House of Commons - Work and Pensions

Select Committee on Work and Pensions Third Report

THE GOVERNMENT'S EMPLOYMENT STRATEGY

IX. The Role of Jobcentre Plus

125. A major theme of the Government's Green Paper Towards full employment in a modern society is the importance of moving the New Deal and the workforce development system as a whole from being supply-driven (developing clients' skills generally) to demand-led (where the starting point is engaging employers in the design of training and work experience and using their hiring requirements to define programme content and the basic standard of job readiness clients need). The strategy requires Jobcentre Plus to have a 'dual-customer focus,' both serving the needs of benefit claimants and also employers.

Increasing the Employer Focus of Jobcentre Plus

126. The Government has worked hard to encourage greater employer engagement in its employment strategy at national, regional and conurbation level through initiatives such as the National Employment Panel (formerly known as the New Deal Task Force), Sector Skills Councils, Employer Coalitions and informal groupings of business leadership. On our visit to Birmingham, for example, we were pleased to meet representatives of the Birmingham Employer Coalition, one of ten coalitions established in most of the major conurbations around the country, and working under the aegis of the National Employment Panel. Membership covered engineering, manufacturing, the police, local authority sector, IT, hospitality, printing and the voluntary sector. Within Jobcentre Plus the Ambition programme - a new sector-led strategy designed to place people on benefit in good jobs and to produce better rates of retention and advancement - is the flagship of the new demand-led approach.

127. It is clear, however, that more needs to be done to encourage employer engagement in the Government's employment strategy. In a report prepared in July 2001, Business on Board, the then New Deal Task Force described how, in the course of researching the report, it had visited 30 Jobcentre Districts. As part of the New Deal for Young People, each District had been required to establish a partnership with employers to advise on the direction and design of the local programme. The research suggested that few partnerships had been able to maintain effective employer participation. Only half had local firms in membership. Of those that had active employers, there was considerable doubt amongst them about the degree to which they could influence the programme, or whether this was the right forum for them to contribute their knowledge and expertise.[127] Mr Ian Reeves of Tomorrow's People told us, "there is inadequate involvement of employers in a process talking about employment."[128] He said:

129

128. There is a need to make the business case for the engagement of employers in reaching the harder to help groups who are also the Government's focus. One of the points repeatedly made to us by intermediary organisations both in this country and in the US was that working with employers had to be on the basis of providing a service they wanted, not on the basis of philanthropy or bureaucratic partnerships. Mr Keith Faulkner of Working Links said; "At the end of the day employers, particularly when economic conditions are difficult, want an employee who fits the need and does the job."[130] Employers have to be sold the benefits of hiring people from harder to help backgrounds on the basis that there is an advantage to them of doing so. But it is not clear that this is yet happening on a wide enough scale. The Chartered Institute of Personnel and Development told us:

131

129. There is a need to challenge the attitude towards entry-level type workers where, as Working Links put it, "employers see attrition rather than training as the way to maintain productivity." The point was made to us, both here and in the US, that employers can be persuaded of the human resource benefits - both in terms of savings in recruitment costs and in the quality of entry-level workers provided - of hiring former benefit claimants who have been schooled in basic level skills and have good work attitudes. In London, the "Getting London Working" partnership established by Tomorrow's People promoted itself to employers on the basis of the heavy recruitment costs and time wasted by having a high turnover of staff. By offering to provide a "tailor-made" service in terms of candidates submitted to interview, it had achieved a positive relationship with employers.[132] In the US, the President of Philadelphia's Regional Workforce Partnership referred to a regional company survey highlighting the difficulties employers found in finding qualified candidates for entry level positions.[133] The Partnership had shaped itself to meet employer need in this area, successfully marketing its trainees to companies accordingly. In Washington, the Seattle Jobs Initiative (SJI) told us their graduates were regarded by employers as better trained than people recruited "off the street." They also had better retention rates. The marketing of SJI graduates by job brokers was not based on getting employers to lower their standards, but on getting them to consider hiring differently based on the positive outcomes SJI was achieving.[134]

130. In the course of our inquiry, we observed and learned of sufficient 'demand-led' initiatives, which provided employers with a service they wanted, to know that the business case can be made for recruitment of former benefit claimants from harder to help groups who have undergone appropriate work and skills training. Despite the encouraging initiatives we have seen, it is clear that far more needs to be done to develop the demand-led approach within Jobcentre Plus and to ensure both that participants on New Deal programmes are given training which matches employer needs, and that employers value the workers they recruit as a result.

131. We fully support the Government's aim actively to engage business and to design interventions that meet the requirements of employers in both private and public sectors. We endorse the sector specific approach adopted by the employerled "Ambitions" programme and propose that further sectors are actively encouraged, particularly where this can be in parallel with developing Sector Skills Councils. We specifically recommend that all training components of the New Deal, other than soft and Basic Skills, are made job-specific and matched to individual employers' actual recruitment needs.

