Youth Unemployment and the Future Jobs Fund - Work and Pensions Committee Contents

Examination of Witnesses (Questions 61-103)


27 OCTOBER 2010

  Q61  Chair: Thank you very much for coming along this morning to give some evidence on the Future Jobs Fund and youth unemployment. Will you, individually, briefly introduce yourselves for the record?

  Neil Carberry: Thank you very much. My name is Neil Carberry. I am head of employment and pensions policy for the CBI. Our director looks after all labour market work for the CBI.

  Emma Watkins: I am Emma Watkins. I am head of public services policy at the CBI. We are responsible for the greater involvement of the private sector in designing and delivering public services, particularly in the area of welfare policy.

  Professor Gregg: My name is Paul Gregg. I am Professor of Economics at the University of Bristol. Unemployment and unemployment policy, in particular, has been an area of research for me dating back to the mid-1980s.

  Tracy Fishwick: I am Tracy Fishwick from the Centre for Economic and Social Inclusion. I am also here as a practitioner, having been involved in the Future Jobs Fund since the beginning in Greater Manchester.

  Chair: Can I ask you to speak up? Although there are microphones, they are more for recording purposes rather than amplification for us. We sometimes find it a wee bit difficult to hear. Harriett Baldwin has some questions.

  Q62  Harriett Baldwin: Professor Gregg, I know that you were very involved in designing the Future Jobs Fund. I just wondered if you could talk through for the Committee the rationale behind designing the programme and say whether you think that, since it was designed, anything has changed in terms of the economy, the labour market or the public finances that would change the rationale for the design.

  Professor Gregg: I was an advocate of the Youth Guarantee before it was introduced, though I wouldn't say I was involved in the design detail of what was put in place. The broad rationale is that since the 1970s we have slowly learned—with the emphasis on "slowly"—what kind of employment policy can make a difference to people's unemployment patterns and the longer lifetime costs associated with that. We know that youth unemployment is associated with long-term scars in terms of unemployment, low wages, poor mental and physical health, and indeed early death. So there has been a history of evolution, which has broadly occurred across many countries. We moved from the early programmes, which were just job relief and gave people low-paid jobs. There were benefits for people in terms of work experience, wages, access to a decent reference and so on, but it was found that people didn't move into work afterwards as quickly as they would have done if they were not going on the programme. That is because of what is called the lock-in effect. People don't look for work when they are in a job, and that slows down the process of moving into work. So there are two dimensions. You want to give people work experience and the basic work skills—turning up on time—and a good reference, but if you delay the process of job search you actually slow the process of moving into the next job.

  Policy intervened to try to do various things. It tried to make the jobs bloody awful—like the Community Programme—to make people look for work, which proved unsuccessful. In a sense, it tried to emphasise the job search, as in the Restart Programme, and it was the logic behind Jobseeker's Allowance, which does have some success. But, at heart, this programme was designed to try to minimise that conflict between the positive aspects of giving people work experience and getting in the way of job search. So, the sectoral routes had clear job prospects at the end. It was agreed that employers would take you on at the end of the training programme to reduce that conflict. It was the same with the Future Jobs Fund. The idea was that the employer—the provider—bid with a deal that asked what they were providing for that individual to help them move on into work after completing the placement. That was not as intensive as I would have liked. I would have liked active payment systems and active requirements on people and providers helping individuals move into work. But the logic was there. You were trying to give work experience but reduce that lock-in effect of people not actively seeking the next job after the placement.

  I am a bit struck by the DWP evidence of likening the Future Jobs Fund to the Community Programme. The analogous one here is the Community Task Force, not the Future Jobs Fund. When you are trying to do a Youth Guarantee, you are trying to make it so that someone has to move on—they can't stay there for ever—and you're trying to make it so that providers have to put something on the table. It is very hard to offer a guarantee out of only the best options.

  For instance, the best deal that we have in terms of what we can offer people is work trials—a short programme of work experience with a regular employer. It is successful, but there are not enough places. What you have with the Youth Guarantee is almost a stage of options, which, to some extent, can fit the individual, but to some extent the likelihood of being effective is decreasing. Because of the guarantee of a job at the end, sectoral routes are at the high end. High-quality and long-term training for apprenticeships has good prospects. Future Jobs Fund is somewhere in the middle. The Community Task Force is least likely to be helpful to individuals. That is roughly the ranking that came out of the New Deal for Young People programme, although there were components that were very similar to these and in a sense had many of the features of this programme. So, we have learned a lot over the years. A youth guarantee or a guaranteed job is an important part of it, but you have to try to avoid the lock-in effect in those components. You have to try to motivate and create job search.

  You asked what has changed. I emphasised that perhaps there was not enough on that job search element within the programme. The other thing that has changed is that this recession did not lead to as many job losses as we first feared. The labour market and the welfare system performed well. However, the people who have suffered intensely through this recession are young people. The increase in unemployment is heavily focused on young people. The first and best option is to get people into education. If you can't do that, things such as sectoral routes and apprenticeships are a good step, but Future Jobs Fund was sort of solid in the middle, as the third best in the ranking of likely prospects.

  Q63  Harriett Baldwin: So, your ranking, again, was the work taster—

  Professor Gregg: First, just keeping people in education is a good start, keeping people on at 16 in full-time education as normal, or as a lot of people do. We saw a big rise in that. That was what was called the September guarantee—trying to keep people in full-time regular education. The next best is work with regular employers; even if it is temporary and unpaid that is the next best. Then you've got training and work experience connected to regular employers—the kind of experience that employers are going to be looking for—and things like the Community Task Force and the Environment Task Force. This had lots of community programmes and there is a long history of that kind of thing. This option is broadly making up the numbers and is the least likely to be effective, but within it you need to incentivise the providers to focus on helping the people get into work. The incentives structure there is important, but that is roughly the ranking.

