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14 Jan 2010 : Column 316WH—continued
The Opposition tell us that in the UK we have the worst youth unemployment rate in Europe. If we consider unemployment rates for young people, comparing like for like and taking the number of young people unemployed and not in education as a proportion of all young people, the figure is just under 10 per cent. That compares with the '80s recession, when the figure was 13 per cent., and with the '90s recession, when it was 12 per cent. So we are doing better than we did in the past and our unemployment rate is better than the EU average and better than the rate of many of our economic competitors-the US, Canada, France, Italy and, of course, Spain.
The '80s may be having a revival at the moment, but we will not stand by and let unemployment reach 3 million, as it did almost 28 years ago to the day. The Opposition are not learning the lessons of the past. We have, of course, recently seen that the Leader of the Opposition is interested in the airbrush effect and, to some extent, his statistics show that. However, let us not forget that he is the same man who in 1991 was special adviser to the then Chancellor, who said that unemployment was a price worth paying.
The Opposition have economic policies that independent experts have predicted could result in unemployment being as high as 5 million-a doubling of today's unemployment level. They simply have not learned from the mistakes in their economic policies. We have, and the support we have put in place has helped people to stay in work, find work quickly if they lose their jobs, and develop exciting opportunities for young people. We will continue to support young people through the recession and into recovery because it is not just the right thing, but the smart thing to do.
2.54 pm
Steve Webb (Northavon) (LD): It is customary at this point in the proceedings to say that it has been an interesting and lively debate-I will have to cross that line out in my notes. None the less, notwithstanding the low attendance, this is a vital subject. As the Minister said, a related motion was moved yesterday, so some points have already been covered in the House in the past 24 hours. It is good to have a Department for Work and Pensions Minister introducing the topic, because we can raise some specific areas that come under his departmental responsibility. That is what I shall do this afternoon.
The starting point must be that young people's potential and talents are going to waste on a massive scale, which, in a sense, is what the Minister said at the start of his remarks. As I tried to point out through my interventions, it is not simply a case of saying, "It's just about the recession." Even before the global downturn and before Britain entered into recession, as the hon. Member for Hertsmere (Mr. Clappison) helpfully pointed out, the scale of young people not in education, employment or training was vast and rising.
That is a crippling problem, and it is not amenable to simple or simplistic solutions. There are a variety of categories and circumstances of young people in the NEET group. I was surprised to read that a significant number of young people not in education, employment
or training are either pregnant or involved with child care. I suppose one could argue that looking after a young child is a pretty active thing to be doing and the phrase NEET implies that people are doing nothing all day, which is not necessarily the case.
Even so, there are clearly large numbers of young people who have had prolonged periods out of contact with formal education. They have not been receiving training or being paid for work, and we are concerned that once a young person has a prolonged period out of contact with the labour market, it has a damaging effect on them-not just this year or next year, but in the decades to come. Professor Paul Gregg who advises the Government on these issues has said that, when someone is in their 40s, one can still see the impact of a 12-month or longer spell of unemployment when they were a young person in terms of depressed wage potential and so forth. It is a waste both economically and socially to allow young people to spend long periods out of work.
What can we do specifically about such young people? We knew that the Minister would list a whole set of initiatives-the January guarantee, the September guarantee, this fund, that scheme and all the rest of it. Governments have such initiatives; some of them work and some do not. However, a fundamental element is missing from all this: with the best will in the world, such schemes tend to cut in after a prolonged period of unemployment. I am aware, for example, that to qualify for some schemes one must have been unemployed for two years, for some schemes for one year, for others six months and so on.
When I quiz Ministers about that, they say, "You don't need to worry because from day one, we're giving people support." I am sure they are giving people support from day one, but it is not on the scale needed for some young people. Indeed, if they were given the scale of support that I am talking about from day one, we would not have a three-month, six-month, 12-month or 10-month guarantee because there would be nothing to add-it would all be being done.
At present, support clearly steps up as someone goes through unemployment. Obviously, if we gave everybody everything on day one, that would be a big dead weight. As the Minister said, there would be a whole set of people who would have found a job anyway without help. Giving extensive, intensive support on day one to everybody is not a particularly good use of public money, when many people might well stand on their own two feet, find a job and not need such help. However, it is also not a good use of public money to wait for what in some cases, sadly, is the inevitable, and then to step in when the problem has got much worse.
