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5.16 pm

Mr. Graham Brady (Altrincham and Sale, West) (Con): I am pleased to follow the hon. Member for Nottingham, South (Alan Simpson). His contribution made up in quality for the lack of quantity on the Government Benches that my hon. Friend the Member for Wellingborough (Mr. Bone) noted.

I am also pleased to participate in a debate that is crucial, because unemployment is rising nationally. We have heard the figures that show the extent and rapidity of the rise, but some of the deeper analysis offers profound cause for concern. The House of Commons Library does a good monthly analysis and it shows that unemployment in my constituency has risen by 88 per cent. in the past 12 months. That is by no means the highest increase, but on current trends it is not far below the point where it will have doubled in that period.

The increase in unemployment has tended to be concentrated in the private rather than the public sector—in finance, property, retail and so-called “executive” jobs. The balance has changed, as has the distribution pattern for higher unemployment.

John Barrett (Edinburgh, West) (LD): Does the hon. Gentleman agree that the worst is yet to come? The Royal Bank of Scotland’s headquarters are in my constituency. The bank has announced 2,300 job losses, but the new chief executive who has taken over from Sir Fred Goodwin has said that the full number will be around 20,000. There are more job losses to come in that sector.

Mr. Brady: I am afraid that the hon. Gentleman is right: worse is still to come. The trend in job losses continues to rise, and he has referred to a sector in the economy that has been especially harshly affected.

Beyond that, we await the so-called “second order” effects in the economic crisis. Another crucial reason why we have to care so much about the rise in unemployment is that people who lose their jobs are more likely to default on their loans and mortgages. That will add to the problems in the banking and financial sector that are already afflicting us.

Like a number of hon. Members who have spoken already today, I recently took the opportunity to visit my local jobcentre. I was hugely impressed by the dedication of the staff and managers, who over 12 months or so have had to cope with a dramatic increase in their work load. They are recruiting more staff, and are coping very well. They are acutely aware of the changing pattern and distribution of unemployment, and of the different kinds of clients with whom they have to deal.

On the subject of the little exchanges that took place earlier on the subject of job clubs, and the appropriate kind of provision for the executive or white-collar unemployed, I found that the staff at my local jobcentre were happy to accept that in the recent past they had not needed that kind of provision, and that it needed to be augmented. They are alive to the issue, and are very open to propositions, some made by constituents who
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have recently been made unemployed. They are working with staff to try to move forward, and that is very welcome.

The hon. Member for North-West Leicestershire (David Taylor) raised concerns about private sector welfare-to-work provision, but my local jobcentre is very relaxed about the mixture, and about the use of private sector provision, when it can be brought in most effectively. It is many years since I served on the Employment Sub-Committee of what was then the Select Committee on Education and Employment; I did so in the 1997 Parliament, when the new deal was first introduced. I vividly remember that when the Committee went to New York to see the nature of the active labour market policy being pursued there, we were astonished, even then, to see the quality of some of the provision from the private sector and voluntary organisations. They were delivering far better outcomes, in terms of people being placed in sustainable work, than was typically the case under the new deal in this country. They were also doing that work at a dramatically lower cost.

I have become less involved in that aspect of policy over the years, but I have watched with fascination as the Government have regularly said that they accept that that can be the case. They say that they are determined to introduce those different methods, and will move forward on that, but so little seems to happen. That is frustrating, because from listening to earlier exchanges it seems that Members on both sides of the House agree that the private sector can contribute. There is a huge amount of evidence internationally on ways in which that can happen, but we are still debating the subject all these years later. Organisations such as Wildcat, which I saw in New York, were brought before the then Department for Education and Employment to advise us on how the new deal might be improved, but there has been tragically little effect, compared with what we saw all those years ago.