  Q64  Harriett Baldwin: It sounds as though the lessons that you say we've learned over a long period of time are lessons that remain valid irrespective of what kind of economic environment we're in.

  Professor Gregg: If you've got nearly full employment you don't need so much of this kind of stuff to prevent that long-term disconnection from work. But the ranking is broadly there. I would say one other thing about this: there is a lesson that we consistently don't learn. We tend to make these things up on the hoof when recession hits, rather than having a plan in advance, which means that everything's done as high profile and with high energy, and mistakes fall into that process. We then try to tinker with it afterwards. It would be much better—the OECD has said this—if we had a plan there in advance for when the economy turns negative.

  Q65  Harriett Baldwin: Does anyone else want to come in on the design question before I move on to other questions?

  Neil Carberry: I would just like to say that we'd associate ourselves with much of the analysis that Paul has just given, particularly on the relation between the different programmes and their utility. I agree very strongly with that ranking.

  Q66  Harriett Baldwin: I'd like to move on now to ask whether any particular kinds of young people were better helped by the Future Jobs Fund? Can you draw any conclusions about the kinds of people who benefited most, for example graduates, people with low-level skills and people with vocational skills?

  Tracy Fishwick: In answering that I will refer to the Greater Manchester experience, and possibly to knowledge I have of Merseyside and Tyne and Wear. Everyone is broadly seeing the same kind of experience, in which the vast majority of people who are coming forward for Future Jobs Fund are the young people who have less than an NVQ level 2, and sometimes no formal qualification at all. As we know, they are referred by Jobcentre Plus, so we have to take who it refers and deems eligible and suitable. In the early days, we were getting people who were nine months' unemployed and getting almost into the 10 or 11-month stage of unemployment. So we have young people who are pretty detached from work, if they have ever worked at all: young people who might be third-generation unemployed, very often from communities where mum and dad didn't work and grandparents haven't worked. The culture and ethics around getting up every day simply aren't there for a lot of young people.

  The range then goes through to other young people, a small number of whom are graduates, and those who perhaps have higher qualifications, perhaps at NVQ level 3. But the sorts of people we broadly get are those young people who, traditionally, we have seen on ILM programmes and other interventions like this, such as New Deal for Young People. Over the 12 years that I have been doing this kind of work, I haven't seen a vast difference in the kinds of young people. What we have seen is a huge difference in scale and in the volume of young people wanting this opportunity.

  Professor Gregg: The bulk of young people who are facing long-term exposure to unemployment are the less skilled. Many of those don't have the qualifications that would be suitable for getting on to the higher-level apprenticeships—the level 3 type apprenticeships. They are a long way away from the high-quality skills and so on that lead to long-term attachment to good jobs. They are, in a sense, the population that we have come to call NEETs; the early school leavers who are often less educated and drift between low-paid work and exposure to unemployment. In a sense, the Future Jobs Fund is focused primarily on that kind of population. It gives work experience to people who have not yet got the basic qualifications and haven't worked previously.

  Another area that has been contentious within this is that it tends to focus only on the duration of current benefit claim, rather than reflecting people's past history of exposure. We know from research that it is the cumulative exposure to unemployment, rather than just the duration of the current spell, that is a good indicator of people who are in need. We would put it slightly the other way: there is a population that is not getting in because people are not on the right benefit for long enough. Those people would potentially benefit from these kinds of programmes. The net was drawn very close.

  Neil Carberry: Much of the public debate in this area in the early part of the recession focused on graduates, and there was a lot of media debate about people coming out of courses. In our experience, what tends to happen during recessions is that graduates still find work, they just find work that is different to what they would have accepted in the good times. So someone is not on a graduate scheme with an employer; they are doing a job that perhaps an A-level leaver would have taken previously, and so on. It tends to be the same low-skilled group that takes the hit in any recession. For that reason, the right sort of active policies specifically targeting those groups, wherever they are found, not just in particular unemployment blackspots, will always be the most useful interventions.

  Q67  Harriett Baldwin: In the CBI submission, you argue that the Future Jobs Fund programme was not effective in creating permanent employment outcomes. I wanted to ask the panel what evidence there is in terms of permanent outcomes. What does the panel suggest should be done differently to improve on the permanent outcomes?

  Neil Carberry: Let me sum up where we came from in the written statement that we made to the Committee. Obviously, it is early to draw conclusions from this. A lot of data in the area will be gathered as we look at the experience of people who have been, and are currently, on Future Jobs Fund placements over the next few years. As Paul rightly says, it is cumulative experience that counts.

  As we say in the evidence, we were supportive of the idea of the Future Jobs Fund because we think that that kind of programme is important, particularly in areas where other forms of intervention are not reaching. What worried us, and has continued to worry us throughout the bidding process, is the speed of thinking up and delivery of the programme—Paul alluded to that. It was very top-down in its design. It was driven from Whitehall on very short bidding processes. That tended to lead to a certain type of bid being successful which was predominantly public-sector led and did not really engage with the private sector in a way that a more effective programme might have done. That might be down to the fact that we left design so late. Most of these people, if they are going to build successful lives for themselves based on long periods of employment, will end up working in the private sector. Therefore, the skills associated with that, and the job experience that a well-designed programme can provide, would be important. We are not convinced that we have seen that being delivered through FJF. If you look through the bid details, you see a lot of people placed into jobs that in the delivery phase risk looking more like some of the less successful programmes of the past than what was set out as the aim of the Future Jobs Fund in the beginning. From our point of view it is still an early stage to judge, but we think that there is a significant risk that the performance of the programme will be very curate's egg-ish. There are some very good programmes.

