(11 years, 5 months ago)
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Baroness Brinton
To move that this House takes note of the importance of sustainable jobs to the Exchequer and the British economy.
Baroness Brinton
My Lords, three years ago when this coalition Government were first formed, both the Liberal Democrats and the Conservatives made it plain that despite our political differences, and there are inevitably many, we had to come together to focus on the economy, moving the country out of recession, and to get spending back into balance. I think that most Governments across the world have found coping with the effects of the global recession challenging, and we are no exception.
Yesterday’s comprehensive spending review announcement showed that we are not through the tough times. However, talking to businesses, I am beginning to hear a different tone. The heads down, “let’s just survive this” approach is beginning to lift, and for some sectors, notably the knowledge economy, there are some signs of early growth. Vince Cable MP, the Secretary of State for Business, Innovation and Skills, has created an effective industrial strategy, investing £5.5 billion in supporting science, high-tech manufacturing and renewable energy to build jobs for the future, many of which will be competing globally.
This focus on the global market is critical to growth. Some 80% of the UK’s small and medium-sized enterprises are not exporting. While for many local businesses exporting is not appropriate, there are some that would really benefit. Statistics show that there is a 34% increase in productivity in the first year of exporting. It also helps with the survival rates of businesses. UK Trade and Investment has a key role in supporting local businesses as they take their first steps in exporting, which will strengthen their chances of survival and help them to grow.
They also need help from banks. I am pleased that the Secretary of State for BIS has launched the regional growth fund—£2.6 billion—to help leverage additional funding from investors, as well as providing clear expectations of the banking sector in its approach to lending to SMEs. To date, the first three rounds of the regional growth fund have leveraged £13 billion of private sector investment, and either created or protected half a million jobs.
I am less pleased to report that the banking sector still seems to be very slow in responding to this challenge. What measures are the Government taking to ensure that banks lend to small businesses? Without that finance, businesses will find it hard to create new, sustainable jobs.
Jobs are absolutely critical to the economy, and for an individual’s life chances. We need a strong economy to be able to compete on the global stage and we need sustainable jobs for a fairer society, helping everyone to get on in life. Yet business organisations continue to report that serious skills shortages are getting in the way of them competing effectively. Worse, many report losing business to international competitors. The UK Commission for Employment and Skills reports that 16% of vacancies are due to skills shortages; that is, there are not enough qualified applicants for specialist roles such as technicians. Nearly half of those businesses say that they struggle to meet their customer service objectives, and that they also have to delay developing new products or services.
Businesses also report that an estimated 1.5 million employees—that is 5% of the UK workforce—do not have the right skills to be able to carry out their job. This is known as skills gaps in the jargon. This often causes friction, with other staff having to help out, and difficulties in meeting quality standards. Nearly a third of businesses report that skills gaps have increased their operating costs and therefore reduced productivity. The UKCES highlights the importance of workforce skills, making it one of the five drivers of productivity; in turn, that increased productivity will help growth.
Skills are absolutely critical to sustainable jobs. Frankly, UK plc has not done well enough in the past. Future Governments must address this. Courses, particularly in science, technology, engineering and maths, at further and higher education levels, must be promoted and supported, particularly for these critical technician jobs. Core skills in literacy, numeracy and ICT must be strengthened, and it should not be possible to drop either literacy or numeracy at 16. Applied short courses should be available for 16 to 18 year-olds—for example, English for engineers, or statistics for humanities students such as my son, who went on to read psychology at university—that will help give them the skills they need.
Full-time study is not always appropriate for young people. For many, the best route into work is through an apprenticeship. This Government have created more than 1.2 million new apprentices. Last year there were 11 applicants for every apprenticeship, which says quite clearly that currently there are not enough employers offering apprenticeships. Those that do offer apprenticeships use them to train staff over a number of years, so that the progression from intermediate level, at which most young people start an apprenticeship at 16, to advanced level and on to higher apprenticeships is becoming more common.
