House of Lords - Youth unemployment in the EU: a scarred generation?

Youth unemployment in the EU: a scarred generation? - European Union Committee Contents

Chapter 4: Use of EU funding and initiatives in the UK

61. This Chapter considers how EU funding is managed in the UK and suggests possible improvements to its effectiveness. The structure of EU funding in the UK is set out in Box 5 below.

BOX 5

EU funding in the UK

Expenditure for the 2007-13 European Social Fund (ESF) programme is to be completed by the end of 2015. The next programme will run from 2014-2020 and the funds available under this programme will need to be spent by 2022. Under these multiannual programmes, Member States present national strategic reference frameworks and negotiate regional operational programmes with the European Commission in order to tailor activities to the specific situation in the respective Member State or region. For the Youth Employment Initiative, Member States have to submit a Youth Guarantee Implementation Plan. Once approved, these are adopted as Council Decisions.

Within the UK, there are separate programmes for the ESF and the European Regional Development Funds (ERDF) in England, Scotland, Wales and Northern Ireland. Management of the ESF funds in Scotland, Wales and Northern Ireland is devolved.[112] The UK Government have said that from 2014, they have brought together the ESF, ERDF (and part of the European Agricultural Fund for Rural Development) in England, to form a single European Growth Programme.[113]

The ESF and ERDF are organised according to 'funding rounds' which are referred to as 'programmes' and run for seven years. The Youth Employment Initiative will be allocated using the same mechanism as the ESF[114] and ERDF,[115]and is expected to be worth €194 million to the UK. Expenditure must be completed by 2018.[116]

The Regulations governing the ESF and ERDF dictate that Member States must contribute national 'match funding' to programmes. The level of match funding varies among Member States and between objectives and is set out in the relevant Regulation.[117] In England, most of this match funding comes from employment and skills programmes managed by the Department for Work and Pensions and the Skills Funding Agency (SFA)[118] under the co-financing system. Under this system, co-financing organisations (such as the SFA in England) identify the match funding before going out to open and competitive tendering amongst the organisations that will deliver the projects on the ground.

For the 2014 to 2020 funding period, Local Enterprise Partnerships (LEPs) made up of local business and civil society organisations, will have responsibility for presenting strategies to the UK Government outlining how they intend to allocate the ERDF, ESF and (where eligible) Youth Employment Initiative funds in their area, in the context of their wider economic strategies. 39 LEPs cover the whole of England. Local areas have considerable discretion about the composition of LEPs, provided they are chaired by a business person and at least half their members are from the private sector. LEPs are not specialists in the area of youth unemployment and draw in expertise from their wider membership. The EU funding plans submitted by them will therefore vary in the extent to which they use the ESF to target youth unemployment and how much of a priority they see the issue as being in their localities.

UK Government position on the Youth Employment Initiative funding

62. The European Commission anticipates that Member States will use the Youth Employment Initiative funding to set up Youth Guarantee schemes.[119] As indicated in Chapter 3, the UK Government expressed concern about the Recommendation for a Youth Guarantee. They confirmed that since the Recommendation for a Youth Guarantee was non-binding, they would not offer a guarantee, but would instead offer "tailored support to young people based on their needs".[120]

63. As already outlined, the core of the Government's argument against a Youth Guarantee related to the specific situation in the UK, where they said that 80 per cent of 18-24 year olds claiming Jobseekers' Allowance stopped doing so within six months. The Minister of State for Employment said that since most young people came off benefits after six months "it would be inappropriate to put the support in earlier."[121] We found this rationale to be problematic because it did not address whether the young people who had stopped claiming benefits had done so because they had found suitable employment, education or training; nor did it address the situation of young people who were unemployed but not claiming benefits. Indeed, the Government conceded:

122

64. The TUC expressed dissatisfaction with the UK Government's decision not to use the Youth Employment Initiative funding to set up a Youth Guarantee. It said that the UK Government was the only Member State government to express such a clear opinion against the Youth Guarantee. Richard Exell, Senior Policy Officer, TUC said that: "The only explanation I have seen [for the Government not supporting the Youth Guarantee] is that it was not invented here. That is a very depressing reason for not going ahead with [it]."[123] Professor Martyn Sloman, Visiting Professor of Management, Kingston Business School, said that it was unclear whether the Government's response to the Youth Guarantee "reflects underlying Euro-sceptism" or "unease over the approach". He said that the "Youth Guarantee should be seen as an opportunity not an imposition".[124]