The cost of the new deal has always been a significant concern. All that time ago, I made my own estimates; my very conservative estimate was that it cost £11,000 for every job created. The Minister at the time—I think that it was the right hon. Member for Dulwich and West Norwood (Tessa Jowell)—estimated that the cost was more like £4,000. The Select Committee—I think that at the time, I was the only Opposition Member serving on it—noted in its report that we believed that the Minister’s figure was a significant underestimate. The cost was certainly between £5,000 and £11,000 per job created through the new deal. Other programmes—not just internationally but in this country—have been shown to deliver better outcomes at significantly lower cost.

In the early years of the new deal, I remember seeing evidence submitted by the Greater Manchester Low Pay Unit; it flagged up, even then, the danger of young people, in particular, moving in and out of employment, becoming disillusioned as a result, and regarding themselves as being trapped in a revolving-door system. Over the years, I have followed the extent to which that revolving-door system appeared to be present in the new deal programmes, and I have periodically tabled written questions to establish how many people are passing through that revolving door.

Perhaps it is time to ask the question again. On 18 February 2008 I received an answer pointing out that the total number who had entered the new deal for
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young people was 1.25 million. The number of those who had entered only once was 890,000. Nearly 250,000 had entered twice, and nearly 80,000 had been through three times. That is a huge number of young people who have been going into new deal programmes, typically from long periods of unemployment, sometimes finding brief periods of work afterwards, then going back into new deal programmes, or returning to unemployment and to further new deal programmes.

Earlier we heard the old claims about unemployment statistics and the method of counting being changed. It is important that we remember the effect of the new deal revolving door in the context of the Government’s claims about long-term unemployment. They claim that long-term unemployment has fallen dramatically over the past decade or so, but once people have been through the new deal programme, they come off the long-term unemployment count. Even if they do not get sustainable work and go back into a new deal programme, they are no longer long-term unemployed.

We have in those figures the evidence that a huge number of people are, to all intents and purposes, long-term unemployed. They have not been finding sustainable, worthwhile, productive work. Instead, they have been kept off the statistics by being put through a programme that potentially costs up to £11,000, or perhaps more, every time somebody gets into employment. The cost per individual going through the merry-go-round is immense. We might not be too concerned about the cost if they were going through into genuine long-term sustainable employment, but when they are not doing so, the cost is unforgivable. In the current economic climate it is incumbent on the Government to look carefully at that, and to recognise that the cost cannot be justified at those rates of return.

It was recognised seven or eight years ago that 40 per cent. of people would never go into sustained jobs from the new deal schemes. The definition of a sustained job was remarkably easy to meet: it meant going into employment for a period of just 13 weeks. Being in employment for three months counted as moving into sustainable employment. That definition was inadequate for the purpose.

We know that the new deal was not a great success even in the boom years of the past decade. I vividly recall the number of witnesses who gave us evidence at the outset of the new deal, as we were trying to establish how it would be possible to evaluate the success or failure of the scheme. They said that it would be difficult ever to evaluate the success or failure of such a scheme, especially because all the evidence is that active labour market policies are more likely to be effective in a time of economic growth and tight labour markets, when people are getting work anyway. The schemes are much better at assisting people into employment when they might have got into employment in a little while in any case than they are at creating new opportunities that did not exist at all.

That is a serious concern for us. Programmes that have, at best, been achieving modest results at significant costs in the economic circumstances that best suit them may now achieve even worse outcomes in adverse circumstances.

In an intervention, I mentioned the Treasury Committee’s visits around the United Kingdom in the past 10 days or so. Some of the themes that I have mentioned have come through clearly in the meetings. What we have
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found most striking is not only the level of unemployment that already exists, and the concern about that, but the palpable fear of unemployment. We visited Belfast, Edinburgh and Leeds, but we saw that fear most particularly in Halifax last night. HBOS has dominated employment in the town, and a huge number of people there are living in considerable fear for their future and their livelihood.