That brings us to the key Liberal Democrat difference from the Government on the issue. The Government tend to say they will ratchet up support as the problem gets worse-the longer someone has been out of touch with the labour market, the more help they will give-but they never seem to say from day one that they know the risk factors likely to lead to the young person still being in the system 12 or 18 months down the track. I appreciate that the matter is not without controversy, because we all know what the risk factors will be. Giving enhanced support to groups with particular risk factors would be contentious, but it might be the best thing to do.
For example, a young person who has left school notionally at 16, but who has in fact probably dropped out when they were about 13 and a half, might come into a jobcentre. They might have been put on schemes and now be aged 18. They might have already been out of contact with the system for some time, have few or no formal qualifications and have poor literacy and numeracy. If the jobcentre they walk into is in a jobs blackspot or if they live in a remote rural area, one can start to think about the risk factors, such as poor public transport, a lack of an independent means of getting to and from work and so on. Why do we have to wait 12 months for what someone once called "the bloomin' obvious"-I think that was the phrase-when we know that we can intervene early?
We could intervene early for those at the highest risk of being long-term unemployed and have much better value for money as a result, because merely being unemployed for a further 12 months makes intervention harder. People get out of the habit of getting up, making themselves presentable and having routines and discipline. That is not true universally, but when it has been a while since someone has had a job, been on a course or done something for which they have had to be in a particular place at a particular time, it is almost inevitable that things will slip. We know that people's mental health tends to suffer during prolonged periods of unemployment.
All that is true in general, but it is particularly true for the young unemployed, who are the focus of the debate, because although a year of unemployment is bad enough for anyone, it is catastrophic for those whose adult life has only been a year long, because it becomes all they have known as adults. That heightens the reason for early intervention for those with the highest risk factors. I do not think that the Government are totally hostile to the idea, and there may be elements of what I am describing in the current arrangements, but they clearly do not go far enough.
There is a question about whether we can spot people on day one. One cannot identify with 100 per cent. certainty which one of 10 people who come in will still be unemployed in 12 months' time, but statistically significant risk factors are involved. We need an objective basis; we cannot have a jobcentre adviser just looking at someone and saying, "Well, we know he'll be back in a year's time." We would have to be scientific about it. I believe that there are statistically significant risk factors-they relate to the local labour market and the demand side, and the qualifications and skills of the young person-that would enable one to identify high-risk groups, for whom early intervention would yield a higher return and represent money well spent.
My second consideration relates to early intervention in schools. When someone leaves school with limited qualifications and poor job prospects, we say that the rot has already set in, but we need, in the spirit of early intervention, to intervene to prevent people reaching that point. The Minister mentioned higher staying-on rates at age 16, which is obviously welcome, but clearly we must also talk about intervention much earlier in the educational process.
The Department for Children, Schools and Families, the Minister's former Department, has commissioned research on more than 15,000 people on the drivers and barriers to educational success, and it has found strong
links between poverty and poor outcomes, which we need to break. For example, it found that for the poorest fifth of the young people we are talking about, only one in five gain five or more A* to C grades at GCSE, including English and maths, compared with three quarters for the richest fifth. Are poor children stupid? No. Are poor children disadvantaged by the system? Absolutely.
What should matter in educational outcome is not parental income, which probably provides the best guess for outcomes-if one wants to know how a child will do at school, knowing how much their parents earn is probably the simplest way of judging that. It should not be like that. We need to do far more to reduce educational inequalities by doing more to support children from deprived backgrounds and in deprived areas.
Another example is that 15 per cent. of the poorest fifth of children are not in education, employment or training at 17, compared with just 2 per cent. of the richest fifth, so a child from a poor family is seven times as likely at 17 not to be in any of those activities as one from a rich family. I do not want to read out a whole stream of statistics, but I will give one further example that relates to aspirations: 76 per cent. of the parents in the poorest fifth would like their child to stay in full-time education beyond 16, which sounds quite high, but the figure is 91 per cent. for the richest fifth. There are differences across the income scale even in terms of what parents want for their children.
