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Standing Committee Debates

Draft Employment Zones (Allocation to Contractors) Pilot Regulations 2006

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Seventh Standing Committee on Delegated Legislation

The Committee consisted of the following Members:


David Taylor

†Alexander, Danny (Inverness, Nairn, Badenoch and Strathspey) (LD)
†Berry, Roger (Kingswood) (Lab)
†Boswell, Mr. Tim (Daventry) (Con)
Clelland, Mr. David (Tyne Bridge) (Lab)
†Devine, Mr. Jim (Livingston) (Lab)
Ellman, Mrs. Louise (Liverpool, Riverside) (Lab/Co-op)
†Flello, Mr. Robert (Stoke-on-Trent, South) (Lab)
†Heppell, Mr. John (Vice-Chamberlain of Her Majesty’s Household)
†Hodge, Margaret
(Minister for Employment and Welfare Reform)
†Jackson, Glenda (Hampstead and Highgate) (Lab)
†Joyce, Mr. Eric (Falkirk) (Lab)
Laws, Mr. David (Yeovil) (LD)
†Liddell-Grainger, Mr. Ian (Bridgwater) (Con)
†McDonagh, Siobhain (Mitcham and Morden) (Lab)
†Rifkind, Sir Malcolm (Kensington and Chelsea) (Con)
†Taylor, Mr. Ian (Esher and Walton) (Con)
†Watkinson, Angela (Upminster) (Con)
Geoffrey Farrar, Committee Clerk

† attended the Committee

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Wednesday 15 March 2006

[David Taylor in the Chair]

Draft Employment Zones (Allocation to Contractors) Pilot Regulations 2006

2.30 pm

The Minister for Employment and Welfare Reform (Margaret Hodge): I beg to move,

    That the Committee has considered the draft Employment Zones (Allocation to Contractors) Pilot Regulations 2006.

I welcome you to the Chair, Mr. Taylor. This is the first time that I have served under your chairmanship and I wish you well.

I understand that there is a Cheltenham race that some of us want to see, and that certain Members have an interest in the contribution of the hon. Member for Brent, East (Sarah Teather) to the debate in the Chamber, so I hope that our proceedings will be straightforward.

When the present Government came to power, we were committed to tackling the twin problems of unemployment and poverty, and particularly the difficulties faced by people who live in areas of persistently high unemployment and deprivation. In addition to the introduction of our new deal programmes, which have proved so effective and beneficial in helping people to move into work, we met our manifesto commitment by establishing employment zones in parts of the country where long-term unemployment was a particularly difficult and persistent problem.

In the employment zones, we have created an environment in which innovation and flexibility can be used imaginatively by both public providers and providers from a mixture of public, private and voluntary sectors to give the most appropriate assistance in breaking down the barriers faced by individual jobseekers, and in helping them to move into employment. In 2004, we introduced pilot arrangements in the larger employment zones to look at whether in helping jobseekers it could be beneficial to introduce a range of different providers operating in one employment zone programme within the same area.

The draft regulations use the power set out in section 29 of the Jobseekers Act 1995, which permits piloting of changes, including selection of participants on a sampling basis to test whether proposals are likely to give help in obtaining work. Section 29 limits the duration of the regulations to 12 months, but at the end of that period, regulations may, if appropriate, be replaced by similar provisions for a further 12 months.

The current Chief Secretary to the Treasury introduced the pilot arrangements in Committee in 2004. My predecessor, my the Minister of State, Department of Health, my right hon. Friend the
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Member for Liverpool, Wavertree (Jane Kennedy), made arrangements for a continuation of the pilot through the Employment Zones (Allocation to Contractors) Pilot Regulations 2005, which expire on 24 April 2006. She indicated last year in Committee that it might be necessary to submit further regulations to enable the pilot to continue for sufficient time to enable the evaluation to be completed. The evaluation is not yet complete, though we hope to be there by the end of the year, and the draft regulations will enable the pilot to continue for an additional 12-month period.

The pilot has now operated for a little less than two years, and clearly it is important not to terminate it prematurely, before there are sufficient data to make well-founded judgments about its success or otherwise. The Department intends to publish by the end of 2006 a comprehensive evaluation report providing detailed analysis of our findings from the pilot. The report will provide the facts that are required to understand what works in employment zones; in particular, whether the use of more than one provider in such zones has been beneficial to jobseekers. The report that we hope to have by the end of the year will help us to determine the future direction of this policy, which is a crucial part of the Government’s strategy to help jobseekers to move into work.

