Youth Unemployment and the Youth Contract - Work and Pensions Committee Contents

3  The Youth Contract: helping young people who become NEET

45. This chapter looks at the new Youth Contract scheme to help 16-17 year-olds in England who leave education without finding work or training (NEETs). We consider the nature of support needed by disengaged young people; the policy objectives, design and contracting arrangements of the new scheme; and the challenges the Government faces in trying to identify NEETs and help them to re-engage in education, training or work.

The nature of support required by disadvantaged NEETs

46. We heard from several sources that supporting and re-engaging young NEETs was often an intensive process. Staff at the Prince's Trust's Fairbridge Programme had found that the best way to build the confidence of disengaged young people was through "experiential learning"—learning through practical experience of a range of different activities. The initial access course for the Fairbridge programme included mostly outdoor activities such as canoeing and rock-climbing. Following this there were courses available in a wide range of areas such as sports, film, music and practical vocational skills including food hygiene, first aid and retail. The Fairbridge Programme achieved positive outcomes—a return to education, training or a job—for 75% of participants using this method.

47. Community Links, a charitable organisation which provides back-to-work support for young people in east London, believed that the development of "deep value relationships" between its workers and young people was the key to "restoring confidence and unlocking potential". Building relationships of this kind was an intensive process. Community Links described its key workers as "part adviser, part carer, mentor, supporter, builder and explainer".[38]

Target group and policy objectives

48. The Education Funding Agency (EFA) is an executive agency of the Department for Education with responsibility for funding education and training provision for people up to the age of 19. The key objective of the new EFA NEET scheme is to help participants move back into education, training or work and to keep them there. It also aims to provide the young people with qualifications and work experience to help them to find work in the future, thereby reducing the proportion that become unemployed in later life.[39]

49. As noted in chapter 2, NEET levels in the 16-18 age group have remained stable due to rising education participation rates whereas the number of 19-24 year-old NEETs has risen steadily since 2008. The new scheme is available to 16-17 year-olds who have left school with no GCSEs at grades A*-C. The EFA told us that it had chosen to apply this eligibility criterion because these young people were "at risk of long-term disengagement".[40]

50. Several witnesses welcomed extra support for 16-17 year-olds, particularly as very few have contact with Jobcentre Plus (JCP) as the large majority of those who remain living in their family home are ineligible for Jobseekers Allowance. [41] JCP support for young people is focused on the 18-24 age group (see chapter 4).

51. Witnesses accepted that poor educational attainment was an important indicator of the likelihood of young people becoming NEET. Tony Wilson of Inclusion told us there was a "very clear correlation": some 40% of young unemployed people have qualifications below GCSE grades A*-C level.[42]

52. However, some witnesses felt that the eligibility criterion of no GCSEs at all at grades A*-C was too restrictive and would exclude some young people who were at equally high risk. The Careers Development Group, a welfare-to-work provider, argued that a young person who has one GCSE at grade C but does not possess a GCSE in Maths or English will face very significant labour marker disadvantage and should therefore be included in the scheme.[43] Tony Wilson agreed that the criteria could be more "nuanced".[44]

53. Community Links reported that there was a "wide array" of factors causing young people to become NEET. These included not only poor educational attainment but also: poverty; drugs, alcohol or substance misuse; homelessness; mental health issues; disability; involvement with crime and the criminal justice system; and "chaotic family lives".[45] All of these factors were also highlighted to us by staff at the Fairbridge Programme.

54. Kirsty McHugh, Chief Executive of the Employment-Related Services Association (ERSA) agreed that no GSCEs at grades A*-C was a "very blunt" criterion, illustrating her point by noting that "a care leaver who has multiple disadvantages and has one GSCE in pottery" would not be eligible. [46]

55. The EFA accepts that there are a range of indicators linked to the likelihood of becoming long-term NEET, including: poor school attendance, exclusion from school and coming from a workless or "troubled" family.[47] Peter Mucklow, representing the EFA, told us that eligibility had been restricted for budgetary reasons and to focus resources on "those who are in the most need". He assured us that there was sufficient funding to assist the estimated 54,000 young people who would fall into the eligible category over the next three years.[48] At the end of 2011 there were an estimated 85,000 16-17 year-old NEETs in total in England.[49]

56. Low educational attainment is an important indicator of the risk of becoming NEET. However, using it as the sole criterion for establishing eligibility for the Youth Contract NEET scheme is likely to exclude a number of very disadvantaged young people. We agree with the Government that it is important to focus the available support on those who need it most. To achieve this aim, we recommend that young people are assessed according to a broader set of criteria to better reflect their level of need.