132. A new initiative of Jobcentre Plus is the introduction of Account Managers in every district, with the task of building up the relationship of the Jobcentre Plus office with local employers. Their task is to understand the needs of employers at a local level, and to ensure that Jobcentre Plus is meeting those needs. At present, investment in Account Managers is fairly small scale. One Account Manager in a District will have difficulties coming to grips with the needs of several thousand local employers. In Birmingham, the Committee was impressed by the creation within Jobcentre Plus of a small team of sector-specific Business Development Managers (or Local Account Managers). These managers worked closely with employers, delivery partners, Jobcentre Plus managers and staff to satisfy employer and business needs for the recruitment of suitable workers, through demand-led approaches, encouraging and facilitating the development of customised training routeways where appropriate, by providing them with high quality and individually tailored services. We recommend that Jobcentre Plus resources its Local Account Managers, particularly in big city conurbations, to work in small sector-specific teams so that expertise and contacts can be built up and employer and business needs properly investigated and understood.

133. The move to a more demand-led approach poses major challenges for Jobcentre Plus staff, who will need to acquire new skills and expertise to be able properly to communicate with employers and understand their business recruitment needs. Few staff are likely to have the commercial background and expertise to ask the right questions, and to build up employer confidence in the service which can be provided. We recommend that specific funds be allocated to training Jobcentre Plus staff in the necessary skills to enable them to understand the needs of employers at local level. We also recommend that consideration be given to greater recruitment of staff from the commercial sector to perform the Account Manager function within Jobcentre Plus.

Increasing self-employment and public sector jobs

134. We are concerned that self-employment help through New Deal is not in proportion to its scale in the labour market and that links between Jobcentre Plus and the infrastructure of business support agencies are almost non existent. Self-employment constitutes some 11% of all employment in the UK and the proportion is higher amongst ethnic minority populations and in most urban areas. Although the number of selfemployed declined between 1996 and 2000, it has returned to growth and, during the last year, the total has expanded at the same pace as for employees. The establishment of a small business is a viable and attractive route out of unemployment if the right support and advice are available, so we sought to establish what help the Government provides and how the services are advertised. We were not impressed by the oral and written evidence we received.

135. One of the routes to find information is through the Small Business Service (SBS) which operates a number of schemes and initiatives that are designed to help small businesses in a variety of ways by encouraging firms to be more innovative, and to exploit new technologies. It aims to help them to get finance more readily and provides ways to make better use of the expertise that is available to them from colleges and other organisations.

136. The SBS manages nationally a network of Business Link services throughout England which are run by local providers. Business Link provides independent and impartial business advice, information and a range of services to help small firms and those trying to start up new businesses. Each of the Business Link local providers has a dedicated team of Business Link Advisers whose role is to provide long term business support.

137. When we took oral evidence from an official from the DTI we sought to clarify how the existence of Business Links becomes known to an unemployed person. We were told that "there are various routes".[135] When pressed the witness could only say: "That is a good question".[136] We asked whether he considered that Personal Advisers in Jobcentre Plus were "plugged in" to Business Links, and were told only that "there are mechanisms in place to provide for that"[137] which consisted of "local discussions between Business Links and Jobcentre Plus".[138] When we asked whether the mechanisms were working, particularly in disadvantaged areas, we were told that "there are ways to ensure that that is happening".[139]

138. Because the DTI Official was unable to help us with any details, a memorandum from the DTI was sought to clarify the position [140] but we searched in vain for answers to our questions as to the method of informing potential clients of the existence of Business Links and ensuring that clients were so informed. There were allusions to Business Links working closely with Jobcentre Plus by "placing a Business Adviser in the Jobcentre on certain days of the week" [141] (our italics) and a "number of routes to find out about the help...provided by Business Links."[142] The figures requested by the Committee[143] on how many people from disadvantaged communities have actually been able to set up a business through Business Links or through the New Deal were not supplied, the statistics instead giving details of awareness.

139. Awareness (conveying a sense of remoteness) was also the word used in the submission to describe the relationship between Business Advisers for Business Links and Jobcentre Plus and New Deals. A strange word to use if, as the memorandum suggests in the next line, "the need for joined-up government in this area is recognised." [144] The Committee is concerned that the work of SBS, particularly of Business Links, seems to be largely unrecognised by, and remote from, the policy-makers and from Jobcentre Plus. We are concerned at the apparent lack of detailed knowledge of, and support for, Business Links and recommend that the Departments concerned take urgent steps to promote all the services and assistance available to those contemplating self-employment or starting a small business, and to increase the relationship between Jobcentre Plus and Business Links from "awareness" to active involvement on a continuous basis.