Last year there were 3,700 new starts for higher apprenticeships—a whopping 67% increase on the previous year—specifically responding to the skills shortages to which I referred earlier. Marshall Aerospace in Cambridge is one such employer to offer apprenticeships across the company, not just in technician roles. Young people from all over the country apply, knowing that they will be supported from the age of 16 right the way through degree-level courses and some postgraduate study for a satisfying job, which also helps the economy and exports. In evidence to the Work and Pensions Select Committee in 2010, the CBI presented data showing that 90% of higher-level apprentices found employment or self-employment at the end of their training and that 40% received an upgrade or promotion shortly afterward. Apprenticeships work.
Since Labour left government, across the country there have been 164,000 new apprenticeship starts in business, administration and law alone, showing that it is not just in technical subjects where there is a large growth. Businesses say how important it is for them to be able to train staff in the work that they want them to do, and they are also able to provide remedial help in literacy and numeracy.
Another myth is that apprenticeships are just for men. The majority of new apprenticeship starts are now women. Increasingly, they are starting in non-traditional female work such as construction and engineering. I concede that they are still very much in the minority but it is an encouraging start.
Unemployment is a scourge and youth unemployment particularly devastating. OECD figures just published show that young people aged 16 to 29 in Britain spend about two years and four months out of work, many having given up, more or less. Andreas Schleicher, the OECD’s deputy director of education, says:
“The short-term impact on individuals, families and communities beg for urgent policy responses; the longer-term impact, in terms of skills loss, scarring effects and de-motivation, will affect countries’ potential for recovery”.
It is worth pointing out that we do not do as badly as many of our OECD competitors. For Spain, the figure is 3.6 years, for Italy 3.5 years, and for Ireland 3.3 years. But he is absolutely right that this must continue to be a priority for this Government. That is why the Liberal Democrats pushed for £1 billion to fund the youth contract, aiming to create 410,000 job opportunities for young people, with a wage subsidy of up to £2,275 for employers taking on a young person.
The youth contract is beginning to work. The number of young people deemed to have been unemployed is beginning to reduce. The latest figures show a fall of 185,000—the lowest since the three months to May 2008, before the financial crisis.
There is also evidence to show that employers are unaware of the support available. What are the Government doing to ensure that employers get this information? Then further jobs will be created and we will see more young people who were formerly out of work starting on their careers.
I return briefly to the OECD report. The lower your skills level the more chance there is that you will be out of work. Of young people who are unemployed, a quarter are without five good GCSEs, 14% have good GCSEs but no further qualification, and 8% have a degree. That is stark. Skills are essential for jobs in the 21st century. Young people without qualifications need both education and employment, whether apprenticeships or courses at their local FE college. Last year, further education colleges saw an 83% increase in applications from unemployed young people recognising that they needed to increase their skills level. Over a quarter of these moved quickly into sustainable employment as they left their college.
Liberal Democrats believe that careers information, advice and guidance are absolutely critical for young people. While welcoming careers advice now starting at the age of 13, we regret the removal of face-to-face independent advice to all pupils. We want to see more young people moved into vocational training and education that is right for them. The evidence from colleges shows that inconsistent rules about what type of courses are funded, the availability of local jobs and the difficulty of colleges in tracking student progress are the biggest barriers to working effectively with the unemployed.
Worse than that, the APPG for Further Education, Skills and Lifelong Learning recently heard of Jobcentre Plus staff pulling young people off courses at colleges, as it was—in their advisers’ view—time they went for a job interview. They thus lost their place on a course that would have given them a better chance of a skilled job. This silo working between departments needs to stop. Can the list of DWP-approved courses be agreed with BIS, rather than in isolation, to prevent this happening again? It is, of course, a waste of public money, as well as being demoralising for the young people concerned.
Despite problems like this, the youth contract and apprenticeships are clearly having an impact on youth unemployment, unlike the problems with Labour’s New Deal and the Future Jobs Fund during the previous Government, which did not create new jobs or help people into work, and were very expensive. For example, the Future Jobs Fund cost £6,500 for every job it created, and in Birmingham, only 2% of Future Jobs Fund placements actually led to jobs. Compare that to some of the figures that I have referred to earlier in this speech.