57. We are concerned about the potential gap in provision for 16-17 year-olds, the large majority of whom have no contact with Jobcentre Plus. Funding for the new NEETs scheme will be sufficient to offer support to 54,000 16-17 year-olds over the next three years. Our concern is that no single agency or body will take responsibility for those 16-17 year-olds who do not qualify for the Youth Contract scheme. The EFA, its Youth Contract partners and local authorities must work together with the aim of ensuring that all 16-17 year-old NEETs are referred to appropriate local provision. It is vital that young people are not left without support until they are 18, at which point they may have been NEET for two years and may have become much more difficult to help.

Programme design and contracting arrangements

58. The new NEET scheme is being contracted by the EFA and delivered by private and voluntary sector providers with experience of working with disengaged young people. It is designed to draw on this expertise and gives providers freedom to address an individual's specific needs without prescription from the Government. This is known as a "black box" approach and is a key feature of the Government's main employment scheme, the Work Programme.

59. Another feature of the NEET scheme which draws on experience of the Work Programme is "payment by results": providers will be paid only when they achieve a positive outcome for each young person. Up to £2,200 is available for each NEET (the "unit cost"). Payments will be staged, with the majority of the money paid in the latter stages of the contracts in order to encourage sustainable outcomes. The payment schedule is as follows:

·  An initial payment of up to 20% of the unit cost in year one of the programme and up to 10% in year two. To receive the initial payment providers have to identify an eligible NEET and "work with the young person to complete an effective and clear action plan for their re-engagement";

·  A payment based on the outcome of re-engaging the young person in education, training or work with training (the re-engagement point) of up to 30% of the unit cost; and

·  A further payment based on the young person still being in education, training or work with training six months after re-engagement (the sustainability point) of 50% of the unit cost in year one or 60% of the unit cost in year two. Sustainability is defined as participation in full-time education, training or work with training (including apprenticeships) for five months out of six.

60. The EFA has let contracts worth £126 million across 12 regions in England. Four of these contracts have been awarded to Groundwork UK, an environmental regeneration charity. The remaining contracts have been let to private sector companies with experience in skills training and welfare-to-work. Services will be delivered via supply chain partners in the private, public and voluntary sectors. This "prime contractor" model also draws on the design of the Work Programme. A further three urban areas—Liverpool, Leeds/Bradford/Wakefield and Newcastle/Gateshead—will decide how to allocate their own Youth Contract budget for 16-17 year-old NEETs (see below).[50]

61. Contracts were let in July 2012 which will allow delivery of the programme to begin in September 2012. The programme will accept new participants until March 2015 but contracts will run until March 2016 to allow for the staged payments for sustainable outcomes to be made. The contracts set out quite stringent performance measures which providers will have to meet in order to fulfil the contracts, including that 70% of all participants achieve the sustainability outcome within 12 months.[51]

The prime contractor model and payment by results

62. In 2011 we reported on the contracting arrangements for the Work Programme, which delivers services in a similar way to the Youth Contract NEET scheme. Work Programme contracts were awarded predominantly to private sector companies who might then subcontract to smaller, often voluntary sector, delivery partners. Our Report highlighted concerns that in these circumstances payment by results could place significant financial risk on the smaller organisations responsible for delivery of services on the ground. We concluded that Work Programme contracts would require active management by DWP to ensure that sufficient funds to enable delivery of services were passed down from prime contractors to subcontractors.[52]

63. Ralph Michell of the Association of Chief Executives of Voluntary Organisations (ACEVO) raised a similar concern in relation to the Youth Contract. He argued that, while charities and social enterprises might be content with the principle of payment by results, there was a risk that, when applied to the new NEET scheme, it could result in insufficient money being available for the types of specialised and resource-intensive interventions often required to help young people who faced the greatest barriers to finding training or employment opportunities.[53]