How do we redress that situation? It is tempting to say that it has always been thus and that is how society works, and there is an element of truth in that. However, we can gear funding for education not just to deprived areas, which school formula funding already does to an extent, but far more to deprived children. Therefore, the Liberal Democrats have proposed the concept of what we call a pupil premium, an enhanced level of funding. We would withdraw tax credits from those on above-average earnings to pay for it, so we are being entirely clear about where the money will come from. By finding that money and spending it on children from disadvantaged backgrounds, we can raise the funding for those children close to private school levels-that is the scale of funding we are talking about. We believe that would have a transformative effect on the outcomes for children from deprived backgrounds.
For example, schools in a particular area might hitherto have exercised what one might call covert selection, by discouraging children from the wrong side of the tracks from coming to their school because they will drag down the league tables. Suddenly those children would look much more attractive because they would bring with them a funding level that enabled the school to do more overall. The money would not have to be spent on an individual child, but the child would bring the funding. In deprived areas, that would certainly boost the level of funding and enable us to do much more.
We cannot go on with the current level of inequality and the fact that parental income shapes a child's outcome. What should matter is a child's talent and effort and the input of the school, not simply whether one is from a prosperous background. My first point about early intervention is about identifying the high-risk groups on day one when they hit the unemployment system, and the second is about the need to ensure that school funding favours disadvantaged children in a much more geared way than at present.
Jim Knight: I will talk more about the interesting point the hon. Gentleman raised on the relationship between poverty and educational outcomes in my winding-up speech. I understand his point about the pupil premium, but one of the measures the DCSF has taken to respond to the challenge is free one-to-one tuition for children, regardless of background, who are falling behind in English and maths. Obviously, that will disproportionately favour those from disadvantaged backgrounds, for all the reasons the hon. Gentleman has given. Does he support that, and will his party commit to continuing it, should they be in a position to influence those spending decisions in future?
Steve Webb: I am grateful to the Minister, who has highlighted the sort of things that can be done when funding is in place to help disadvantaged children, whether specific catch-up classes on literacy or numeracy, or one of 1,000 things a creative school can do when it has the funding and has been set free to deliver what is right for the individual child. If a school decides that the right thing to do is to spend that funding on one-to-one catch-up lessons, it would be free to do so, and that is entirely welcome. However, we would want schools to tailor the support they give to the individual child, so we would free them up to do that, rather than having central Government say, "We are putting some extra money into the system but it always has to be spent in this way, regardless of the needs of the specific child."
Clearly, a danger in the coming years, if the Conservatives take power, is that the rhetoric about unemployment would start to become very much on the supply side, and not the demand side. Historically, Conservative Governments have tended to say that unemployment is principally about the willingness of the unemployed to seek work and take jobs, so they have regarded the demand side essentially as a given. I do not mean that uncharitably, but as a reasonably accurate characterisation of the difference between a Conservative Government and other Governments. The focus of activity for a Conservative Government tends to be on things such as incentives and sticks and carrots for the unemployed. Right-of-centre Governments tend not to think that Governments can create jobs or do a great deal to affect the demand side of the economy.
One of the differences of the Liberal Democrat approach is the notion that Governments have a great ability to influence unemployment, because they have massive spending power and can use their money in a way that is job-rich or job-poor. An example is the temporary VAT cut introduced 12 months ago. I think, from memory, that it cost around £14 billion. In any case it was a vast sum of money, yet there is precious little evidence that it had a serious impact on unemployment. I accept that it was a one-off amount, but a capital sum of that amount could have been spent, and in our plans would be spent, on creating a significant number of jobs, such as environmentally sustainable green jobs. For home insulation, which is a classic example, funding could go far beyond what the Government are doing.
Home insulation is labour intensive, can be started straight away and, critically, yields a long-term return. It would not be, as Keynes famously said, like paying people to dig holes and then fill them in again; it is a very constructive activity. It would involve people of all ages being trained up and acquiring skills. It would
benefit people whose homes were insulated, because their fuel bills would be lower. It would improve the infrastructure of the housing stock. It would lower fuel poverty and carbon emissions. It would be a real win-win. The Minister will say that the Government have all sorts of schemes to deal with home insulation, and I am sure they do, but the scale of what we need is vastly greater than the scale of the Government's ambition, given that fuel poverty is at very high levels. In areas where the Government identify that they will use their spending power, therefore, they can introduce such measures, which are job-rich, good for the long-term health of the economy and environmentally sustainable.
