Supplementary memorandum submitted by
HM Treasury following evidence 16 December
PRE-BUDGET
REPORT 2004
1. Notes were requested on the following
issues:
Returning substance users to work
A note to bring together figures across Government
about the success of initiatives such as progress to work in returning
substance users to work.
(1) Information on the Council Tax package
announced in PBR in relation to reduction in schools FSS on education.
(2) A note to confirm that there has been
no cancellation of capital spending programmes by church schools
in the £1 billion for Council Tax, and showing the rise in
capital budgets for schools.
DfES efficiency savings—retirement age
of teachers.
A note on the DfES efficiency savings—particularly
the raising of the retirement age for teachers.
A note on the specifics of the discussions with
potential providers of increased "third sector" areas
on affordable credit.
2. The Education Minister will write separately
on the question raised by Mr Walter about £3.8 million being
reallocated from one group of (church) primary schools in his
constituency.
RETURNING SUBSTANCE
USERS TO
WORK
Progress to Work
Progress to Work currently helps about one in
four people into work (compared with New Deal for Young People
which helps around one in two into work and New Deal 25 Plus which
helps about two in five into work[7]).
However, people who go on to Progress to Work are, or have been,
long-term drug users (mainly heroin) and experience a wide range
of disadvantages. For example:
— 80% have a criminal record;
— 22% are homeless or in temporary
accommodation;
— 40% have no formal qualifications;
— 46% of have been out of employment
for more than two years; and
— over 40% are on inactive benefits.
Given these characteristics, you would expect
lower job outcome rates for Progress to Work clients than for
people who go on to mainstream Welfare to Work programmes. Comparisons
of job outcomes are also difficult because participants are still
classified as being on the programme when they enter work and
remain so for up to three months.
A longitudinal cohort analysis is perhaps the
best way of measuring progress on job entry rates. For example,
of the 284 starts in July 2003, 17% had a job within three months
rising to 20% within six months. There are other encouraging signs
of progress:
— 94% of clients on Progress to Work
are currently engaged in either employment, training, education
or mainstream provision; and
— 26% of starts will eventually leave
to positive outcomes.
The fundamental Progress to Work approach of
connecting drug treatment with extra personal support and employment
help is the right one. But there is clear scope for further performance
improvement. DWP aim to use the Building on New Deal (BoND) prototypes
to do this. BoND will allow a more flexible, modularised, menu
of jobs help which is likely to be more attractive to people on
Progress to Work. In addition, local delivery plans agreed between
Jobcentre Plus districts and the relevant local agencies will
drive better joint working.
General—Home Office and Department of Health
interventions
Drug Treatment
The Drugs strategy has set the challenging goal
of doubling the numbers in treatment to 200,000 within 10 years
(against a 1998 baseline). So far they are on target to deliver:
at least 154,000 users were in treatment in 2003-04. This represents
an increase of 54% since 1998.
The numbers retained in or successfully completing
treatment are up from 52% in 2002-03 to 72% last year. Waiting
times are now lower than ever and immediate treatment is available
for the most serious cases.
Young people
Class A drugs use among young people stabilised
after years of growth. The Positive Futures programme equips young
people with healthy alternatives to drug misuse. More than 50,000
young people have participated in Positive Futures since the programme
began in 2000.
Additionally, the FRANK information campaign
has been successful with the website receiving more than 3.5 million
hits and the helpline over 650,000 phone calls.
Schools and Council Tax
1. Information on the Council Tax package
we have made public in PBR in relation to reallocated resources
on education
The Pre Budget Report announced a package of
measures to reduce pressures on council tax by £1 billion
in 2005-06.
This included reallocation of £512 million
of existing funding from central programmes to local authorities
and £125 million of new funding for England. Alongside this
funding a range of further measures were agreed to relieve pressures
on local authorities. Relevant details are set out in the Pre
Budget Report.
DfES' contribution remains consistent with meeting
the Government's per pupil minimum funding guarantee for 2005-06.
In addition local authorities can, at their discretion, make additional
funds available to schools if they wish.
2. A note to confirm that there has
been no cancellation of capital spending programmes by church
schools in the £1 billion for Council Tax figure, and showing
the rise in capital budgets for schools.