  Q68  Harriett Baldwin: Do you have any specific statistics?

  Neil Carberry: Statistics are very light in this area at the moment, to say the least. It is very early.

  Professor Gregg: I want to just echo that. We don't really know, because the evidence base has not yet been produced on the effectiveness. As an academic, I feel that culling this element of the programme so early is anti-scientific, because we will not ever learn how good or bad it was and which design features were good or bad. That is a shame, although it is perhaps not the Government's main priority here.

  As the CBI has said, you would want to build two features to make it as close to a regular job as possible. If it can be with the private sector or the near charitable sector, that is good. You want to get that organisation focused on getting that person into work afterwards. The employer is part of the deal, if you like, putting on the table the contacts, the networks and so on. I agree that the rapidity of the design meant that some of these features were not put in place on day one, but I suspect that you would rationalise that given time. You would try to move to the private sector more and you would try to involve employers more. That is part of the problem of trying to set up something in an emergency.

  Q69  Richard Graham: Can I come in on that? If we look at the Future Jobs Fund and its impact constituency by constituency—where we all live and work—I know that in my constituency there is not a single job in the Future Jobs Fund that is being created by the private sector. Everything is public sector, quango or charity. This is an era where we know that the public sector, after a massive rate of expansion, will have to contract pretty sharply. We know that if growth is to start again then it needs to be led by business and the private sector. Given that, the whole concept of creating a six-month job will be fundamentally unattractive, particularly to smaller and medium-sized enterprises, which will just see someone coming in for a short space of time, with no real sustainability to it over a longer period.

  Do you agree that that is the case, and that it is likely to be the case if you carry on with something like the Future Jobs Fund. Do you agree that pound for pound, the better investment would be in ways of freeing up bureaucracy and making it more attractive for private sector employers to take somebody on in the longer term? That might be through the apprenticeship scheme, or it might be through changing how people can take on additional young employees. What would your views on that be?

  Tracy Fishwick: The restrictions around the kinds of jobs that could be legitimately created through the Future Jobs Fund, such as the state aid rules around not being able to create jobs in the private sector to scale, have posed problems for the people delivering it. The FJF can do that in small numbers and there have been creative examples of where that has happened. For example, you may see a job where the person is employed in the voluntary sector in a social enterprise, but is actually working with a construction company that is building a new school. That is a legitimate role to create through the Future Jobs Fund and we have examples of that across the country. In Manchester, for example, we have people employed working at Manchester airport, which is a private sector environment, but the airport is 51% owned by the public sector. Again, we can be creative around those rules, provided that we keep within some parameters. That has been helpful for us, but overall it has been quite restrictive.

  How we morph the programme as it moves to the latter six months and beyond, to enable us to do more of that, would be a really interesting thing for us to debate. We could try to link jobs to apprenticeships in a structured way, so that people who start on the Future Jobs Fund move into apprenticeships, and do not dip in between. There are examples emerging of people moving into the private sector to do that.

  Q70  Chair: May I ask Richard's question, but in a slightly different way, to the CBI? If it had not been for the state aid rules, which seem to have been an incredible block on getting the private sector involved, would small and medium-sized companies have been happy to get involved in the Future Jobs Fund—had the state aid rules not existed or had a way around them been found?

  Neil Carberry: I think there is more to it than just the state aid rules. The best example is probably on the apprenticeship side, but most private sector employers, and especially small and medium-sized enterprises, don't really speak fluent public sector, in terms of bidding for state funding. The complexity of skills-support funding streams in particular has been significant over the years, with a number of bodies offering different support for different things. That has been an issue.

  The Future Jobs Fund has suffered in a similar way. So, you had local authority-led partnerships, which were looking for input on the local employment partnerships basis from the private sector, but the complexity of what the scheme was and, in particular, the additionality rule caused significant problems. I think that, for employers, the idea of bringing someone into your business to do something that is not in the normal course of your business feels a little odd. You want to give someone a proper job—we have discussed the importance of giving someone a job that is a real job. That was a drawback in the Future Jobs Fund.

  Q71  Harriett Baldwin: I want to conclude this line of questioning by looking at value for money and, obviously, scarce public money. How would the panel suggest that the money be spent more effectively? We have heard some suggestions in terms of alternative interventions.

  In answering that, can you also talk about this particular category of people? You articulated very well, Professor Gregg, why it is so important to look at youth unemployment, but it would be helpful if you articulated the particular interventions that are most valuable and best value for money for this group of people.

  Professor Gregg: What was the first bit of the question?

  Harriett Baldwin: The first bit was about value for money and what would be the best use of scarce public funds.

  Professor Gregg: Broadly, the best first step is trying to support people in active and productive job search. That is the cheapest and most effective way of support, but it doesn't work for everyone. This has been done—it is kind of the logic of the Work Programme and, indeed, of the old New Deal programme, which had this kind of gateway phase of intensive job search. What you are trying to do there is get people out through the low-cost route rather than spend big money on everyone. So, in a sense, you are focusing the money on the most needy by trying to reduce the population of need.

  However, you cannot run with that model for ever, because you get the people into the scarring zone, if you like—the longer they are in unemployment, the chances of getting them out through just supporting job search diminish essentially. Damage is being done by the long exposure, so the Youth Guarantee offers a way of trying to break that scarring-type process. As we have discussed, you want to make the thing have features that are as close as possible to a regular job and to give the person the experience that future potential employers will find invaluable—and you need to maintain the job search. Those are the kind of features of a system that you would like—in a sense, a deflection strategy first, to try and reduce the total cost spend, then a focus on what is left, but keeping the focus on keeping the motivation to look for work. That is, broadly, the model that works.