The regulations before us make similar provisions to those in the 2005 regulations, although our experiences of operating the programme in the past 12 months have resulted in a few minor amendments to improve the operation of the programme. Those amendments cover such things as how we define eligibility and, perhaps particularly importantly, extending the programme so that we can help homeless people who find themselves in a particular area but are without a fixed address.

The pilot will continue the existing manner of operation of the employment zones. Within the designated zones all eligible jobseekers will randomly be allocated work with one of the two or three providers operating in the area. That random allocation will ensure that each provider receives a similar cross-section of jobseekers within their case load. Emerging evaluation evidence suggests that customers view random allocation as a normal part of the process of referral, and providers see it as a fair and open process. Our careful management of the contracts will ensure that all providers supply a satisfactory level of service to all jobseekers. I am satisfied that allocating jobseekers to providers in such a way is compatible with the European convention on human rights.

I understand that after a lengthy period out of work some jobseekers may be concerned about their ability to adjust to a new job, type of work or working environment. It is important that all eligible jobseekers take the opportunity to avail themselves of the assistance and personalised support that are available in the employment zones. The regulations will make it mandatory for eligible job seekers to participate in the programme that is being provided for them, but they
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will not impose additional demands on people in the pilot locations compared with those in the other employment zones. Employment zone participants are subject to a similar sanction regime as applies to other jobseekers taking part in mandatory employment programmes such as the new deal.

Our experience of operating employment zones indicates that instances where sanction action has to be taken because of non-compliance with a programme are similar to those under the national jobseeker’s allowance sanction regime. The regulations will continue to enable those whose personal circumstances place them at a significant disadvantage in finding work to volunteer to join the employment zone programme at an earlier time than usual. That has worked well so far.

In order that time on the employment zone programme is fully utilised, and to give providers operating the programme the maximum flexibility to tailor help for particular participants, the regulations will suspend some of the usual conditions of entitlement applied to other jobseekers claiming the jobseeker’s allowance. That relaxation will free participants from the need, for example, to register for work fortnightly at their local at their local Jobcentre Plus. It will also ensure that time on the zone is utilised to its maximum advantage.

With the planned closure of the working neighbourhood pilots next month, we are taking the opportunity to incorporate in the employment zones some of the former working neighbourhood pilot locations in Glasgow, Birmingham and Tower Hamlets. The boundaries of the zones will otherwise remain the same as those where the pilot currently operates. We have consulted the Social Security Advisory Commission on the draft regulations, and it has advised us that it does not wish them formally to be referred to it.

I hope that I have been able clearly to explain the scope and purpose of the regulations. We are seeking to continue to provide a flexible support to those jobseekers covered in the previous regulations, who have the greatest problems in breaking out of poverty and moving into sustained employment. The Government’s development of a competitive environment in which such assistance can be provided is an example of our determination to explore and develop the most effective manner of delivering good public services.

2.39 pm

Mr. Tim Boswell (Daventry) (Con): I, too, welcome you to the Chair, Mr. Taylor. We know each other well in other contexts, but I think that this is the first time that I have served under your no doubt acute chairmanship on such matters. I also thank the Minister, with whom we tend to debate these things from time to time—I hope not ad nauseam or to the extent of boredom. I hope that in the spirit of what she said, while we have 90 minutes to discuss the draft regulations and a duty to scrutinise them properly, we will take as long as is needed and not more.

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I hope that the Minister will respond with some positive answers, particularly when I say to the Committee that the Opposition have no objections in principle to the regulations and have a warm sympathy for the concept—albeit that this is a pilot, so it is of an experimental nature at the moment—of employment zones. We broadly think that they have attractive potential as an active labour market intervention. From what I have seen, they seem to be working quite well and they certainly need active consideration for the future. I make those comments neutrally, because we are not debating the overall concept, of course, and my remarks will be tangential to the regulations themselves.