140. The Committee also identified that public services have been one of the largest employment growth sectors in the most recent year. Spending Review 2002[145] confirms that expenditure on public services is set to grow significantly over the next 3 years and the Treasury has identified a number of blockages in public sector recruitment which could diminish the effectiveness of this increased spending. We also note that despite a commitment in 1998 to involve the public sector in New Deal, the response has been extremely patchy although central government departments had accepted 5,542 New Deal starters at the most recent count.[146] Equally, there is evidence to suggest that take-up of unemployed clients has been low in areas of public service that are highly jobs intensive like healthcare and in local government.

141. With Education, Health, Transport, Housing and local government services likely to receive sharply increased levels of spending over the next 3 years, the Committee believes that the Government has a unique opportunity to ensure that its own recruitment needs are served by New Deal. We recommend that a range of specific sector initiatives be launched using the template of "Ambition" to help prepare employers in the

public sector for the recruitment of Jobcentre Plus clients and to tailor packages of job preparation for the needs of these public sector employers.

Working with contracted providers

142. Witnesses from service providers told us that relationships with Jobcentre Plus are sometimes placed under considerable strain. Mr Charlesworth was critical of a contracting regime which "seems to be out of control ¼ appointing the highest number of contractors at the cheapest price".[147] He also criticised the funding models that in his view place a disproportionate amount of payment on end-results:

148

143. By contrast, he observed that the New Deal for 50 Plus, which is delivered exclusively by Jobcentre Plus, has no outcome-contingent funding at all. He argued that service providers needed a more "equitable share of risk and recognition that there are start-up costs and set-up costs". Mr Reeves for Tomorrow's People and Mr Hawkhead for Groundwork argued that providers were excessively funded on the basis of job entry. When working with more disadvantaged clients, they suggested that the funding system needed to recognise the "value-added" of the provider's service and the "distance travelled" by a client towards the labour market.

144. As discussed above, we are concerned to ensure that harder to place groups are not neglected within Jobcentre Plus, where staff are currently rewarded for numbers placed in work and on retention rates. We regard as a positive development hearing from Mr Richardson of DWP that, arising from the consultation exercise conducted for the current year's Performance Agreement, the National Employment Panel would be helping the Department identify whether such a target could be constructed. He was able to re-assure the Committee that "we are working with a wide range of stakeholders"[149] on this task.

145. Mr Leigh Lewis also described the process of "working more closely with our providers to ensure that training and education" are related to clients' needs and to the local labour market. Mr Richardson observed that "we have lost quite a few providers ¼ as a result of a more rigorous approach to the outcomes we expect."[150]

146. The relationship with service providers was also illuminated by the evidence of Working Links. The Government has a one-third stake in the company and Mr Keith Faulkner reported that it has had "relatively few relationship difficulties with Jobcentre Plus". However, he felt that at a local level "some managers within Jobcentre Plus are uncertain whether they see us as allies or enemies."[151] The Committee recognises that Working Links represents a new and effective way of blending private and public sector organisations and cultures, and appreciates the view expressed by Mr Leigh Lewis that it is a successful partnership working in a way that "when I joined the public service would have been thought unimaginable." Nonetheless, the fact that local Jobcentre Plus staff have an ambiguous view of an organisation in which they own a stake testifies to the tension that is inevitable between Jobcentre Plus and contracted service providers.

147. The Minister regarded the relationship with the Government's major partners as "on the whole, good".[152] But he also recognised that money and contracts "are the largest single issue of contention" between Government and its service providers.

Extending flexibility and local discretion

148. Mr Keith Faulkner said that Government "needs to give more freedom to those who are close to the ground to develop solutions"[153] The Committee received evidence that was enthusiastic about the effectiveness of Employment Zones (EZs) and Action Teams for jobs and the evidence shows that the Zones and Action Teams seem to be delivering better results than the standard model.

149. Action Teams for Jobs - which were launched in 40 areas by October 2000 - have managed to place almost 40% of their jobless clients into work (15,084 out of a total of 37,887 clients). Precise data is not available about the effectiveness of interventions for target groups or areas although the overall aim of Action Teams is to raise employment rates among disadvantaged groups in employment-deprived areas. Evaluation evidence shows that Action Teams' key successes relate to their ability to engage with clients and tailor appropriate support to their needs. Clients value the services received from Action Teams and this support had played a key role in their decisions to take work.[154]

150. The latest data for job entries from Employment Zones shows that 19,700 participants started jobs - 34% of all starters on the programme. This compares with 22% of an equivalent cohort of starters on the New Deal 25+ who had started jobs. These comparisons are made more significant because the Employment Zones are located in areas where job performance on the New Deal for Young People and on the New Deal 25+ was low.[155]

151. The Committee understands that this view is shared by the Prime Minister who has said that the best Employment Zones achieve impressive job outcomes and are popular with claimants. The Zones have offered the Government some valuable lessons which he described as:

"giving your front-line staff greater autonomy and with it responsibility and flexibility'; and

"combining strong incentive payments for jobs with real leadership, performance pay and team working".[156]

We endorse the Prime Minister's assessment. He suggested that the Government would be looking at how to transfer these ways of working into Jobcentre Plus practices, and that there was a strong possibility of extending this approach to other client groups such as lone parents.