  Now, the issue for the Work Programme and the future of where we are likely to be going is that the former feature is there, but it is not clear that providers will be using work experience as that kind of break within the system from the scarring-type effects, if they are just left to their own black-box devices. The incentives for them are just to work on what's right for them, not necessarily what's right for the individual, and certainly not what's right for the state.

  Creaming or skimming—focusing on the easiest to help; the ones, in a sense, you're going to get the payment from—is the risk, and these guarantees put a brake in there and force providers to focus on everybody, and they force the individual to behave. They have to turn up; there's some discipline within the system, so you can't stay on unemployment benefits without activity for a long period. Those properties are the good design properties, as far as we know.

  Tracy Fishwick: I'd like to just say a couple of things on that. One is I think it would be really helpful to have a proper cost-benefit analysis done of the Future Jobs Fund anyway, so when we look at the cost and see £6,500, we know that that isn't the case for every single person, because not everybody stays for 26 weeks. It's not always the case that everybody has cost £6,500, and also most of that goes into their wage packet, so they spend that money back in the economy—going shopping, using public transport and so on—so there's a recycling effect there, involving that money, that wouldn't have existed previously.

  Professor Gregg: And they are off benefits. Some of the cost is actually lower benefits.

  Q72  Sajid Javid: If I can just stop you, that would have existed anyway, because if the Government had not given it to them, they would have spent it somewhere else or given it back to taxpayers. It's not fresh money.

  Professor Gregg: Some of the money is actually what would have been spent on benefits—

  Q73  Sajid Javid: I just think your point is not quite accurate.

  Tracy Fishwick: I think the point is, if we could look at what the true cost is and what the wider benefits are of actually having a job—in terms of the economic benefit of that, and for communities—that would be something that was quite helpful for us to understand in terms of planning future policy and seeing what is worth spending on this kind of intervention. I think that in the broad range of interventions for young people there's always a place for this kind of thing. The scale may have to be different, obviously, but the kind of intervention where you get young people in work, every day, doing something constructive, doesn't really exist in most of the other kinds of intervention.

  Q74  Harriett Baldwin: Neither of you has mentioned apprenticeships yet, in this context.

  Tracy Fishwick: That was going to be my last point, which is, we recognise the move to apprenticeships, and I think that's a really strong way forward. How we look at who gets those apprenticeships, moving forward, would be something to consider. Would employers normally recruit into those apprenticeships young people who'd been out of work for some time? They might not do. They might recruit from a different pool of people—maybe those leaving college, for example. So can we look at how those apprenticeships could be tailored or even ring-fenced in some way for young people who might have gone on the Future Jobs Fund, but could equally go on an apprenticeship?

  Professor Gregg: Apprenticeships are fine. The problems, in a sense, are, can you get enough volume and are some of the people far enough advanced in their skills, in a sense, to get on to serious two or three-year apprenticeships for level 2 or level 3-type qualifications? There's a sort of a shortfall there, in that you need some basic qualifications to get on to these—you know, to do a plumbing qualification you need basic GCSEs and a lot of the kids are a long way from that.

  Q75  Richard Graham: One of the great things about apprenticeships is that they are as wide as any employer wants them to be. You don't have to have any qualifications at all to do an apprenticeship in hairdressing, which is one of the best routes to setting up your own business. Do you think the question is more whether employers out there need to be, in a sense, encouraged to think more broadly about what training course they might want to help to create, in order to attract an entry-level employee under the apprenticeship scheme?

  Professor Gregg: The description of apprenticeships depends heavily on what level of qualification you are describing. The stuff that leads to good employment and decent wages is level 3 and some level 2. Level 1-type stuff really isn't worth a biscuit in terms of employment or wages. There are issues here about what you're putting people on to. We want to get people on to some quality stuff. That can be done. We've a long history, dating way back, of not being able to generate enough of those higher-quality things. Now, this is all broadening out to a different debate about how we manage the school-to-work transition and how we get enough people into higher level or level 3-type apprenticeships, which we systematically failed to do—

  Q76  Richard Graham: The other question is one of the things that has been completely forgotten, which is the whole business of work experience. If you talk to employers, the vast majority of them will say that they choose their apprentices and people they take on later based on their experience with people who have done work experience with them. In your experience, is there more that could be done with schools, especially schools in deprived areas and with difficult children, to set up links with employers, so that they get more people on to work experience earlier and therefore create more opportunities for those people to get known by a company and to start a relationship that leads on to a job? That would not or should not cost a shilling of Government money, but could more be done to help to create links between schools and employers?

  Professor Gregg: I would have no problem with that—it seems a sensible strategy. In a sense, you are articulating what, to some extent, the Future Jobs Fund is trying to do a bit later, which is give people work experience and contact with employers. Obviously, if you do that earlier, you are doing it for everybody rather than the targeted few, who we are talking about here—the people at risk of serious, long-term exposure to unemployment. You won't get all the people who would be going into that kind of category deflected by earlier intervention. We are talking about the most deprived, and it would be hard to get most of them into contact with employers who might take them on in advance of their entry to the labour market. But as a way of trying to improve the functioning of the school-to-work transition—fine, what you say is right.

