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

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.[76]

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[77]. A significant number of witnesses also provided qualitative information suggesting that they experienced difficulties in creating private sector FJF jobs.[78]

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 sector employment".[79] 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.[80] North Tyneside Council argued that the FJF could have been used to help reduce the local economy's reliance on the public sector.[81]

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. [82] 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.[83]

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.[84] 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.[85]

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. [86]

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.[87] 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 workers".[88]

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 energy efficiency.[89] 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.[90]

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.[91] 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.[92]

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 implementation

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 advice:

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.[93]

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.[94]

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.[95] 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.[96]

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.[97] 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.[98]

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.[99] Redcar and Cleveland Borough Council indicated that the programme was set up so quickly that, at the start, the rules were still being written.[100] 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.[101]

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

77   Ev 42; Ev w107 and Ev w56 Back

78   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

79   Q 134 Back

80   Ev w165 and Ev w115 Back

81   Ev w165 Back

82   Ev w 221 Back

83   Ev w223 Back

84   Ev 53 Back

85   Ev 46 Back

86   Ev 42 Back

87   European Commission, Employment in Europe 2010, October 2010 Back

88   Q 47 Back

89   Ev w116 Back

90   Ev w151 Back

91   Q 49 Back

92   Ev w31 Back

93   Department for Work and Pensions, Guide to the Future Jobs Fund, 2009, p 1 Back

94   Ev 46 Back

95   Ev 46 Back

96   Q 67 Back

97   Q 81 Back

98   Q 51 Back

99   For example, Redcar and Cleveland Borough Council, Ev w95; Scottish Council for Voluntary Organisations, Ev w44, and Sandwell Metropolitan Borough, Ev w59. Back

100   Ev w95 Back

101   Ev w44 Back

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Prepared 21 December 2010