6 Involvement of the private sector |
Creation of posts in the public
and private sectors
68. It is clear from the evidence we have received
that more Future Jobs Fund jobs were created in the public and
voluntary sector than in the private sector. The UK Commission
for Employment and Skills provided evidence showing that the use
of the FJF was "far greater" in the public sector, with
6% of employers from public administration and the defence sector
and 7% from the health and social work sector recording use, compared
with 1% among private sector employers.
69. Some local authorities also provided evidence
showing a low level of private sector FJF opportunities: Birmingham
City Council reported that 2% of their 2,500 jobs were in the
private sector; Barnsley Metropolitan Council reported that 7%
of their 614 jobs were in the private sector; while Oxfordshire
reported that 33% of their 120 jobs were in the private sector.
A significant number of witnesses also provided qualitative information
suggesting that they experienced difficulties in creating private
sector FJF jobs.
70. Mark Fisher, Director, Jobseekers and Skills
at the Department for Work and Pensions, told us that the Department
"never designed the Future Jobs Fund as a vehicle for private
However, many witnesses lamented the absence of private sector
posts within the programme. For example, North Tyneside Council
and Wigan Council both suggested that private sector FJF posts
may have been more likely to result in permanent employment opportunities,
whereas sustainable funding was always unlikely to be available
for public sector or voluntary sector posts.
North Tyneside Council argued that the FJF could have been
used to help reduce the local economy's reliance on the public
71. Manchester City Council considered it a "significant
weakness" that private sector employers had not been able
to take on Future Jobs Fund candidates. They argued that the private
sector represented the best opportunity for progression routes
to permanent employment, especially given the climate of spending
cuts and job reductions in the public sector. 
Evidence from the UK Commission for Employment and Skills suggested
that many employers, particularly those in the private sector,
were unaware of the Future Jobs Fund:
Awareness of the Future Jobs Fund amongst employers
is low in comparison to other initiatives. Only 15% of employers
in Great Britain are aware of the initiative, this compares with
55% awareness for the longer established New Deal. Awareness varies
considerably across different sectors with public sector employers
far more likely to be aware.
State aid regulations
72. Future Jobs Fund posts were required to benefit
the community and to be "additional" posts (ie ones
that would not otherwise have been created without FJF funding).
DWP said that it had introduced these restrictions to ensure
that it complied with EU state aid rules. The Department, and
other witnesses, told us that these restrictions acted as a "barrier"
to private sector engagement.
The CBI outlined how the state aid restrictions led to a lack
of private sector involvement, with negative consequences for
the programme. They argued that:
- The "overly rigid"
criteria created difficulties for businesses who wanted to access
funding for jobs that the business genuinely needed (as opposed
to jobs with a community benefit that did not link closely to
the core work of the business).
- The requirement that posts must be "additional"
in practice meant that jobs created within the FJF were less likely
to be retained than others, once government support had been withdrawn.
73. Birmingham City Council stated that the community
benefit criterion made it very difficult for them to engage with
private sector employers. They described the difficulty for private
sector employers in creating jobs, even if they offered a significant
community benefit element, or had a direct link to a permanent
job. They reported that creating such jobs was only possible where
a large contractor had a charitable arm which could employ FJF
workers in work regarded as bringing community benefit. 
74. The state aid rules may have represented
a significant barrier to any departmental plans to involve private
sector organisations in the FJF programme. However, as described
in the European Commission report Employment in Europe 2010,
wage subsidies can be used to support those at risk of unemployment
in times of economic difficulty. The report gives a range of examples
from across Europe which demonstrate how wage subsidies have been
used to tackle long-term unemployment, including schemes involving
the private sector.
Moreover some witnesses felt that the Department might have done
more to find ways to engage the private sector within these rules.
David Coyne of Glasgow Works argued that there are ways of working
with the state aid regulations in a more creative way: "Where
a private sector employer has a genuine vacancy that they are
recruiting for, it is legal to offer a wage subsidy under the
general block exemption regulation for recruiting disadvantaged
75. Some local partnerships were successful in
creating FJF positions in the private sector, working within the
restrictions of the state aid rules. Durham City Council described
how two local businesses developing products in support of green
technology qualified for FJF support through the promotion of
Knowsley Council entered an agreement with Jaguar Land Rover to
take on young people through FJF, since there was a period of
working in the community built into the job. Young people completing
their six months were guaranteed an interview for a permanent
job with Jaguar Land Rover.
76. Given these positive examples, there is a
question as to whether the Department and FJF providers did enough
to encourage opportunities within the private sector. Tony Hawkhead
of Groundwork UK told us that there was a "nervousness"
in Departments about state aid. He suggested that they needed
to build in ways to engage all sectors from the start.