  Emma Watkins: Can I come back on the value for money point—how we ensure value for money moving forward—and on the apprenticeships point, as well? The Work Programme, as envisaged at the moment, is being designed and delivered so that it has outcomes-based commissioning at its heart and so that a provider will gain the money only if it has ensured sustainable employment for an individual over two to three years. You may want to come on to the Work Programme later; I know that you have a separate inquiry into that. We feel that the outcomes-based commissioning and the way the Work Programme is designed to involve both the private and the third sector together—allowing for more innovation and tailored support, and hence more sustainable employment—will hopefully prove more effective in the future.

  Q77  Harriett Baldwin: But you would accept that there might need to be a variation in the payments—given how far some people might be from the labour market, while others might be very near to it—to tackle the issue that Professor Gregg raised about skimming?

  Emma Watkins: Potentially.

  Neil Carberry: On the apprenticeships point, we have made it very clear in our evidence that we regard paths to apprenticeships as very important. The point that has been raised about what happens in schools is absolutely vital. It is vital to a range of issues about the paths that we steer our young people on to when they think about work. For instance, if we have a discussion about a gender pay gap, better careers advice for girls at 14 and 15 would be a key part of addressing that issue. We are strongly supportive of businesses becoming more involved with schools, schools opening themselves up a bit more to businesses for careers advice and work experience—hopefully, that will lead people down the route of thinking about apprenticeships—and a simpler funding stream, with more money in it. We saw the announcement last week on adult apprenticeships, of which we are very supportive, although in our policy proposal we wanted that money to be made available from 16 rather than from 19 to help people who maybe don't see A-levels or post-16 education as being for them to make that transition into the work force.

  I think Paul is absolutely right—what we are dealing with here is a tricky transitional labour market, where people are coming to work for the first time. If they make that jump successfully, once they are in that first job, a range of life outcomes for the next 30 or 40 years takes a significant uptick.

  Q78  Harriett Baldwin: Can I ask one final question? Could the panel explain a Future Jobs Fund job compared with a level 1, level 2 or level 3 apprenticeship? Would you put it on that scale or are they such different things that you can't really compare them to each other?

  Tracy Fishwick: I think there will be some examples of Future Jobs Fund jobs that bear some resemblance to an apprenticeship. That is where you have a structured programme of skills development and qualifications that might be involved in a job, and such jobs do exist, but to confine a job to six months and to try to achieve a number of stages of qualification is quite difficult for most people, given that they might not have had a qualification before or if learning is a new thing for them. So, they are quite different in lots of respects. We see more that the Future Jobs Fund is leading into, or is a gateway into, that longer term.

  Q79  Harriett Baldwin: Is it before a level 1?

  Professor Gregg: It isn't a qualification. What employers want is people with skills. They also look at other basic skills such as the ability to turn up on time and your attitude while you are at work. They want signals from other employers that this person is a good bet. It is giving you, in a sense, a different set of skills that employers really want and look for, but it is not an accredited level 1, level 2 or level 3. It is the kind of stuff that we all have in our reference that says that we are the good citizen who will be good as an employee. These kids don't have that, and have little way of getting it.

  Q80  Harriett Baldwin: So, it's before a level 1?

  Professor Gregg: It's almost on a different scale. It's a non-qualification-based skill that employers value and want positive signals of. They want people with positive work attitudes, who turn up on time and aren't pissing about. It is trying to give the sort of work experience that employers look for before necessarily taking people on and offering the career-type training and development that is good for them in the long term.

  Neil Carberry: Essentially, employer-led apprenticeships tend to be about competency. Picking up on that point, Future Jobs Fund is about workplace behaviours and attitudes and about someone being ready for the workplace. I agree that it is still a skills set; it's just an attitude skills set.

  Professor Gregg: It's an accreditation as well. It is just an accreditation in a different way. You have an employer who says, "This person is all right." That is gold dust.

  Chair: It's often what the employers want.

  Professor Gregg: And it should matter whether you get the incentives right. If they are just going to say that everyone is wonderful, it loses credibility very rapidly.

  Q81  Karen Bradley: I want to turn now to look more at the implementation of the Future Jobs Fund and the lessons that we can learn from it. We have touched on several of those points already, but it will be useful for us if we drill down and summarise the specific points. The first point was about the lessons from the bidding process. You talked about it being very top-down, but perhaps you could expand on what you have seen so that we can learn from the bidding process.

  Tracy Fishwick: I was involved in writing a bid in Greater Manchester. I had a month to do it. The whole experience of Future Jobs Fund has been a rapid one from the day it was announced. If we'd had longer—we would have liked longer—we could have engaged more with employers and figured out how we could do this kind of demand-led employment pathway that really would be the ideal scenario to deliver the Future Jobs Fund through. The speed with which we had to respond was unprecedented. Nevertheless, it galvanised everybody's thoughts at a local level. The public and the voluntary and community sectors came together to figure out how they could do shared bids—collaborate and develop one bid for a sub-region—rather than run lots of separate bids in neighbouring boroughs and then waste lots of money on admin. That is what we have seen with Future Jobs Fund that we have not seen with other big programmes where lots of councils work together to create economies of scale.

  Neil Carberry: When we looked at your call for evidence before the summer, we went away and talked to our members. What surprised us, although we were already beginning to be a little sceptical about the impact of the Future Jobs Fund in the private sector, was how few of them had had much to do with it. Essentially, if you have a month to prepare a bid, it is hard for our members because they have businesses to run and clearly that has to come first. I suspect that the speed of the timetable greatly restricted the number of private sector companies that could get involved, and that includes even those who were already involved in local employment partnerships, of which there were some really good examples in some of the key areas of the country for the Future Jobs Fund. Beyond that, we have discussed the additionality requirement, particularly among the national firms, which have a bit more capability to think about taking part in this and some idea of where they might be able to base a dozen or more people. Some of the geographical controls, based on the 1.5%, were further pull-back factors. I think that that's what lay behind the lack of engagement on the private sector side.

