we placed in work were still not necessarily
in the same job, but still active in the labour market 12 months
later. In some of the areas where we operate, we are exceeding
90 per cent job sustainability after 13 weeks. We are putting
a lot into aftercare opportunities. We are still in contact with
both the employers and the individuals, but frankly once we get
six or nine months out we are beginning to lose sight. We think
they are still there. If we are truly successful they should still
be there. We should like stronger measures.
116. Is there anything else you would like to
add to the evidence you have given us this morning?
(Mr Faulkner) The only thing I should like to give
emphasis to is that there is always a choice when you are directing
funding as to whether you direct it towards employers to encourage
them to make jobs available—and some of the subsidies within
New Deal took that direction: let's make it easier for employers
to take people on—or whether that funding should be directed
towards the individual, to support them back into employment.
We have the very strong view that it has to be focused towards
the individual with employer engagement through programmes like
this and we do work very strongly with New Deal. You do not develop
a very strong commitment with those types of incentives which
are directed towards the employer. At the end of the day employers,
particularly when economic conditions are difficult, want an employee
who fits the need and does the job. Someone who does not, but
has a subsidy attached, whether it is a tax break or a direct
subsidy, is not attractive.
117. Yet the evidence is compelling and powerful,
but how sui generis is it? If you had not got you, Leigh
Lewis and some understanding Frenchman who has stumbled into this
partnership, could you do this again? You say there are possibilities
for expansion, but it is the actors on the stage who are so committed
in dragging this forward that you may say if you all decided to
go and work in Spain and run your own contracts then the thing
might collapse.
(Mr Faulkner) No, the model is entirely replicable
based on the experience we have gained. I doubt whether we would
have said that a year ago, because we were not far enough in to
be confident that we knew how we were operating and how we were
bringing those two factors together. If you look at our management
structure today, it is very hard, as you look around the organisations,
to know who comes from private, who comes from public, within
the business. We know how we got there and we could do it again
and we could do it again in education, we could do it again in
other areas.
Chairman: Thank you very much. That has been
very, very helpful. Thank you for appearing and thank you for
doing what you are doing.
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