It is vital that we work to help the existing unemployed back into work, but I would like to emphasise a point that arose earlier. It is critical that we do everything possible to ensure that people who need not become unemployed are kept in work. That is much easier to achieve; it is less costly and gives us far better prospects of maintaining economic success in other regards as well. On the recent visits, Treasury Committee members have been hearing endless stories, especially from small and medium-sized businesses, about the Government schemes and guarantees that have been promised but do not appear to be there when people visit the bank manager. Those schemes, such as the enterprise finance guarantee, need to have a real and immediate effect. We have heard that there are massive problems with trade credit insurance. That is a huge difficulty for so many businesses, which may be faced with making redundancies if the problems are not overcome. Action needs to be taken, and quickly.

Finally, I emphasise again the importance of helping people, not only for their economic well-being, but for the wider economic well-being of the country. If unemployment continues to rise as it has been rising, that will rapidly compound our economic problems in a worrying way.

Several hon. Members rose—

Madam Deputy Speaker: Order. Mr. Speaker has imposed a 15-minute time limit on Back-Bench contributions. If Members voluntarily impose an even shorter time limit on themselves, more may be successful in catching my eye.

5.33 pm

Mr. Oliver Heald (North-East Hertfordshire) (Con): I start by agreeing with the point that my hon. Friend the Member for Altrincham and Sale, West (Mr. Brady) just made. There is a fear among people about unemployment, and it comes from the knowledge of what a searing experience it is to be unemployed, particularly for some time. I also agree with my hon. Friend’s analysis of the new deal. In its early days, it had limited success at great cost. It did not do what the experience from America suggests such schemes need to do—that is, concentrate on providing a flexible, personalised package of help to an individual. The new deal was a more general form of help for large groups and classes of individuals.

To a large extent, the new deal in its early days involved the Government’s taking credit for the natural effect of economic improvement on employment, rather than their helping individuals who had barriers to work. One of the sad things about the past 10 years has been the number of people who desperately want to work but have barriers to employment, so they cannot do so. Some 2 million people face such barriers, particularly people with disabilities. Over the past few years, unemployment has fallen by about 300,000. While 2 million
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extra jobs have been there in the economy, they have gone not to those people but largely to young men from other parts of Europe and the world. Although one is in favour of the globalisation of labour markets, giving free access and so on, it was important that we should have given people with barriers to work a fair deal and a good chance to get a job.

Mr. Bone: My hon. Friend is making a powerful point. Does he fear that when jobs start to be created again, they will go to the fit young people who are now being made redundant, so it will be much more difficult for people who have been long-term unemployed to get into work?

Mr. Heald: I totally accept my hon. Friend’s point, which is the main point that I intended to make.

Before doing so, I want to comment on what the hon. Member for Nottingham, South (Alan Simpson) said. It is important that we use the recession in a purposeful way to ensure that when we come out of it, we have made improvements to the skills of our work force and created businesses in the green sphere so that green jobs are coming through. We should not just assume that in three years’ time, or whenever the recession is finally over, the world will be the same as it is now. I agree with the hon. Gentleman that we could do far more in the green sphere. In Germany, 250,000 photovoltaic plates are being put in each year for solar energy; last year in Britain, there were only 356. There are a whole range of other green opportunities that we should take, and with which the Government should do more.

The grave threat in this recession is that we will see a massive rise in long-term unemployment. That is likely because, looking at the overall jobs market, unemployment has risen very fast in the past year. The headline figure is 1.97 million, and it is up by 438,000 year on year. At the same time, vacancies have fallen by an alarming number. Monthly vacancies are down by 200,000 compared with 2007. Of the half a million or so vacancies, more than half are in sectors where jobs are hard to fill or there are skills shortages, so the actual number of jobs available for people to apply for is tiny relative to the numbers looking. I mentioned Woolworths earlier. We have lost stores in my constituency. A constituent from Letchworth wrote to me saying, “Where’s all the extra help that we believed had been promised? We need it.” She said that 22 people were looking for each job in the retail sector that might be available to someone from Woolies. The position as regards vacancies is particularly worrying.

The chief economist of the Social Market Foundation gave evidence to the Select Committee about how he saw the way forward given the research that he and his colleagues have been doing. They believe, based on current economic projections, that the number of long-term unemployed—people who have been out of work for more than 12 months—is likely to increase by 300 to 400 per cent. over the next three years. Let us look at what that means. There are roughly 150,000 long-term unemployed at the moment, so to go up to 600,000 would be a huge increase. Every one of those represents a tale of somebody who is reaching despair by the time they have been out of work for a year.