When the Liberal Democrats publish their manifesto at the next election, it will include a year-by-year spending plan and we will identify the various things that we would not do and which would save money in each year of a future Parliament. We will also identify some of the things that we would do, including introducing the pupil premium. One imagines that it would take at least a year to legislate to get such things in place. We envisage, right at the start of the Parliament, that we could spend the proceeds from the things that we would stop doing on job-rich activities. There would be a payback because we would employ unemployed young people and others, there would be an environmental payback and the economy would be stimulated. We are therefore very much of the view that the Government can use their spending muscle to generate jobs. Clearly, the private sector is the ultimate generator of jobs, but the Government buy services and decide what to spend their money on, and they can do that in job-rich ways. That is what we want to see and that is the third key difference in the approach the Liberal Democrats would adopt.
When I intervened on the Minister earlier, we talked about churn-people going through programmes again and again. My understanding is that more than a third of the people who started the new deal in 2009 had already participated in programmes at least once. One in three of those people are not coming into the system fresh; they have already been through it, they have not got a job at the other end, they have had a period as a normal jobseeker and they have come into the system again. I was talking to a young unemployed person in my constituency recently, who said, "January's coming, and I'll be back on the new deal."
Clearly, we do not just write people off, and if one programme does not work, another programme will be a good thing. However, some people have suggested-the Minister is perhaps more careful than many with his figures-that long-term unemployment has almost been abolished, and the Prime Minister may have implied that on occasion. That grossly misrepresents what is going on. As MPs, we all know people who have been out of work for prolonged periods but who do not crop up in the right column of the figures. The problem is greater than Ministers have sometimes-in the past at least-led us to believe.
Another issue is how the new deal will cut in for the long-term unemployed and how providers will be incentivised to help those whom it is hardest to get into work. The Liberal Democrats have concerns about the structure of some of the contracts with flexible new deal providers. The Government have told people that they will have a provider in a particular area, who will
get a certain amount of core funding as a reward for getting people back into work, as well as enhanced funding-as the Minister said-for getting them into sustainable work, which has to be the goal. The worry is that the funding does not distinguish different groups. Some people would have got a job in any case, although I appreciate that the number among the long-term unemployed is low. However, it is not nil, and a percentage of people, even after being unemployed for 12 months, will still get a job in the next three months by their own devices, and the funders will get the money, even though those people would have got jobs anyway.
The Minister will be familiar with the issues of parking and cream skimming. With parking, people are shunted to one side because they are expensive to deal with, and the cost of sorting them out does not match the money available per person who returns to work. The obverse of that is cream skimming. Someone will look at their intake and will, rather as I said earlier, immediately spot the people they can immediately slot into a job with a little support and the people who will need a lot of hard work. There is a positive incentive to go for those who will be easy to fit into a job and a negative incentive to park those who are difficult and who have complex problems.
What do we do about that? The Liberal Democrats favour what we call accelerator funding. For the first person we get back into employment, the funding is pretty modest, but as we work our way deeper into the pool of unemployed people, the reward is enhanced. There is a good argument for taking that approach from the point of view of ensuring value for money for the taxpayer. We get nothing back from the provider for the first person they find a job for, because that person would have found a job anyway. However, if they really dig deep into the pool of unemployed people and help those who are hard to help, they will start to get serious rewards. That will probably save the taxpayer money because even an enhanced level of per-head reward for helping someone who would otherwise have been unemployed for another three or five years and who would have been on benefit or something similar probably results in a net profit for the Government, particularly when we take account of the tax that people might pay when they return to work.
That is quite hard-headed economics. We are saying that the marginal return to the taxpayer is pretty low for people who would have got a job anyway, but pretty high for those who are hard to help. If the funding matches that, the incentive structure for the company-the new deal provider-will match the return to the taxpayer. That seems logical, but it is not a feature of many of the flexible new deal contracts, although I am happy to be corrected on that and-
Steve Webb: I may be about to be.
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