Regarding the regulations, I suppose that there might be parliamentary anoraks who are even more developed than I am. However great the attractions of reading at 3 o’clock in the morning every cell in the matrix or of going to Birmingham to check each street to decide whether the postcode is entirely appropriate, I have not been quite as assiduous as I should perhaps have been, or dare I say it, as the Minister might have been.

Will the Minister assure us that there are no material changes in the regulations? In effect, there are five pages of legislation, even though it is subordinate, and there were an equivalent number last year for the pilots discussed then. It occurs to me that in the small print, there is always likely to be an error, even if it is only a misprint or some other minor infelicity. It would be helpful to the Committee if she could tell us whether any such errors have been ironed out.

I have a slightly more substantive point on the presentation of the regulations. Those who have got far enough in the detail will have seen the almost endless list of postcodes, which I have mentioned. The Government do not control the postcode list. I can remember a degree of inconvenience in my constituency when a village was repostcoded. Recently, the town of Daventry was repostcoded because of expanding numbers, and it is a nuisance. As the regulations stand, if a postcode changes, the Government or the employment zone would have to make modifications. Presumably, contracts with the private sector would have to be modified to meet the change by excluding something or finding a way around it or fresh regulations would have to be submitted to the House. At this stage of the pilots, that would be somewhat disproportionate.

Perhaps Ministers can reflect on whether there is any other way in which they could take out the lines on a map, as it were, without breaching the principle of an affirmative order, about which I am not seeking to cavil. That is but a small niggle in relation to the small print. Certainly, if anything has been changed, it would be helpful if the Minister could tell us. It would also be helpful she could say a little more about the sampling basis that her officials—or more accurately, Jobcentre Plus officials—adopt in selecting people to go on the employment zone programmes. It is not clear whether the process of choosing participants is completely random. If it is, the subordinate choice of the private sector provider to whom the person is
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allocated is itself also random, and is therefore neutral and not skewed, as it were. It would be interesting to know.

There is always a difficulty in public policy with excluded people who wish to join something, but who might feel that they are left out because of the arbitrariness of the allocation, although I notice that the regulations allow people to join on a voluntary basis, if there is good reason. Will the Minister say a word or two on that? Not least in the current discussions on the Floor of the Chamber about the Education and Inspections Bill, we may be thinking about an economy, at least in the public sector, that is concerned with quasi-markets. They are not actually real markets, and nobody is being allowed to choose between private sector provider A or B. They are being told where to go. She might like to speak a little bit more about that philosophy. She referred to sanctioning and suggested that this was not out of line with anything that is being done under the jobseeker’s allowance nationally, but it would be helpful to know roughly what the sanctioning rate is. Will she tell us the proportion, duration and benefit forgone, on average, in respect of participants in these schemes?

I have two other points on what might be termed tidying up the pilots. Although the Minister did not use that phrase, it is clear that the order is being introduced to give adequate time for the pilots to be tidied up. Will she repeat the assurance that she intends to bring the matter to a conclusion by the end of the year? Government schemes and academic reports are both traditionally subject to a degree of slippage. While I am perfectly happy that we should get a proper evaluation, I do not think that we would want to go through the same process next year, particularly as our Committee is now graced by the presence of my right hon. and learned Friend the Member for Kensington and Chelsea (Sir Malcolm Rifkind), who brings a great deal of gravitas and experience to these proceedings. We do not want to do it every year, but we want the Minister to get on with it and evaluate it properly.

The Minister referred to the working neighbourhoods pilot, which I have also seen. I am not quite clear what the interaction is or whether the Government intend to produce one evaluation report for both types of scheme or two simultaneously, or where we are on the working neighbourhoods pilot. That is not to prefer one against another, but it is clearly right that Ministers should get this data out as soon as is convenient. They should take an objective view, based on the data thrown up by all these pilot schemes.

I should like briefly to refer the Minister to a number of slightly more strategic questions, rather than to the small print. I emphasise again to the Committee that I do so in the context of our broad warmth towards the concept of employment zones and the involvement of private sector bodies as partners in securing more effective employment in areas that are subject to considerable employment and social pressure. Those
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areas effectively form the major part of three cities—Glasgow, Liverpool and Birmingham—and three major areas in London itself. That is over and above the other employment zone programmes, which have a single provider and which we are not discussing this afternoon.