  Professor Gregg: I agree with everything that was said there. There was a sense of doing things at such incredible speed. There was a deliberate push towards sectors they felt they could get to respond quickly.

  Richard Graham: A bit of national service.

  Professor Gregg: It was in their control in a sense; they could get people to jump who could jump, and the private sector wasn't part of that group. I always expected that that would be changed and that there would be a deliberate outreach to private sector employers after the first stage. This is very early in the cycle of a recession, relative to previous interventions, which have often come one, two or three years afterwards. That lack of disaster planning is being discussed. There wasn't a plan there to be wheeled out. When we worked out that we were in recession, things were done through emergency planning, which is not the best way, but the view shouldn't necessarily be that the first product is the end product. You would expect to evolve such a programme. They clearly wanted numbers very quickly, and that meant getting the people who were used to jumping to public sector calls to jump.

  Q82  Karen Bradley: That was very helpful, thank you. We talked about state aid rules and additionality. Were there any other restrictions that prevented the private sector from being involved? I cite the example of my local citizens advice bureau, which managed to get the Future Jobs Fund to cover a maternity leave. I question the additionality there. What have you seen in practice?

  Neil Carberry: From our experience—Emma might want to add to this—there has been so little engagement that what we have said so far is about the sum of it. Most businesses just haven't been engaged in the FJF. Indeed, looking to the provider side, people are engaged in things like the Flexible New Deal. Even there, there wasn't a lot of engagement among firms in making use of the Future Jobs Fund as part of the mix of tools that they were using to deliver. In particular, there is the issue of the relative strength of the funding stream behind the Flexible New Deal, which is about £1,500 on average, targeted at 50% of people still in a job six months on. Pound for pound, by comparison with the Future Jobs Fund, that is a significantly lower amount of funding for a not much higher target rate of retention of employment. Even on the provider side, where you would expect more engagement, it's been quite limited.

  Emma Watkins: I would just echo Neil's point. Within our welfare-to-work grouping of members providing these services in the CBI—it has been a very active group in putting together our original evidence and, just over the past couple of days, trying to gather anecdotal evidence—so few providers are used to the market and involved in the process that it is hard to gather evidence.

  Tracy Fishwick: I come back to the points that I have made already. State aid is the biggest barrier, coupled with the community benefit criteria. While we understand where those things come from, and we have had to work within them, they have been a huge obstacle, which we have not been able to overcome, unless we have been able to be quite creative and track jobs back to public spend through things such as construction works.

  Q83  Karen Bradley: What I'm taking from this is that the barriers included speed of delivery, state aid and additionality issues, and the lack of evolution in the programme because it was such early days.

  Professor Gregg: Can I just say one thing? There is an interesting contrast with what was done under the New Deal for Young People, where the employer option was almost entirely private sector, with very little public sector. This is completely the reverse. That makes a point about some of the rules. I don't know whether the rules have changed in the meantime. It isn't impossible to get private sector involvement. The old programme in '98 did it, but this one didn't. I think it's not because it's impossible, but because the kind of stuff we're describing was, in a sense, designed to get a rapid response from the people who could do it very rapidly and not a lot of thought was put into how to get the private sector engaged.

  Q84  Mr Heald: I don't know whether Professor Gregg would agree, but I think the problem may be this: if you have an intervention that comes in at 12 months and is to help somebody who is long-term unemployed with barriers to employment, I think you can offer them a subsidised job, but if it's six months and there isn't that history, the state aid rules make that impossible in the private sector, or difficult anyway.

  Professor Gregg: I was trying to articulate that you probably want an intensive deflection process first, before you deliver something like this, in terms of getting the numbers down and raising the case of targeting on the most needy.

  Mr Heald: I fully agree.

  Q85  Karen Bradley: I have a final point on implementation. I would be interested to hear about the experiences you and your members have had of interaction with Jobcentre Plus and how useful that has been.

  Neil Carberry: It's very interesting. In the past, our members have been somewhat cynical, to be honest, about Jobcentre Plus, but many of them had very good experiences during the recession. It's on a patchy basis, but there are good examples from certain areas of the country. The collapse of Woolworths is a classic example. Certain parts of Jobcentre Plus got into Woolworths stores very quickly and did a lot of real "action this day" work to try to get people into other retailers in the local area, and very successfully. A lot of it seems to be driven by the management structure of Jobcentre Plus at local level. People may be fostering good links with local employers and helping with the understanding of local labour markets. There was a strong streak of very good performance during the recession. In some areas, it was still a case of going to Jobcentre Plus with a job and getting 60 applications, 45 of which were not appropriate, but that was less prevalent than maybe it was in the previous decade.

  Tracy Fishwick: I really felt for Jobcentre Plus in the early days, because it had a lot on its plate at that time, a year or so ago, with increased volumes of customers coming in and people trying to get up to capacity in their own offices. Also, it seemed to be a while before it got its guidance on the rules about how it could engage with the Future Jobs Fund, what "eligibility", "suitable" and so on meant, how you physically refer a person sat in front of you, how you use the system and how they then end up going for an interview. All those things needed to be worked out and, as it happened, most organisations that were running the Future Jobs Fund worked it out together with Jobcentre Plus. That's partly why you end up with slightly different versions of what's happening across the country. Different partnerships agreed on different mechanisms to do things, but once we got over that, the process was fairly good.