We are on the right track. Even though the road from the economic collapse in 2008 is hard, we are making progress. Sustainable jobs are a key part of the rebalancing needed in the economy. We have helped businesses to create more than 1 million private sector jobs since taking power, which has more than offset the number of public jobs lost—painful as that is. We have created 1.2 million apprenticeships and provided £2,000 worth of support for employers. We have created 110,000 work placements for unemployed young people. Being in work improves your health and well-being; it gives workers’ children a better start in life; and it helps prevent isolation and social breakdown. More than this, jobs created to help companies grow increase productivity and the UK’s ability to export and trade abroad, bringing in much needed extra wealth. It is a virtuous circle which will give us a stronger economy and a fairer society in which everyone has a chance to get on in life.
Lord Teverson
My Lords, I was at the final two debates last night, one of which was about small and medium-sized enterprises and exports. Many noble Lords commented that language was one of the challenges for small and medium-sized businesses in exporting. One of the most difficult areas of language, with which Google Translate would never deal, is sayings or colloquialisms. One of the first I ever learnt was, “To every cloud there is a silver lining”. I want to talk about the cloud, and then I will talk about the silver lining.
The cloud is literal: it is carbon emissions. It causes global warming and is a real issue. Now that we have passed 400 parts per million in carbon emissions and are moving towards higher temperatures, we have, as noble Lords know, the retreating polar ice caps and sea levels going up some 3 millimetres every year. It is carrying on. I was obviously delighted by my noble friend’s pronouncement about investment this morning, but I was even more ecstatic about President Obama’s recent pronouncement about the United States restarting its global and national engagement on climate change and global warming, particularly on restricting American coal emissions and making a major contribution to the reduction in global carbon emissions.
I say that because that agenda is being restated globally. Although we think of China as one of the world’s greatest polluters, it is a major agenda item there. I hope, particularly with the involvement of the United States, that the world will move forward on that. However, there is still a cloud up there that threatens our planet, our lifestyle and our economy into the long term.
What is the silver lining? It is clearly that this offers opportunities to us as a nation, uniquely, to take advantage of the technologies and how the way in which we live needs to change. As someone who often speaks on energy and climate change, that is why I supported the coalition so strongly when it was formed and the coalition agreement was authored: we were to be the greenest Government ever. I agree that we have struggled with that. We are still there and are still moving forward, but that aim and the policies arising from it—I will go through some of those—are the major reasons why we can look forward to growth beyond our recent track record and that of other European nations. Over the past couple of years, growth in green industries has been at around 2.5% per annum, while we have had relatively difficult economic performance elsewhere. Jobs have gone up in that area as well.
Green jobs and growth will really help us in three main areas, and they are not always the ones that we think about; we sometimes think about investment in wind farms and that sort of area, but I will come back to that. One of the key areas is competitiveness. We often hear about how shale gas has reduced energy costs in the United States and about how, because of that, US industry has become more competitive. However, that is an economy that thrives on energy inefficiency. That is the background to the power of the United States: wasteful carbon emissions and energy use making it the great manufacturing and industrial nation that it was.
In this country we have a very different model for potential energy efficiency. For the long term, we can perhaps reduce energy costs for business through the lower gas prices that we are yet to see from any shale gas development, but clearly we can ensure that we can do so through energy efficiency. That is why the programmes that the Government have brought forward, particularly the Green Deal, are important for our future not just for our homes but for businesses as well.
That initiative has only just started. The Government have been absolutely right to make sure that the programme has had a fairly soft start so that we learn, as that process goes forward, that it does not rely on public expenditure, making it future-proof against budgets and Chancellors of whatever colour taking decisions. Once that investment programme works, it has the benefit not only of relieving fuel poverty and reducing fuel bills but of making our industry more competitive and producing a large number of real jobs in the semi-skilled area, which are so important, as well as the skilled areas as we move through the long term to the future.
