House of Commons - Work and Pensions

Select Committee on Work and Pensions Third Report

THE GOVERNMENT'S EMPLOYMENT STRATEGY

V. Re-design, Streamlining and Co-ordination of New Deal Initiatives

The New Deals have helped over 600,000 people into work.

52. The overall scale of New Deal achievement since January 1998 is impressive in reducing youth unemployment. Over three quarters of a million young people aged 18-24 have entered the programme with 362,000 known to have entered work as a result. The National Audit Office Report of 28 February 2002 pointed out that the majority of those aged 18-24 who found work through NDYP would have done so anyway and the overall tendency of youth employment had been steadily to decrease over many years. However, we are convinced that most will have been placed into more sustained employment than might otherwise occur because the job matching process will have been more exacting whilst the skills and job-readiness of New Deal job entrants will have been greater. As the NAO report also says, other less tangible benefits such as employability, reduced social exclusion and the estimated improvement to the economy as a whole have not been measured but are considered to have had a positive effect.[52] Just over 65,000 people aged 25+ have entered jobs whilst another 157,000 have been helped into work by the New Deal for Lone Parents. The latest figures available also show that the New Deal for Disabled People (NDDP) has helped 8,000 into work with almost 20,000 gaining jobs through Employment Zones and 15,000 through Action Teams. As a result, 627,000 people are known to have entered employment through these programmes.[53]

53. We have reviewed the macroeconomic evidence about the effects of New Deal on the labour market since 1998. Whilst it was not the Government's policy intention for New Deal to create jobs, the National Institute for Economic and Social Research (NIESR) estimated that the New Deal for Young People led to a reduction in longterm youth unemployment (more than six months' duration) of 45,000. Long term youth unemployment would have been almost twice as high in March 2000 without NDYP. NIESR estimated that total youth unemployment was reduced by approximately 35,000 over the same period. This took account of some increased inflows into shortterm unemployment following NDYP. NIESR also estimated that, over the first two years of the programme, 60,000 more young people moved into jobs than would have been the case without NDYP.[54] Furthermore, the NIESR found little evidence of job substitution with other age groups. In conclusion the NIESR found that the New Deal for Young People increased the effective labour supply, reduced benefit expenditure and increased tax revenue with the result that national income was around £500 million per annum higher.

54. There are also success stories that are yet to be revealed. Almost 200,000 young people have left New Deal but their destinations are unknown although evidence strongly indicates that about half of these have also entered work. We know that about 10% of New Deal leavers have been placed on to a benefit that is more appropriate than JSA and others have gone into full time further and higher education.[55]

55. However, we are concerned that almost 40% of 18-24 year old New Deal leavers end up back on JSA within 6 months and this is reflected in the fact that one in three currently joining New Deal are not doing so for the first time. Since 1998, nearly 80,000 of the known job entrants started jobs that were not sustained beyond 13 weeks duration. Many of these find themselves back on New Deal as re-entrants. Using the most demanding definition of sustained, unsubsidised jobs, where the young person has not returned to benefit within three months, 262,680 young people are known to have left New Deal for sustained, unsubsidised jobs.[56] We believe that the most rigorous definition of New Deal achievement should measure sustained job entry as a proportion of those leaving New Deal. On this basis, New Deal has a job entry rate of 40% nationally - with some notable performance variations between different geographical areas. Although these job entry rates are significantly better than any other equivalent previous labour market programme, there is a consensus that New Deal can and should deliver higher performance. This can be achieved in a number of ways, particularly recognising that the client groups are changing significantly.

56. We recommend that the emphasis of the New Deal should shift from the younger JSA claimant population to older JSA recipients, those facing acute barriers to work, those on other benefits, and those who are economically inactive.

57. With JSA claimant numbers at an historically low level, the Employment Green paper heralded a shift in emphasis from JSA claimants towards those on Income Support (IS) and Incapacity Benefit (IB). JSA claimants now constitute less than one million of the five million working age adults receiving benefits.