As the Minister said, it is important that we look at what works and what works best. It would be helpful if she could tell us a little more about what research has been done or is emerging on the relative period of retention on employment programmes, including not just this programme, but the new deal. Some of us feel uncomfortable about the relatively short reporting period for the new deal, which we have debated before. A quarter is not long enough to enable us to throw our hat in the air and say, “Great, they’ve got a job and they’ve stayed in a job.”

The employment zones have mechanisms for looking at a 26-week period. As I understand it, the Dutch are looking with private sector employment providers at a 12-month period to access whether the individual has got a job at the end of the process and has stuck in that job. None of us would suggest that people have to be tied down in the same job for an indefinite period, but it is clearly important to get a degree of stickability in employment and to avoid the revolving door. I hope that the Minister will talk a little bit more about those considerations.

Although the Minister may wish to say nothing at this stage—I will have to respect that—may I ask her to give us a little flavour of the emerging experience in comparing the single provider employment zones and the double or multiple provider employment zones? Again, I do not blame the Government for considering different structures, but I point out that it is important to take a cool view in deciding on the preferred option. Instinctively, I prefer some competition, but I argue that one must also consider the viability of contracts and be honest about the fact that this is not yet a fully developed market system, for the reasons I have given.

It would be useful if the Minister could dangle towards us some of her thoughts or conclusions in comparing the employment zones with other types of active labour market intervention, including the new deal. As she knows, I favour the employment zones rather than the new deal approach. None of us should be frightened of the facts: what works the best is the best. In that context, the split between public sector and private provision must be considered. By definition, all provision in employment zones involves a private sector broker or contractor; it is almost their defining characteristic.

In a recent debate, the Minister was edging towards presenting me as an ideologue, which I am not. I will not automatically say that the private sector is good and the public sector bad; there will always be the engagement of both, not least because of the issue of benefits, as people who move off benefits may need a private sector employer. It would be helpful if she could give the Committee a steer, however, as to the relative efficiency of in-house provision, as opposed to outsourced provision.

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There is a common wish among members of the Committee to improve people’s employment prospects, especially in areas of traditionally high employment, social dereliction and relative social pressure. The employment zones seem to be an attractive way of doing that, and the multiple provision or contract model is one worth studying. We wish that to be done objectively, facilitated and brought to a conclusion. If the Minister can give us those assurances, we will not make difficulties for the proposal.

2.52 pm

Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): It is a pleasure to serve under your chairmanship, Mr. Taylor. I am grateful to the Minister for having set out clearly and relatively briefly the purpose and import of these sensible regulations, which I will not contest.

I want to raise a few matters which relate largely to the evaluation. The Minister said that legislation makes it clear that the purpose of introducing the pilots is to establish whether they will work when they are rolled out in the longer term on a more permanent basis. The explanatory memorandum states:

    “Monitoring . . . of the pilots is now well advanced.”

Will she share with the Committee the present situation in respect of the early findings of the evaluation, given that it is well advanced? Can we take it from the statement in the explanatory memorandum that the early findings are sufficiently positive to justify the continuation of the pilots, which is the consequence of the regulations?

How is the evaluation of the pilots being conducted and to what is extent is the experience of clients in the employment zone—people who are being helped by employment zone contractors—included in the evaluation?

Mr. Boswell: I invite the hon. Gentleman to ask the Minister to respond to an issue I should have mentioned. If a job seeker falls out with an employment zone provider, perhaps because of a clash of personalities, is there any mechanism for their transfer to an alternative provider? I think not.

Danny Alexander: The regulations make it clear that if someone drops out of a scheme in less than 12 months, which is the time that a person is supposed to spend within the scheme, they are required to return to it in some other way, possibly with another provider. I would be grateful if the Minister could clarify that point.

I wonder to what extent the evaluation of the employment zones will be weighed in the balance against the evaluation of other such Government schemes that are currently proposed. I considered in Committee a couple of months ago the jobseeker’s allowance mandatory activity pilot areas—another scheme designed to help people on jobseeker’s allowance back into work. The pathways to work pilots have also begun in relation to the wider question of welfare reform.