65. As at 15 January, of the 20 Member States expected to benefit from the Youth Employment Initiative funding, only the UK Government and two other Member State governments had not submitted their plans as to how they would spend the funds.[125] On 21 January, Commissioner Andor told us that the UK was the only Member State not to have submitted its plan.[126] The Government submitted their plan for spending the Youth Employment Initiative funds on 3 March 2014, over two months after the deadline. In their plan they said that, while they strongly supported the aim of the Youth Guarantee (to reduce youth unemployment), they did not plan to introduce it in the UK for the reasons discussed in Chapter 3 (paragraphs 53-54) and paragraphs 62-63. The Government's plan described how their current initiatives met the key elements of the approach detailed in the Recommendation for a Youth Guarantee. The European Youth Forum and Pervenche Berès MEP, the Chair of the European Parliament Committee on Employment and Social Affairs, expressed surprise at the Government's delay in submitting a plan for spending the Youth Employment Initiative, given the amount of money available and the need to consult on how it should be spent.[127]

66. We regret the UK Government's delay in submitting their plan setting out how they will spend the Youth Employment Initiative funds. We are also disappointed with the Government's lack of support for the European Commission's Recommendation for these funds to be used to set up a Youth Guarantee. We recommend that the Youth Employment Initiative funds should be used to pilot a Youth Guarantee scheme in the five areas expected to benefit from the Youth Employment Initiative.

Interaction between current UK Government funding and EU measures

67. It was not within the remit of our inquiry to scrutinise domestic policy, but we considered UK measures in order to understand how they interact with EU initiatives. It is the UK Government's duty to manage both EU and national funding to ensure that, together, they provide the maximum possible support to young people. Therefore, one of their objectives should be that EU funding can 'add value' to the substantial body of funding and programmes available at a national level and, "make sure ESF is filling the gaps."[128]

68. The Government's main current initiatives to address youth unemployment in the UK are outlined in Box 6.

BOX 6

UK measures to address youth unemployment

The Youth Contract was launched at the beginning of April 2012 and is the UK Government's flagship scheme aimed at reducing youth unemployment. It aims to help young unemployed people prepare for work and find long-term employment. The Government said that the Youth Contract has the capacity to provide 500,000 new opportunities for 18-24 year olds. The six key elements of the Youth Contract are:

· Funding for 160,000 "wage incentives" schemes, over three years, worth up to £2,275 each for employers who recruit an 18-24 year old who has spent six months or more on benefits. "Wage incentive" payments are made to the employer after the young person has been employed with them for six-and-a-half months.[129]

· An extra 250,000 work experience or sector-based work academy places.

· More time with Job Centre plus advisers.

· An opportunity to be referred to a careers interview with the National Careers Service.

· An investment of £150 million over three years to support the most disengaged and disadvantaged 16-17 year olds by supporting them to get back into education, onto an apprenticeship scheme or into a job with training.

The Work Programme was launched in June 2011 and supports those who have been Not in Employment, Education or Training (NEET) for a long period of time.[130] The Government are investing £3-5 billion in the Work Programme. Most young people are referred to the Work Programme after claiming Job Seekers Allowance for nine months—rather than 12 months, as is the case for claimants aged over 25. Around 28 per cent of those referred to the programme are young people. 18 providers have been selected to deliver Work Programme contracts across the UK. These so-called 'prime' providers have assembled supply chains involving smaller specialist and local organisations.

The Work Programme gives these providers freedom to provide individually tailored help to those on the programme. The providers are paid by results: they can claim a job outcome payment after a participant has been in a job for three or six months (depending on the young person's situation) and are paid more for supporting groups that are "harder to help" into work. Providers can then claim sustainment payments every four weeks for up to two years.

Source: UK Government, written evidence

69. The UK Government's plan for implementing the Youth Employment Initiative in England featured their existing policies to support people into work, including the Work Programme and Youth Contract measures.[131] Professor Sloman referred us to a Government statement that the UK's Youth Contract broadly met the underlying aims of the EU's Youth Guarantee and that the Youth Contract would form part of their plan for spending the Youth Employment Initiative.[132]

70. We are not convinced by the UK Government's argument that the Youth Contract meets the aims of a Youth Guarantee. The Youth Contract has as its focus the financial bolstering of the demand side (for example, via wage incentives for employers) in order to create work experience opportunities for young people. The Youth Guarantee is focused on individuals and commits to finding them a suitable placement within four months. This in turn differs from the Work Programme, which focuses on finding sustainable job opportunities for those referred to it.