152. Working Links reported that its approach in the Employment Zones and Action Teams that it delivers is based on:

"individual solutions not generic panaceas, flexibility for our consultants within a firm framework of values rather than rules" [157]

153. We heard from Mr Leigh Lewis that Jobcentre staff are responding well to greater devolution of responsibility to the front-line. In particular, the Adviser Discretion Fund had proved "very, very popular" with advisers because it "enables them to respond immediately and very swiftly to the actual circumstances". The Fund enables advisers to allocate up to £300 per client to purchase any assistance required in order to overcome barriers to finding and sustaining work. The Minister pointed out that the average expenditure on this fund was £70 from which he drew the conclusion that advisers were using it properly. Mr Lewis commented that if you "give people discretion, overwhelmingly they use it sensibly".[158]

154. We recommend that the proven model of Employment Zones should be extended into a further 15 areas of labour market need within the term of this Parliament. We also recommend that the Government promotes more schemes similar to the Seattle Jobs Initiative, the Oregon "Steps to Success" programme and the "Transitional Work Corporation" in Philadelphia.

Encouraging Innovation

155. In their evidence, service providers argued that innovation and risk taking is not supported. Mr Keith Faulkner said that there is insufficient funding to do "new things, to encourage people with new ideas". Yet the Department told us that is has been disappointed by the response to its Innovation Fund. These views are not mutually exclusive. We believe that recent bidding rounds for the Innovation Fund have been too prescriptive for many innovative approaches to be supported. We recommend that a review of innovation financing is undertaken in order to identify ways in which it can stimulate entrepreneurial activity and promote a stronger culture of risk-taking amongst Jobcentre Plus managers and contracted suppliers. The key tests should be focussed on agreed predicted and actual outcomes.

Learning from Innovation

156. Throughout this inquiry the Committee has been strongly attracted by the arguments for greater flexibility, discretion and innovation. However it recognises that operating with fewer rules and a relaxation of the New Deal's prescribed design framework, would require a greater degree of knowledge about how to use any newly acquired flexibility.

157. In particular, a more flexible framework of delivery will only succeed if service providers are systematically guided by the evidence base of evaluations, pilots and best practice intelligence. Government and delivery organisations need clear signposting to what works, why it works and how it can be replicated - or not. We recommend a more systematic use and replication of this evidence base.

158. During our visit to the USA we were informed about the role of The Reinvestment Fund (TRF) in Philadelphia. The Fund was a community development financial institution dedicated to building wealth and opportunity for low-income communities and low and moderate income individuals. Now 16 years old, it managed around $130 million which it lent and invested in projects with social goals and social returns.

159. It had three pools of funds: loan funds; money from banks; and venture capital funds - where capital was invested in companies with growth potential, which were profitable, and which invested in entry level jobs. (In terms of the money from banks, there was a community reinvestment obligation on banks laid down by law. Banks used The Reinvestment Fund as an intermediary to meet their responsibilities.) There were around 750 investors. Five hundred were individuals, the remaining 250 were institutions - religious groups, financial institutions, and corporate and civic organisations including hospitals and universities. The Reinvestment Fund benefitted from being able to build a network of relationships across these sectors. Investors were able to choose their rate of return. Less than one per cent of funds had been written off. They had a 14 per cent internal rate of return.

160. TRF had a "credibility of portfolio" with both the experience of being in the market, and knowledge of what worked in policy areas. They had a credibility with private sector investors, and brought innovation to areas traditionally dominated by high cost, highly regulated, public investment. The average loan was $2-300,000, and TRF was often involved in helping to put an investment deal together.

161. Funds had gone into affordable housing, childcare provision for low-income families, schools (including so-called experimental "charter" schools), small businesses, community centres, and workforce development. They operated under market disciplines but with public, civic, values.

162. We understand that, following the Social Investment Task Force report, the DTI is sponsoring a range of initiatives that replicate some of The Reinvestment Fund's characteristics. We have not found any evidence that these have been co-ordinated with Jobcentre Plus programmes and strongly urge closer integration.

127 Business on Board, New Deal Task Force, July 2001, para 3.2. Back

128 Q. 141. Back