  If we're talking about the volume of people who are being referred in some areas, we can take the Greater Manchester experience, which involves 8,000 jobs in total, or that's what it will be. The number of people who end up being referred every day and every week is in the hundreds all the time. It is quite a mammoth task if you just break it down to that one area. Then you get people not knowing quite what the job is that they've come for, or people being referred who are probably not that suitable for the job that they've come for. Keeping employers on board in those situations can be difficult, but mostly everybody understands that scale and volume will create these things. Overall, I would say Jobcentre Plus has done a very good job.

  Q86  Karen Bradley: In Greater Manchester, you went for 35-hour jobs. Is that right?

  Tracy Fishwick: Yes.

  Q87  Karen Bradley: Was there a reason why you went for 35 hours rather than the minimum?

  Tracy Fishwick: Yes. The bid was developed at the highest level in Greater Manchester. It involved the chief executives of all 10 councils. It was a very strategic decision to get involved on that scale. It sat alongside the other efforts on how we tackle worklessness, how we look at getting people out of the poverty trap and how we got as much as possible of the six and a half grand into their pockets to spend, rather than being tied up in administration and other things. It was a deliberate strategy, which has proved challenging to manage financially—but, yes, it was very deliberate.

  Q88  Chair: The bell is ringing and we are not quite finished. Perhaps we can roll up the last set of questions into one question with a few parts, because I am conscious of the time.

  We know that Future Jobs Fund is coming to an end—there will be no new entrants from March 2011. It was mentioned in the earlier session that the Work Programme does not come into place until next summer at the earliest. There is clearly a gap, so is there room for evolution or can that not happen because the programme will come to an end? Is there room for some evolution because some of the lessons that have been learned from Future Jobs Fund could sit easily within the Work Programme?

  The Government say that they will fill that gap because of the increasing number of apprenticeships, but those are for 19-plus, so is that a different cohort from those who have benefited from Future Jobs Fund? We know that the apprenticeship guarantee applies only to England anyway, because that is a devolved issue in Scotland and Wales, so are there gaps there?

  To roll all that into one question, what advice should our Committee be giving to the Government? If they are not going to continue with Future Jobs Fund, what should they be doing to fill that gap, to make the transition, and to keep the good stuff that is already happening in Future Jobs Fund? What should they be wary of to make sure that they do not make any mistakes as they introduce the new programmes? That is quite a lot in one question, but hopefully you get the gist of what I have asked.

  Tracy Fishwick: Youth unemployment is still with us—a third of all Jobseeker's Allowance claimants are aged 18-24, and in some areas it is getting into 40%. It is still a huge issue. There will be a significant gap in many areas, especially in the north and in areas where the impact of public sector job cuts will be bigger, and so on, bearing in mind the readiness of the private sector to fill that void in terms of creating new jobs. People are worried about what is likely to happen to a large group of young people.

  I would like there to be some kind of temporary extension to Future Jobs Fund, even if it is sat within the Work Programme, ultimately. There might also be a way of looking at some of the unused, what is called rolled-up, weeks. While we create jobs for 26 weeks, not everybody stays for that long, so there is some money, potentially, still in DWP that is not being drawn down for every single person. Is there a way of using that to subsidise other jobs in that gap period? That would be a request, or something that DWP could look at.

  Ultimately, how will the lessons that we can learn from Future Jobs Fund be morphed into Work Programme? A huge infrastructure has been created just around work placements; around managers who are turned on to the idea of having young people in their offices, their businesses, and their social enterprises; and around the voluntary and community sectors, and so on. It is a huge infrastructure and there is a willingness and an appetite for this, so how do we get that lasting legacy into the Work Programme? Can we make sure that the Work Programme providers talk to the big LABs—Lead Accountable Bodies—which have been running Future Jobs Fund, so that we can join all that up where possible?

  Q89  Richard Graham: We have talked a lot about Future Jobs Fund and different programmes. From all the evidence that we have heard, it sounds as if Future Jobs Fund was a well-intentioned, spur-of-the-moment, desperate attempt to try to get young people off the unemployment register, with mixed results and not much involvement from the private sector. The bottom-line question to all this is why are there so many young people who are NEETs in this recession? Why is the number so much bigger than in previous recessions?

  Professor Gregg: It's not. It is not bigger than in previous recessions.

  Q90  Richard Graham: Yes it is. We have record young unemployment at the moment, whereas employment figures were much higher in the early '90s.

  Professor Gregg: The gap relative to older people is higher, but the number of NEETs is not.

  Q91  Richard Graham: But the percentage is much higher. Is there not a wider question in there? Why is it that employers are not taking on young people? Is it that they have lost confidence in what people are coming out of school with? Are they preferring to take on someone who has had a job already—almost whatever job—because, as a point of reference, it is something that shows that they are capable of doing a job? What do you all think? Or do you think that this is all perfectly normal, and that we should expect to have record youth unemployment?

  Professor Gregg: Young people always suffer more in recessions. Firms do not shed labour that they have got, which is valuable, experienced and trained, unless they are desperate. In this particular recession, what has been very successful is that firms have not done as much of that emergency shedding of labour—the panic stuff—because they are going out of business. They have done shrinkage by not recruiting, a recruitment-freeze type of shrinking.

  Q92  Stephen Lloyd: Also wage cuts. Everyone has taken wage cuts.

  Professor Gregg: Yes, I'll accept wages. All that means is that the people who bear the brunt are those trying to enter the labour market rather than those who are there already, suffering large-scale displacement. That is why it falls on the young. This time, the gap between the older and the young is more acute than in previous recessions, but it is slightly less as a share of the young person's population. More are in education now. Far more young people are staying on in education, so the share is of those who are not staying on in education. That is where the unemployment rates are high. That is high, relative to previous recessions.