58. The latest comparable data (the 3 months to November 2001, GB) show that the total number of JSA claimants had fallen to 853,000 whilst the number of lone parents claiming Income Support was 845,000. Both these population groups had declined since May 1997, with JSA claimants down by 674,000 (-43%) and lone parents down by 122,000 (-12%). By contrast the numbers receiving a sickness or disability related benefit have risen by 131,000 (+5%) over the same period and now total 2,733,000.[57]

59. Information from the Labour Force Survey indicates that almost 38% of non-employed people with a work-related disability or health condition want to work; amongst Lone Parents, it is estimated that 55% want to work. This means that at least 1.6 million of these economically inactive claimants want to work, nearly all of whom will have been detached from the labour market for a long period. The DWP in its evidence stressed that, whilst the long term unemployed comprise only 20% of the JSA population, 80% of lone parents, sick and disabled claimants have been receiving benefit for more than 12 months.[58]

Employment rates of disadvantaged groups compared with others (LFS, Winter 2000-2001, not seasonally adjusted)
Disadvantaged group	Group employment rate	% not working who want to work	Number who want to work in group		Employment rate not in disadvantaged group
Disabled	46.6%	38%	1,356,270	Not disabled	80.2%
Ethnic minorities	56.4%	41%	411,313	Not ethnic minority	75.6%
Fifty plus	67.0%	28%	798,742	All working age	74.7%

60. The number of 18 to 24 year olds unemployed for 6 months or more has declined by 75% to stand at 41,000, whilst long term unemployment amongst older men has declined by 50% and currently stands at 71,000. Part of this reduction could be explained by claimants transferring to other benefits - such as IB - rather than entering employment.

61. In evidence, Working Links reported from experience that, during economic downturns, "there almost always remains a steady supply of vacancies". Although recently laid-off applicants have a competitive advantage over longer term unemployed job seekers, more severely disadvantaged applicants "can win through with the right support."[59] To avoid further growth in the "population of severely deprived individuals, families and communities, we have to ensure greater equality of opportunity in the labour market".[60] We endorse this view and believe that the Government should prioritise its support for more disadvantaged jobseekers, particularly those who have been in receipt of benefits that previously did not qualify them to receive a full range of labour market services.

More Jobcentre Plus clients face multiple barriers to work compared with former ES client groups.

62. The New Deal's success in helping younger JSA claimants into work combined with the nature of Jobcentre Plus's new client groups, means that services, in future, will inevitably need to accommodate the range of multiple barriers faced by these claimants. The DWP told us that it remains firmly "focussed on outcomes" notably job entry and a new emphasis upon sustained employment. This is welcome. However, Jobcentre Plus needs to strike a careful balance between its intensive job entry services for JSA claimants and others who are closer to the labour market and the longer term work required to help people who face multiple and complex barriers to employment.

63. Jobcentre Plus is already testing a range of new interventions designed to help people facing the most acute barriers to employment and the Committee welcomes these developments. One example is "StepUp". This two-year £40 million initiative builds on the 'intermediate labour market' (ILM) approach and provides a guaranteed job to those clients who have not been able to find work 6 months after completing NDYP or the New Deal 25+ Intensive Activity Period. The pilot project is evaluating a new way to help the most disadvantaged back into the labour market which the previous Secretary of State promised would "guarantee those who qualify a full-time job, lasting up to a year, and paid at the national minimum wage. They will have the same employment rights, and they will be entitled to the same in-work benefits, as anyone else".[61]

64. Eligibility for StepUp is restricted to JSA claimants although the original DWP announcement had indicated that 'lone parents, men over 50 and people on sickness and disability benefits' could benefit too. The Committee believes that the StepUp approach is a good way to help clients who face significant barriers - regardless of their claimant category. We recommend the StepUp approach should be extended beyond the original pilot areas in order to accommodate a wider group of clients.

65. The Committee recognises that offering a 'guarantee' is a significant step for the Government to take because such an offer potentially might not be met or might involve long-term financial commitments. We commend the Government's confidence in the underlying strength of the labour market and its relationship with employers prepared to engage in the programme.

66. StepUp is only one model of "transitional employment" and the Committee heard in the United States from a wide range of organisations delivering innovative and effective services to jobseekers. These offered carefully tailored personal services to each participant who was then placed either into an existing work site or into employment with a specially created project.

67. We also heard evidence from UK based providers of Intermediate Labour Market (ILM) programmes.[62] These are a tried and tested way of improving employability that gives economically disadvantaged people the time, support and wages to get off benefits and into work. ILMs can help to create real waged jobs in areas that have few opportunities, especially where structural change has meant a severe loss of employment from many primary industries. They also help to regenerate communities and provide additional public services, particularly in environmental improvement.

68. The Committee was impressed by the creative way in which many of these projects or job placement services create practical "joined up" solutions to local problems by bringing together local partners and diverse funding streams with jobless individuals and communities that need work. In stark contrast to many bureaucratic efforts to create policy coherence and "joined-up" delivery, these organisations have found practical mechanisms to integrate many different government goals, often by finding ways to circumvent highly prescriptive funding rules, targets and beneficiary groups.