Stoke-on-Trent City Council shared this view:
The issue of state aid threw up a number of issues
and made many of our fellow employers very nervous. We believe
that DWP had sufficient time to notify the programme to the EU
and secure their approval prior to the programme commencing.
77. It is important that EU
state aid rules are not perceived as a barrier to private sector
involvement in employment programmes. The Department should clarify
exactly what is and is not allowed under state aid rules for employers
in the private sector when employing young and disadvantaged people
using a government subsidy, and produce a simple guide to help
build confidence of employers.
Bidding process and speed of
78. The bidding process for the programme played
an important role in determining the extent to which the private
sector could become involved in the FJF programme. All organisations
and local and sectoral partnerships were invited to bid to create
FJF jobs, and the DWP's guide to the programme offered the following
Bids can come from anyone, but we have a strong preference
for partnership bids involving a wide range of organisations.
We expect a significant number of bids to be led by local or sectoral
partnerships. But we are also looking to organisations in the
third sector and private sector to play their part in creating
new, exciting jobs.
The CBI argued that the Department's preference for
bids involving local or sectoral partnerships meant that the allocation
of funds was weighted against the private sector:
In July 2009, of the 117 bids that obtained funding
from the FJF, 62 were allocated to partnerships involving local
authorities. These partnerships are less likely to deliver sustainable
paths into employment than schemes led by businesses.
It highlighted that the FJF was only available in
localities with unemployment rates over 1.5 times the national
average or for young people who had claimed unemployment benefit
for over 10 months. It described these criteria as "arbitrary
demarcations" that prevented business from rolling out FJF
programmes. In oral
evidence, Neil Carberry from the CBI also argued that the speed
at which the programme was implemented resulted in a bidding process
that was "top-down in its design", leading to predominantly
public sector-led bids being successful.
79. Tracy Fishwick told us that she had only
had a month to write the Greater Manchester bid, and argued that
if they had been given longer, they could have engaged more with
employers and the private sector. However, she also believed that
the public and voluntary sector partnerships that were brokered
in that period were very valuable.
Tony Hawkhead of Groundwork UK told us that he had "never
seen any Government programme in any department set up at the
speed this was set up" and believed that it would have been
possible to get the private sector more involved given more time.
80. Some of the written evidence suggested that
the bid criteria were not fully established in advance and providers
did not have enough time to prepare before FJF work started.
Redcar and Cleveland Borough Council indicated that the
programme was set up so quickly that, at the start, the rules
were still being written.
The Scottish Council for Voluntary Organisations suggested that
the eligibility criteria for candidates were unclear, and that
employers and Jobcentre Plus were uncertain about how to write
specifications for the jobs.
81. We accept that the Department
felt obliged to design and implement the FJF programme rapidly,
given the labour market conditions at that time. However, we believe
that the Department needs to take into account that engaging private
sector organisations requires more time than was allowed for within
the FJF programme. In future welfare-to-work programmes, a balance
needs to be struck that takes advantage of the different strengths
of the public, private and voluntary sectors. Given the proposed
severe cut backs in public sector jobs, the Government will be
much more reliant on the private sector to provide the jobs necessary
to meet its targets for moving people off benefits and into work.
76 Ev w223 (The UKCES findings will be published in
a forthcoming report) Back
Ev 42; Ev w107 and Ev w56 Back
Including: Warwickshire County Council, Ev w5; Wakefield Council,
Ev w19; Community Skills Partnership, Ev w49; Merthyr Tydfil Borough
Council,Ev w54; Norfolk County Council, Ev w62; Wigan Council,
Ev w115; Durham County Council,Ev w116; Liverpool City Region,
Ev w151; North Tyneside Council, Ev w165, and Association of Greater
Manchester Authorities, Ev w214 Back
Q 134 Back
Ev w165 and Ev w115 Back
Ev w165 Back
Ev w 221 Back
Ev w223 Back
Ev 53 Back
Ev 46 Back
Ev 42 Back
European Commission, Employment in Europe 2010, October
Q 47 Back
Ev w116 Back
Ev w151 Back
Q 49 Back
Ev w31 Back
Department for Work and Pensions, Guide to the Future Jobs
Fund, 2009, p 1 Back
Ev 46 Back
Ev 46 Back
Q 67 Back
Q 81 Back
Q 51 Back
For example, Redcar and Cleveland Borough Council, Ev w95; Scottish
Council for Voluntary Organisations, Ev w44, and Sandwell Metropolitan
Borough, Ev w59. Back
Ev w95 Back
Ev w44 Back