  Let us take the young person population. Because there are more in school, what you are dealing with is a more acutely deprived group than was previously the case. It echoes a deeper point, which has been made once or twice. The school-to-work transition isn't working well. For many people leaving school with low qualifications, the transition into work, which is important in respect of getting on that ladder, isn't working well.

  Q93  Richard Graham: So that's where the departure is.

  Professor Gregg: Connexions and that kind of stuff need to be looked at. The Connexions service isn't working well in terms of getting people from deprived backgrounds into work at the first stage. As the economy picks up, some of that will be solved. The deepest problem has been gathering pace prior to the recession since about 2004, but I would like to make the split between that deeper problem with the school-to-work transition that is not working well, and how to deal with the people who fall through—there will always be some—and who end up at risk of long-term exposure to unemployment.

  You can't catch everybody with the first net in this case. The lives of some people go wrong afterwards. You need something built within the welfare system, and I advise that some form of requirement for work experience—maybe not six months, but much shorter—is embedded within things like the Work Programme. As we discussed before, you may use Work Programme first—it's low cost—to get people out. But at some categorisation of people in the most needy group, you must get some kind of work experience embedded within the programme, not pure black box.

  Q94  Chair: I am very keen on the CBI speaking, and that we don't lose track. We need points made about what needs to be in the future in terms of what the Government will do, either to carry on what was good about the Future Jobs Fund or make sure that it is more effective.

  Neil Carberry: One of the advantages of the early proposals for the Work Programme is that they are a bit more bottom up. There is a lot more of sitting with someone, thinking about what interventions they need and at what point the practical work experience that Paul has identified is useful. I also echo the point made about labour conservation. There has been a strong stream across the private sector— probably based on the experience of the '90s recession when some executives felt that the axe was taken a bit far, a bit early and the firm was not then prepared for the recovery—to control wages as the method to cope with conserving labour. That means that there is quite a lot of excess capacity in terms of human resources within members. That is one of the factors that is driving lower hiring. As Paul says, lower hiring does affect the issue.


  Q95  Chair: If that's the case, and there is less hiring, will there be a problem with employers taking on apprentices, which is clearly the new Government's preferred route?

  Neil Carberry: It takes a long time for employment to recover from a recession, but we are now beginning to see some of that apprentice spend returning. Apprenticeship programmes seem to be somewhat more resilient to recessions than less formal arrangements. If you as a firm take in two or three A-level leavers every year for a more on-the-job approach, that is more open to being cut back than if you are engaging in a two or three-year apprenticeship programme. Therefore, we hope that apprenticeship numbers are more resilient on that basis, and that funding can be used to encourage apprenticeship development in key areas, and particularly at younger levels than 19.

  Q96  Chair: There's going to be a four to six-month cohort who will not get on the Future Jobs Fund from March and won't get into the Work Programme until it is up and running at some time in the summer. That is key to us as a Committee, and you have the chance to give us suggestions for what we should recommend.

  Emma Watkins: It's probably not entirely our place to comment on the transitional arrangements.

  Q97  Chair: Please do.

  Emma Watkins: There obviously need to be some to avoid a substantial gap. We hope that some of those people might be picked up through existing Flexible New Deal contracts to bridge the gap.

  Q98  Chair: But they'll have gone by then, will they not?

  Emma Watkins: We're not entirely clear.

  Q99  Chair: It doesn't cover Aberdeen, for instance. I know that it is only partial across the country.

  Neil Carberry: Certainly, there is a range of tools that will remain in place. The question is whether they will be resourced in a way that helps that particular cohort.

  Q100  Chair: Is there a danger that that won't happen, because all the energy and focus is going into the Work Programme?

  Professor Gregg: There is a big risk. It is very hard to get the capacity. When developing a whole new system, a lot of energy will be focused in that area by central Government and Jobcentre Plus. It will be hard to maintain or catch the people who are in that kind of gap. We have seen it every time there is a new programme. The old staff diminish in quality and volume ahead of the arrival of the new programme.

  Q101   Chair: But some kind of carry on, whether it's Flexible New Deal or Future Jobs Fund.

  Professor Gregg: If it's an apprenticeship guarantee and if you have enough places and can make it stick, fine. But some kind of guaranteed option place is—

  Q102  Chair: On apprenticeships, could someone answer my question about whether it is the same cohort getting apprenticeships? I think you mentioned that before, but perhaps a different cohort might get the apprenticeships as opposed to the Future Jobs Fund, and what happens to the guarantee in Scotland and Wales?

  Tracy Fishwick: In terms of cohort, I think there is a really big risk of young people not getting into an apprenticeship either because they won't see themselves as being able to get one, so they select out, or they won't have the prerequisite basic level of education—five GCSEs or similar. That is where the Future Jobs Fund and other things in the past filled the void.

  The other thing I would like to add, which does not necessarily help, is that other local funding is about to stop, such as the Working Neighbourhoods Fund and Objective 1 areas in Liverpool, and other places in the country where the European Social Fund will stop. A lot of that added capacity locally for this kind of programme delivery—ILMs or other kinds of employment support with mentoring and coaching and that really intensive stuff that you don't see with the broad brush Jobcentre Plus interventions, and the £1,000 interventions. You don't see that level of input, so there is a building gap that isn't just about the Future Jobs Fund.

  Q103  Chair: When will ESF stop completely?

  Tracy Fishwick: Some of it will have gone, some of it will go in December and some of it will be some time next year—the same time scales.

  Chair: Any other questions? Well thank you very much for coming along, and thanks for your evidence, which will be really useful when we come to write our report.

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