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Everyone on the Committee agrees that it is important to test and develop innovative ways of helping back into the labour market people who have been unemployed or on incapacity benefit for a long period. That must be a key priority. With the current panoply of pilots—I hope that hon. Members will excuse the alliteration—it is important to try to gain a sense of whether one approach works better than another. It is a question not only of evaluating the employment zones on their own terms, but of conducting that evaluation in relation to other such schemes.

In that light, the 2003 evaluation of employment zones conducted by the National Centre for Social Research stated in its conclusion:

    “The new phase of contracting for Employment Zones is an opportunity to draw on the capacity for innovation of the Zone Providers. We suggest this might be focused on efforts to increase the longer-term sustainability of jobs and on measures to address the limited ‘employability’ of harder-to-help participants”.

Will the Minister enlighten the Committee as to how the Government responded to those conclusions in developing the new phase of employment zone pilots in which we are currently engaged? What are the rates of return to benefit claims for those who enter work from the programme, and have the innovations that have taken place, such as allowing multiple providers in employment zones, helped to improve that? Have the innovations that have taken place improved the outcomes for harder-to-help participants?

Given that the 2003 evaluation made it clear that the employment zones were proving more successful than many aspects of the new deal, what action have the Government taken to make improvements to other employment programmes such as the new deal or indeed pathways to work, and to learn from the successes that have come through on evaluation of the employment zones?

It will be interesting to see whether the Minister follows up the point made by the hon. Member for Daventry (Mr. Boswell) about whether any difference in outcome is now being identified between single provider and multiple provider zones and about what effort has been made to ensure that in selecting the contractors in those zones there is a variety of voluntary sector and private sector participants, each of which has the freedom to innovate.

The Minister referred to the fact that the allocation of individuals to each contractor is made randomly; in other words, contractors are being asked to do the same thing and effectively to compete against each other. Have the Government given any thought to the idea that rather than having multiple contractors, each of which is being asked to perform the same role, it might be worth testing an approach involving multiple contractors, each with a different specialism, so that people can be referred to individual contractors not randomly, but on the basis of their specific or individual needs, perhaps allowing a wider range of help to be offered to people who need that support to get back into work than is currently available?

Finally, I am pleased to see that the regulations will continue to allow people to self-refer as early entrants to employment zone schemes. Will the Minister tell us
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what the relative employment outcome levels have been so far for people who are self-referring in that way as opposed to people taking part in the schemes because they have been directed on to them through the random allocation process?

I would be grateful if the Minister could deal with those points in her concluding remarks, but I am happy to welcome the regulations and look forward with a great deal of interest to the result of the evaluation, which, as she said, will be available later this year.

2.59 pm

Margaret Hodge: I am pleased that we have support on both sides of the Committee for the continuation of the draft regulations, and I am grateful for the expressions of support from hon. Members on the Opposition Benches.

I assure the hon. Member for Daventry that there are no material changes in the regulations. They contain just the practical changes that I mentioned, which arose from experience in administering the previous regulations. The change that I think the hon. Gentleman would most welcome is that which enables homeless claimants to be covered. Previously, their lack of a fixed address meant that they could not be covered by the geographic definition.

The hon. Gentleman made some helpful remarks on how we define geographical areas. I have no clue as to why we have this endlessly long list of postcodes. If we can deal with the matter in a simpler way that does not require us constantly to come back to the House, we shall no doubt attempt to do so.

The sampling methodology that we use is a random allocation system, which has been developed to ensure that every provider has the correct share of the customer group, and that within that share they receive a similar cross-section of each group. JSA claimants are not themselves permitted to choose which provider they engage with, but that is no different from the situation in other employment zones where there is a single provider and the claimant has to go to that provider. In exceptional circumstances, where random selection might be inappropriate because of a clear clash of personalities, a common-sense approach is taken and a particular provider may be selected. Jobcentre Plus contract managers have the authority to override the allocation.

Lone parents who choose to enter the programme can select the provider, though early evidence from the evaluation is that claimants do not particularly value the ability to select a provider themselves. That confirms evidence that I have seen from Australia, where there is a great deal of choice and claimants find it difficult to make a qualitative judgment on the services offered by various providers.

To turn to the statistics so far, in London, just under 30 per cent. of participants start a job. That rises nearer to 40 per cent. in places such as Glasgow and Birmingham, which I think reflects differences in the
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barriers faced by individuals in the London conurbation, where we know that there are greater difficulties.

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