71. We also received evidence indicating a lack of support for the Youth Contract. WORKing for YOUth, an organisation that works with multinational employers to address youth unemployment, said that "in the private sector they know [the Youth Contract] has underperformed … the problem is that it was underinvested in at the beginning. It only aimed to get 50,000 young people into work after its first year, when 250,000 people were out of work at the time".[133] Although the wage incentive section of the Youth Contract has the potential to help 160,000 young people over three years, the UK Government's figures showed that from the launch of the Youth Contract in April 2012 up until November 2013, only 10,030 wage incentives were paid to employers who had taken on an unemployed young person. The data did indicate an increase in take-up of the scheme, with 65,500 "job starts" over 18 months.[134] WORKing for YOUth said that the Youth Contract's lack of success had meant that it had not "captured the imagination" of the private sector.[135] Professor Sloman said that it was difficult to understand why the Government were putting forward the Youth Contract, which he referred to as "one of the least successful of the recent plethora of initiatives", as a plan for spending the Youth Employment Initiative funding.[136]

72. We recommend that the UK Government reconsider their decision to use the Youth Employment Initiative funding to bolster existing domestic initiatives, including the Youth Contract. They should instead implement a pilot Youth Guarantee in the five areas which will receive the Youth Employment Initiative funding. The Youth Contract is focused on addressing the longer-term structural issue of a lack of entry-level opportunities in the youth labour market. The Youth Guarantee's focus on stemming the post-2008 increase in youth unemployment would therefore complement rather than duplicate the work of the Youth Contract.

Gaps in UK funding provision

73. It is unclear how much coordination exists between the provisions made by local civil society organisations and funding from the UK Government or EU. Youth Unemployment UK Community Interest Company (CIC) was critical of the support available centrally for young jobseekers, but said the support available from the voluntary and youth sector was encouraging and was achieving good results. However, it said that there had been "no integration and little leverage" of the various types of support available and that "there are a raft of measures" to support harder-to-reach young people, but that graduates and other young people moving from education to work do not have access to the same level of support.[137] The Association of Graduate Careers Advisory Services (AGCAS) agreed with this view and said that "there is probably insufficient congruence between efforts directed at NEETs and those which could be deployed to move graduates from 'underemployment'[138] into graduate level employment."[139] It said that a link between the two was important in order to avoid graduates creating a "blockage" to entry-level jobs, thereby exacerbating youth unemployment.[140]

74. The UK Government acknowledged that "the system" in the UK was geared up to focus on "the most disadvantaged young people". They said that "in general, the UK policy is not to help those who need the least help, it is to help those who need the most help".[141] They said that the focus was on disadvantaged people who were long-term unemployed, with the expectation that other people will find a job soon enough, without government assistance.

75. The funding available at UK level is largely focused on disadvantaged or long-term unemployed young people, rather than other young people who might also be struggling to find appropriate and sustainable work. We agree that the majority of the funding in this area should be focused on those young people who are the hardest-to-reach.

76. We note that highly skilled young people who are 'underemployed' can create a blockage to entry-level jobs for other young people. We recommend that the UK Government use some of the European Social Fund to introduce ways of assisting highly skilled young people to access the labour market, for example, through improved careers advice or support for entrepreneurship. This would complement their use of the majority of government and EU funding to target those disadvantaged young people who may be harder-to-reach.

Local control over EU spending

77. We received a substantial amount of evidence to suggest that there was a need for the UK Government to devolve further EU funding in the area of youth unemployment to local authorities and bodies.

THE VIEW OF LOCAL AUTHORITIES AND LOCAL ENTERPRISE PARTNERSHIPS

78. Birmingham City Council said that local authorities needed to have greater influence in commissioning support and services to address youth unemployment in their areas. It pointed out that the current management structure of the ESF in the UK, where projects are co-financed through bodies such as the SFA, meant that UK Government contracts were awarded to large national providers who had no local presence and were often poor at connecting with local harder-to-reach young people.[142] The Council agreed with the Greater London Authority's view that, as a local authority, it was not easy to "find your hardest-to-reach people."[143] It said that the best way of finding and helping these young people was in consultation with local specialist charities, which "perhaps specialise in drug addiction or an ultra-local approach from a particular estate".[144]

79. Birmingham City Council, the Local Government Association and the Buckinghamshire Thames Valley LEP said that young people and local businesses found it easier to engage with localised funding providers. Local agencies could provide a "single uncomplicated gateway",[145] and give young people a chance to contribute to what works.[146] DELNI said that in their experience, a local approach could better engage businesses in youth unemployment schemes, empowering them to take leadership over training.[147]