There has been no cancellation of capital spending
programmes by church schools as a result of the £1 billion
support to reduce Council Tax pressures in 2005-06.
Government support for capital investment in
schools has risen considerably since 1997, from under £700
million in 1996-97 to £4.9 billion this year.
As announced by the Department for Education
and Skills in November 2004, capital investment in schools will
rise to £5.5 billion next year, £5.8 billion in 2006-07
and will reach £6.3 billion by 2007-08. Through the Building
Schools for the Future programme, the Government is committed
to rebuilding and renewing schools buildings to ensure that secondary
education in every part of England has facilities of 21st Century
standard.
DfES efficiency savings—retirement age of
teachers
Since the publication of the December 2002 Pensions
Green Paper, "Simplicity, Security and Choice: Working and
Saving for Retirement" (CM 5677), the Government has been
making it clear that higher pension ages are needed in the public
services to reflect improved longevity, modern working patterns,
practice in the private sector and longer working lifetimes. Higher
pension ages will also help ensure financial sustainability and
give scope for the other reforms, including benefit improvements,
that scheme members and employers want. This is being carried
out through a programme of pension scheme reviews, such as that
for teachers' pensions.
Increasing the pension age of teachers from
60 to 65 is expected to generate a small saving over the Spending
Review 2004 period (and further savings thereafter). Around half
of the savings from this change will be ploughed back into improving
the benefits of the scheme. The remainder will be passed on to
employers (schools, further education colleges and higher education
institutions), because the employer contribution rate will be
lower than it would otherwise have been had this change not been
made. These institutions should therefore have more resources
available for other priorities than if the pensions review had
not taken place.
The scheme will still provide a high level of
benefit, forming part of a very competitive reward package for
teachers, and we anticipate that the benefits of the scheme in
teacher recruitment and retention will be maintained. If so, the
cost reduction will not affect the level of service provision,
meaning that this will amount to an efficiency saving under the
Gershon criteria.
Financial Inclusion
Third sector provision of affordable credit
The Government recognises the valuable role
already played by third sector lenders in providing low-cost lending
services to financially excluded customers. However, coverage
is at present limited and a number of barriers to further growth
remain.
The Pre-Budget report supplementary document
"Promoting financial inclusion" therefore sets out a
range of measures to increase the capacity of not-for-profit or
third sector lenders in providing affordable credit to those on
the lowest incomes.
Subject to any necessary state aids clearance
from the European Commission, the Government will set up a growth
fund for third sector lenders, from within the Financial Inclusion
Fund, to boost the coverage, capacity and sustainability of the
sector. The Government will invite bids to the Fund from third
sector lenders. Support for credit unions will be granted on the
basis of credit unions' business strategies for further growth
and sustainability. Support for community development finance
institutions (CDFIs) will be made up of a mixture of revenue and
capital support.
Further guidance on this process and the allocations
within the Financial Inclusion Fund for the provision of affordable
credit will be issued in due course.
Some in the third sector think that the statutory
interest rate limit of 1% a month to which credit unions are subject
constrains their ability to make loans available to the most vulnerable;
disadvantages credit unions in comparison with other not-for-profit
lenders; and makes it harder for credit unions to become financially
self sufficient. The Government will consult on the costs and
benefits of raising the cap on interest that credit unions can
charge on loans, in particular to ascertain the likely impact
on existing credit union members and the communities they serve.
CDFIs need to attract investment from external
investors in order to ensure long-term sustainability. The Government
will also consult stakeholders on the case for and practicalities
of, extending the Community Investment Tax Relief (currently only
available for investment in enterprise lending CDFIs) to investments
in CDFIs' personal lending activities. Any action in this area
would be subject to state aids clearance from the European Commission.
In developing all these proposals, the Government
has undertaken extensive discussions with individual practitioners
in both credit unions and CDFIs, along with the key representative
bodies within the third sector. These continuing discussions will
inform the final guidance on the growth fund and the planned consultations
to ensure that Government action in this area is appropriately
targeted and monitored. Further details will be published shortly.
January 2005
7 New Deal performance data is based on leavers into
work as a proportion of all New Deal YP and 25 Plus leavers, averaged
over the past 12 months. Back
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