69. These solutions are effective because they provide pathways to work through bottom-up, community-based activity and nurture social entrepreneurs who are finding home-grown ways of restoring vitality to communities. Whilst many of these organisations concentrated on community based jobs, all aimed to place their successful employees into jobs in the open labour market by enhancing their ultimate prospects of obtaining a job.

70. We do not believe that these forms of innovative transitional employment can be fostered through specific Government programmes. Instead they can only flourish by allowing local organisations imaginatively to design solutions matched to problems that are understood by local managers and community leaders. Jobcentre Plus needs to offer flexible funding and, whilst measuring outcome as a key indicator of success and the basis for continued funding, it must avoid setting rules that prescribe the processes that these providers have to follow.

71. We recommend that the Department for Work and Pensions actively explores routes to create flexibility and encourage these innovative Intermediate Labour Market solutions to unemployment and economic inactivity amongst the hardest to place, like lone parents, longer term unemployed, people with health problems or disability.

Outreach for ethnic minorities

72. Outlined in the April 2001 Green Paper, Jobcentre Plus has agreed contracts with local organisations, as part of a £15m two-year programme announced in July 2002 to engage actively with jobless people in the five urban areas where three quarters of Britain's ethnic minority people live. [63] The contractors included small, locally-based organisations which have an established or potential rapport with specific groups of disadvantaged ethnic minority people. The projects will work by attracting people to mainstream services such as the New Deal, by improving links between communities and employers or by providing specialist training where necessary. There are 52 contracts with organisations in the five urban areas in which the ethnic minority outreach project will operate. Specific areas within the five urban areas are: Birmingham, Black Country North, Black Country South, Bolton, Bradford, Calderdale & Kirklees, Coventry, Edgware, Lambeth, Leaside, Leicestershire, Lewisham, Manchester North, Manchester South, Oldham & Rochdale, Thames Gateway.

73. We believe it is essential that the 17% gap[64] between the employment rates of ethnic minorities and the general working age population be narrowed. Whilst we commend the active approach being taken by Jobcentre Plus, we recognise that the pace of improvement until now has been relatively slow and highly varied between different parts of the country. Recognising that Jobcentre Plus is aiming to improve performance in 60 areas of deprivation and low labour market participation by ethnic minorities, we nevertheless do not believe that this will necessarily mean better outcomes for ethnic minorities. We recommend that Jobcentre Plus urgently reports on the effectiveness of its ethnic minority outreach projects and identifies further ways in which its programmes can be targeted to achieve parity faster. We particularly recommend that Jobcentre Plus places a greater emphasis on self-employment entry in conjunction with black and minority ethnic business development agencies.

74. The £40m initiative called "Progress2Work" was announced in the 2001 Budget and aims to provide help for those whose misuse of drugs puts them at a disadvantage in the labour market. It will support them into and through types of existing employment interventions. Co-ordinators will agree local employment-focussed plans between Jobcentre Plus and key agencies, especially Drug Action Teams, to ensure that all organisations with an interest work together as productively as possible to improve the capacity of Jobcentre Plus front-line staff to help those with drug misuse problems and to provide additional specialist help for those more seriously affected by drugs misuse.

75. We also believe that additional support should be made available by Jobcentre Plus to help further groups of working-age claimants to access specialist services. These need to address disadvantages such as a history of offending or anti-social behaviour; alcohol dependency; patterns of homelessness or insecure housing tenure; and domestic or family stress. Much of the best expertise in these areas currently lies outside Jobcentre Plus. We believe that Jobcentre Plus should concentrate on its own strengths and rely on expert, independent, specialist organisations in the voluntary and private sectors for the delivery of the many services needed by these clients who face significant barriers to work. From the evidence of Action Teams, Employment Zones and our discussions with providers in the UK and USA, we conclude that services to these clients - and their ultimate entry into the labour market - can be significantly improved by funding private and voluntary sector providers to undertake these tasks. We believe that the contractual architecture inherited by Jobcentre Plus needs to be overhauled so that these private and voluntary organisations are not simply contracted to deliver small bespoke "add-on" packages of help. Instead, their central role should be recognised, they should be given flexible funding and a broad remit of devolved service responsibility, matched by a transparent framework of accountability.

New Deal programmes are insufficiently flexible to "mix and match elements" to arrive at a tailored package for each individual.