Level of funding per NEET

64. Kirsty McHugh of ERSA, representing welfare-to-work organisations, some of which were in the process of bidding for the EFA contracts when we took evidence, felt that the maximum "unit cost" on offer was low, given that the target group was likely to have a range of significant barriers to participation and require intensive interventions as described above. She noted that the maximum £2,200 payment was inclusive of VAT and also that bidders had been encouraged to compete for contracts on price. She estimated that the average payment for supporting each young NEET through the entire process was therefore likely to be only around £1,500.[54]

65. The EFA told us that it had set the maximum payment at £2,200 based on "experience and evidence from other programmes", including advice from DWP, but that ultimately it had been a "judgement call". Peter Mucklow stressed that the EFA had a duty to secure value for money and had therefore allowed bidders to compete on price. He confirmed that 30% of the bid evaluation weighting had been assigned to the "commercial proposition, which includes price", with the remaining 70% assigned to the quality of the bid.[55]

66. Delivering the new NEETs scheme through a prime contractor model and on a payment by results basis creates a risk that insufficient funds will flow to the organisations delivering services on the ground. We believe that the financial risks of the scheme should be shared by prime contractors and not simply passed down to subcontractors, whose role will be to deliver the often intensive interventions required. As part of its contract-management role, the EFA must take proactive steps to ensure that supply chains operate fairly and in a way that ensures the best possible service for young people.

67. We share the concern that the maximum payment under the scheme of £2,200 per NEET may be too low to enable delivery of the intensive interventions often required by the most disadvantaged NEETs. The EFA must monitor this carefully. We recommend that the Government takes a flexible approach to allocating funds within the overall £1 billion Youth Contract budget and considers increasing the funding for the new NEETs initiative should this prove to be necessary, either because of the level of demand or if it becomes apparent that the payment structure is preventing the delivery of the necessary interventions. We would also find it helpful to know, in response to this Report, the extent to which the Government expects NEET scheme providers to make available in-depth support to tackle personal and social issues, within the contractually agreed "unit price" per young person.

Finding and engaging NEETs in the new scheme

68. Witnesses identified that finding and engaging the young people most in need of help would be challenging. The EFA referred to local authorities' statutory responsibility to support young people to participate in education and that: "It is expected, therefore, that providers of the Youth Contract for 16 and 17 year-olds will work closely with local authorities to ensure that they engage and meet the needs of those young people in their area who meet the criteria of the target group".[56]

69. Staff at the Fairbridge Programme told us that it could take their outreach workers months to convince some young people to participate. Community Links said it often took two months to find and recruit young people to its programmes and that it involved going out and looking for them in the community. For Community Links, working in east London, the task was complicated by gang culture; if young people had been involved with gangs they would not be willing to attend programmes in other gangs' territories, for example. A similar point was made at the Fairbridge Programme.

70. Community Links told us that the critical time for finding and engaging NEETs was the summer months, after young people had left school. They could often "drift" or "completely go underground" during this time if early action was not taken to find and engage them.[57]

71. ERSA argued that experience of previous publicly-funded programmes suggested that relying on local authorities to refer NEETs to the new Youth Contract scheme "will not work". Despite local authorities' duty to track the outcomes of young people leaving school, ERSA had found reliable data on the number of NEETs with no GCSEs at grades A*-C in each local authority area "hard to come by".[58] The Invitation to Tender for the scheme only indicates the total number of NEETs by region in 2010, for example.[59] Kirsty McHugh of ERSA predicted that finding and engaging NEETs would be an intensive process in which providers would need to engage directly with schools, youth clubs and other local organisations.[60]

72. Tony Wilson of Inclusion also highlighted past experience of relying on local authorities to refer participants to publicly-funded programmes. He noted that European Social Fund "troubled families" provision had failed to reach expected volumes: local authorities had not been motivated to refer participants because they had not felt part of the original commissioning process for the programme. He believed that there was a risk that the same could happen in relation to the Youth Contract NEET scheme.[61]