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The flexible new deal is being introduced to help people who have been out of work for a year. The original estimates of how many clients there would be were much lower than they are now. The Government have written to the Select Committee saying that they expect the figure to be 300 per cent. higher than they originally thought. That fits in with the projection of the Social Market Foundation; it is not that far off. If there is a fourfold increase in long-term unemployment, that brings back the spectre of the horrific problems that long-term unemployment has caused in the past. It is not enough for the Government to say that they are talking to the contractors involved with the flexible new deal. The process is just not viable without proper resources, which need to be adequate for a large number of extra people.

I am a fan of the flexible new deal. I was one of those, along with my hon. Friend the Member for Altrincham and Sale, West, who criticised the early new deal because it was not flexible, and in my pamphlet, “Auditing The New Deal: What Figures For The Future?” in 2004, I proposed a flexible, personalised new deal using private contractors to help, and I cited the examples in America that my hon. Friend mentioned. It was well received—and I should mention my co-author, Mark Waldron, because he did a lot of the work. It set out the way forward to which the Government eventually came round, and I am pleased that the flexible new deal will go ahead. But let us not kid ourselves that we are now looking at the same proposition as introducing a flexible new deal that was intended for 150,000. It will end up having to cope, working in a detailed way, with 600,000 people. It will need a lot more resources, and it will have to be properly organised.

My concern is that we are not organised adequately as a country to cope with the scale of the challenge of long-term unemployment. It is all very well to take shots at what happened in the 1980s, but the youth opportunities programme, which started in 1978, was a Labour scheme. It was already in trouble by the time the Conservatives won office in 1979, and was heavily criticised because it did not do enough for each young person. It continued to be criticised after the Government of Margaret Thatcher came in. The same is true of a range of schemes over the years; there is often criticism of them. The lesson is that the quality of such schemes is hard to maintain if they involve a large number of people, and the Government must consider that issue. If there is to be a large number of extra unemployed, we will need much greater provision in the jobcentres and in the flexible new deal. There is no way round that, and the Government need to come up with solid proposals to deal with it.

We should use the recession to train the people of this country so that they have the skills they need. Some 5 million people in this country are functionally illiterate—unable, for example, to write to a bank and explain that they have changed address. It is a shattering thing that every year 40,000 young people leave our schools in that condition. We have a big problem, and it is sad because a lot of those young people are quite capable of learning to read and write. I remember a visit to Rainer in Sheffield, where I met a young man who had a few problems, and who wanted to be a dry liner. He had to learn to read to get his health and safety certificate. He learned to read very quickly—it took him about two
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months—but he had spent 11 years in our education system without managing to read and write properly. That is a staggering indictment. We should not be dealing with such problems when people are 19, but when they are seven, or six. It is important that we get literacy and numeracy right in this country.

My other point about training concerns apprenticeships. The Government have made great claims about increasing the number of apprenticeships. We have never quite got the promised increase—I believe that the Prime Minister promised 320,000 places and we got 239,000—but apprenticeships are vital if we are to improve skills. I am worried about their quality, however. Traditionally, the academic standards underpinning an apprenticeship have been at level 3; it has basically been an A-level, but in a technical area.

Now, most of the apprenticeships coming through are rebadged Government training schemes at a lower level. They are at level 2, and are not at A-level standard in technical subjects. The question is whether they will give people an advantage in employment. All the evidence is that the traditional level 3 apprenticeships give a great advantage, but there are fewer of those now. The level 2 apprenticeships are being used to top up the numbers.

I make a plea to the Government to use this recession not just to paper over the cracks with poor-quality schemes but to get the training right for a change. We must ensure that when we come out of the recession, far more of our people can read, write and add up properly, and that young people who have been on apprenticeships genuinely have the skills that they need to do jobs in the future.

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