76. The DWP told us that it continually seeks to improve its established labour market programmes. The New Deal for 25+ was re-designed from April 2001 whilst the New Deal for those aged 18-24 has seen greater flexibility introduced for its personal advisers and the Department has "reduced the programme's administrative complexity".[65]

77. However, the Committee heard compelling evidence about the need to change the prescriptive, fixed design elements of programmes, such as the four options in the New Deal for young people.

78. Mr Andy Westwood and Mr Max Nathan spoke about the need for flexibility to suit a locality's requirements and to offer a service personalised to an individual's needs.[66] Groundwork, Shaw Trust and Working Links emphasised this.

79. Mr Keith Faulkner argued that in New Deal "there is still excessive definition of how the funding will be directed ... and the processes that clients must go through".[67] He concluded that this "restricts the ability of the people delivering to do what we would really like to do with those clients". During the Committee's visit to the USA, the Committee was struck by the flexible design of programmes that packaged together elements of training, work placement or volunteering along with personal support and development. Mr Leigh Lewis described the Tailored Pathway pilots in 17 areas where a more flexible mix of help is offered to participants after a spell of Gateway preparation.[68] This enables advisers to design a bespoke package of help that draws on items from the menu of Jobcentre Plus services. We support this approach and recommend that the current pilot schemes should form part of a national roll-out.

80. We also understand that flexibility has recently been introduced into the subsidised employment option whereby training no longer needs to lead to a recognised qualification. Instead employers can now offer in-house or less formal training as long as it is in accordance with a written Individual Training Plan agreed between the New Deal for Young People client, employer and DWP Personal Adviser who continues to monitor the arrangement. This had been piloted in a number of areas and has now been extended nationally.

81. We received evidence that competitive pressures are leading to demand for higher levels of employability in entry-level positions[69]. To improve tenure and support progression, training also needs to improve the capabilities and performance of individuals whilst in work so that they can acquire skills that are portable and which give them the scope to increase earnings - often by moving from one employer to another.

82. Training in the New Deal needs to be delivered with flexibility to ensure that it is sufficiently work-focussed, brings participants up to employer standards and is relevant to local labour market needs. Government funded training should not substitute for skills development that an employer is already prepared to pay for and which is specific to that firm. Instead, Jobcentre Plus should aim to develop more portable skills ("soft skills")[70] that are specific to the individual and will improve their progression prospects.

83. The Minister also accepted, when asked if there should not be one overall, streamlined New Deal programme, that "there may be a case for drawing some themes together".[71] However, he emphasised the Government's approach: that different types of problem required a specific type of programme solution. He argued that "the problems of a lone parent will be different from those of a recovering drug addict or an ex-offender". This begs the question that the same individuals may well have a combination of different barriers to overcome. Mr Richardson also insisted that a dividing line had to exist between two groups of claimants - those on JSA who are subject to work conditionality rules and those who are not. He assured the Committee that "there is quite a lot of scope for streamlining and there will be some advice reaching the Minister's desk very soon".[72]

84. We hope that this advice to the Minister will be radical. We recommend that the Government considers removing the different options and pilot programmes within the various New Deals, and instead allow advisers much more flexibility to design support around the needs of the individual. In doing so, they should draw on the more devolved models evident in our evidence on Employment Zones, Action Teams and the US, as described below.[73]

52 NAO report "The New Deal for Young People, Session 2001-2002, HC 639 paras 13 & 18. Back

53 http://www.dwp.gov.uk/asd/asd1/new_deal/ndyp_may02/ndypmay02.pdf;

http://www.newdeal.gov.uk/english/statistics/word/statical2002.doc;

http://www.dfee.gov.uk/emplymentzones/results.cfm and "Evaluation of Action Teams for Jobs", DWP Working Age Evaluation Division Report, WAE 114. Back

54 Riley, R. and Young, G. (2000) The New Deal for Young People: Implications for Employment and the Public Finances, Research and Development Report ESR62, Sheffield: Employment Service. Back

55 http://www.cesi.org.uk/_newsite2002/newdeal/weeklybriefing/brief192.htm. Back

56 http://www.cesi.org.uk/_newsite2002/newdeal/weeklybriefing/brief192.htm. Back

57 Cross Benefit Analysis, DWP. Back

58 Ev 149, para 21. Back

59 Ev 43, para 10. Back

60 Ibid. Back

61 Official Report, 28 Nov 2001, col. 974. Back