80. The Gilfillan Partnership, a research and evaluation organisation for skills and employment, was concerned that local decision-makers could be as remote as central government from understanding the realities for unemployed young people, if they did not involve "people working with the most disengaged people on the ground fully in designing their programmes".[148] It said that such engagement was important, in terms of enabling LEPs to gain an understanding of what had been successful before, but that this did not appear to be happening because of the pressure LEPs were under to submit their spending plans to the UK Government on time. It suggested that a possible solution to these problems might be the production of a practical guide for LEPs and similar bodies, providing examples of how certain issues had previously been addressed and with contact information for people and organisations who had built up experience in tackling youth unemployment.[149]

THE UK GOVERNMENT'S VIEW

81. The UK Government acknowledged that the structure of support in the UK had been too centralised in the past.They said that the move to localism was still work in progress and that they were in the process of consulting local authorities and writing guidance about how devolution of powers in this area should be structured.[150]Lord Heseltine signalled a note of caution in this respect, as he reflected on the extent to which the Government had taken forward the recommendations in his report, No Stone Unturned: in pursuit of growth[151] that there should be a greater devolution of powers to local government. He said that "giving up the reins of power is not an attractive thought for anyone who holds the reins. The Government have gone further than any previous Government. I much admire that but they could go a lot further."[152]

Timescales for spending EU funds

82. Witnesses had mixed views on the usefulness of the timescales associated with EU funds, which are based around seven year programmes (see Chapter 4, Box 5). Birmingham City Council said that, although European funding programmes worked in seven year cycles, they had mainly been used to support short-term projects that last two or three years. It said that a longer-term approach would allow local authorities to develop relationships that are more productive with business and local organisations.[153] Prospects, an organisation that provides services (including the UK's Youth Contract) to young people, agreed with this view and said: "sometimes just as the programme becomes embedded and is producing good results, we stop, we re-commission, we tender again and we come up with a different model".[154] In response, the UK Government said that the seven year cycle is problematic, because it did not match the three year spending review cycle at a domestic level.[155] Youth Enterprise and Unemployment, an organisation that runs an EU funded e-learning programme, also said that fund allocation in the UK should be longer-term, as short-term interventions were useful as pilots, but did not address long-term and generational issues such as youth unemployment.[156]

83. We conclude that the current system of managing EU funding in the UK is too centralised and over-reliant on very large-scale, standardised contracts. We believe that this has resulted in provision which is insufficiently tailored to local needs and which makes ineffective use of local civil society organisations, local authority experience and specialist knowledge, particularly in relation to services for harder-to-reach young people. It also prevents proper engagement with young people and local businesses. We therefore welcome the UK Government's commitment to introduce greater localisation into the allocation of funding and their undertaking to give additional freedoms and flexibilities to Local Enterprise Partnerships. We urge the Government to ensure that this local approach is carried through to the finalised programme guidance and recommend that they consider full devolution of responsibilities, including programme management and delivery, to those local authorities and Local Enterprise Partnerships who see a need for it in their area.

84. We recommend that the UK Government and local authorities produce written guidance to help Local Enterprise Partnerships and other relevant bodies to build quickly an understanding of what has previously been successful in the area of provision for young unemployed people. This should be based on robust evaluation and experience and should be disseminated widely.

85. We recommend that local authorities and Local Enterprise Partnerships use the seven year cycle connected with EU funds to complement national measures, which are often two or three years in duration, by funding longer-term projects. These would provide sustainable solutions for young people and businesses that need more targeted support, and help overcome the current situation where provision is short-term and continually changing. The UK Government should ensure that the terms of their agreement with local authorities and Local Enterprise Partnerships enables them to use the funds in this way.

112 We contacted all of the devolved administrations requesting evidence. We received written evidence from the Welsh Government, and oral evidence from the Northern Ireland Executive. Back

113 UK Government Back

114 Regulation (EU) No 1304/2013 Back

115 Regulation (EC) No 1080/2006 Back

116 Q 1 Back

117 Regulation (EU) No 1304/2013; Regulation (EC) No 1080/2006 Back

118 The Skills Funding Agency is an executive agency of the Department for Business, Innovation & Skills. It is responsible for giving colleges, training organisations and employers the funding to help young adults, the low skilled, and the unemployed to get the skills they need for employment. Back

119 COM(2013) 144 final Back

120 UK Government Back

121 Q 239 Back

122 Q 9 Back

123 Q 82 Back