73. As noted above, the Government has allowed local commissioning in three conurbations as part of its "City Deal" agenda, designed to give more autonomy to England's "core cities".[62] However, the Local Government Association (LGA) had called on the Government to allow local authorities to commission the Youth Contract scheme across England, arguing that they "already understand who the most vulnerable young people are, record and track young people's progress and understand which local organisations are best able to help them".[63]

74. In oral evidence, the LGA told us it was "difficult to say" whether local authorities would refer young people to the Youth Contract scheme in the way expected by the Government.[64] In follow-up written evidence it stated that the centrally commissioned model offered "minimal engagement" with local authorities. Its view was that the decision not to implement local commissioning across the country was a "missed opportunity" to integrate Youth Contract funding with extensive existing local provision for NEETs. It argued that, now that the contracts have been let, there is one remaining mechanism by which funding might be better aligned: by allowing local authorities a contract performance management role.[65]

75. The EFA told us it would be "very disappointed" if local authorities did not engage with the Youth Contract. Peter Mucklow emphasised local authorities' statutory responsibility to support young people's participation and argued that the Youth Contract had the potential to help local authorities discharge this duty at no extra cost.[66]

76. Our main concern about the Youth Contract NEET scheme is that it will not reach its intended volumes unless local authorities engage fully with it. Local authorities have a statutory duty to support young people's participation in education. We therefore expect local authorities to engage with Youth Contract providers and assist them in finding and engaging NEETs.

77. Local commissioning of the Youth Contract NEET scheme in three areas provides an opportunity to compare the effectiveness of the local approach with the EFA-contracted provision in the rest of the country. We recommend that the Government conducts research to ensure it properly understands the advantages and drawbacks in each approach and makes any necessary changes to the scheme in response to the evidence on relative effectiveness.

Proliferation of initiatives to help NEETs

78. Several witnesses highlighted the proliferation of schemes and initiatives aimed at re-engaging young people in education and employment in England. The devolved administrations in Scotland and Wales also each have several of their own schemes and initiatives.[67] The Careers Development Group (CDG) noted that, in the course of researching its bid for the Youth Contract, it had identified several duplicate programmes contracted through the Skills Funding Agency, the Greater London Authority, the DWP Innovation Fund, the European Social Fund and the Department for Communities and Local Government. There was also a range of local authority projects. CDG argued that the proliferation and duplication of provision for NEETs was likely to lead to a low referral rate for the Youth Contract scheme.[68]

79. We discuss the variety of different funding streams and accountabilities for delivering the Youth Contract, and education and skills policy more generally, in chapter 8.

38   Ev 110, para 5.5 Back

39   YPLA, Invitation to Tender: Specification and supporting information for the Youth Contract, March 2012, para 6 Back

40   Ev 133, para 4 Back

41   AELP, Ev w9, para 6; Manchester New Economy, Ev w37, para 35; Reachfor, Ev w42, para 2.1.1 Back

42   Q 44 Back

43   Ev w13, para 19 Back

44   Q 47 Back

45   Ev 108, para 3.1 Back

46   Q 314 Back

47   YPLA, Invitation to Tender: Specification and supporting information for the Youth Contract, March 2012, para 17 Back

48   Q 240 Back

49   DfE, NEET Statistics Quarterly Brief, February 2012, table 1 Back

50   "Radical Scheme to rescue NEETs kicks off today", Office of the Deputy Prime Minister press release, 20 July 2012 Back

51   EFA, Ev 134, para 22 Back

52   Fourth Report from the Work and Pensions Committee, Session 2010-12, Work Programme: providers and contracting arrangements, HC 718, Chapter 6. Back

53   Q 37 Back

54   Q 316 Back

55   Q 257 Back

56   Ev 134, para 13 Back

57   Q 313 Back

58   Q 237 Back

59   YPLA, Invitation to Tender: Specification and supporting information for the Youth Contract, February 2012 Back

60   Q 316 Back

61   Q 46 Back

62   "Radical scheme to rescue NEETs kicks off today", Office of the Deputy Prime Minister, press release, 20 July 2012 Back

63   Ev 147 Back

64   Q 226 Back

65   Ev 148 Back

66   Q 228 Back

67   See and Back

68   Ev w14, para 21 Back

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Prepared 19 September 2012