I think that we have made the right decision on energy-intensive industries, although I was somewhat iffy about this at the time. I have to admit that we risk increasing carbon and energy costs and offshoring energy-intensive industries. By doing that, we just shift those emissions geographically from the UK, where there is relatively better environmental regulation, to other economies where perhaps that is not the case. Therefore I welcome a transition for those industries, and it has to be a transition until we have a much more level playing field across the rest of the world.
Moving on from competitiveness, we come to investment. In the green economy, we have, as my noble friend the Minister has already announced, a huge programme of potentially £100 billion for energy investment. Much of that will be very highly skilled work, which will be local and will produce local jobs and local skills. We have to make sure that we get the current Energy Bill on to the statute book and make some of the detail better than it is at the moment, but we have a real focus on making sure that that happens.
In Sunderland in the north-east—I will probably defer to my noble friend Lord Shipley on this, as he knows that area better—Nissan has been producing Leaf electric cars since April this year. It is the only plant in Europe to do so, and provides some £450 million of investment and 500 extra jobs. In addition, we have a number of potential wind farm sites. In Scotland we have AREVA, where we hope to have another 750 jobs. We will see if those arrive. This is all about making sure that the industry has confidence in the green economy.
Apart from investment and competitiveness, we will make this business work only if we have the skills in the economy to drive it forward. This requires two things. The first is certainty about government policy. The Government have not always been hugely successful in that between the Department of Energy and Climate Change and the Treasury. It is much better now, given the deals that have been done and the road map that we have before us. In addition, we require investment and skills. That is why the Government’s target, particularly in BIS, to increase investment in apprenticeships is really the right way forward. We have a great opportunity there.
I conclude by quoting John Cridland, who I think has already been mentioned once this morning. He said:
“it is easy to understand why some people are fearful that ‘going green’ might further dent the economic recovery. For me, this is a false debate”.
He goes on to say:
“tackling head-on the critical challenges of energy security, affordability and climate change … isn’t a lofty ideal to aspire to—there is a hard-nosed economic argument that moving to a low-carbon economy can drive significant business investment and create many new jobs across the country”.
I think that is the fundamental view of this Government in their growth and economic strategy, and they must keep to it. We will have in the end not only the greenest economy but one of the most successful economies, not just in Europe but in the world.
The Earl of Shrewsbury
My Lords, I congratulate the noble Baroness, Lady Brinton, on instigating this important debate and thank her for providing your Lordships with the opportunity to discuss a subject vital to the economic well-being of this country.
In these austere times in which we live, it is not rocket science to realise that jobs are extremely difficult to come by and that each and every opportunity that exists to create jobs must be exploited to the full. SMEs provide vast opportunities for job creation. They simply must be encouraged, be it through the ability to borrow funds for expansion, or through the simplification of bureaucracy and unnecessary red tape, or excessive interference by Government. I will address that latter point in this debate.
I live in an industrial part of the West Midlands, very close to JCB, which is an enormous success story in Staffordshire. I agree entirely with what the noble Baroness said about apprenticeships and the creation of such—and JCB creates them. It employs about 10,000 people and has an engineering academy, which is to be applauded. For many years I have taken a considerable interest and have acquired friends in various industries both within and outside that region. I am well aware of the many obstacles which normally face SMEs. Recently I have been made aware of situations in which a government agency is making life exceptionally difficult and, tragically, sometimes terminal for some businesses in areas where it is difficult to obtain employment. That body is the Environment Agency.
I would be among the very first to acknowledge the absolute necessity of having an agency that is charged with protecting the environment and regulating the various industries which deal in potentially hazardous material and the recycling and disposal of such materials. However, I am aware of a number of cases where the all-powerful EA has acted in a thoroughly heavy-handed manner and shown itself to be the judge, jury and executioner. I have attended meetings with the EA and have received details of actions taken by it with regard to one particular firm based in Sheffield, the 4R Group. I have no interest in or connection with that company, but it contacted me on the recommendation of a mutual friend.
The company alleges that the EA’s local officer took action which is most likely to have the effect of closing down that business, rendering the staff unemployed and meaning that waste material that was being processed and sold to the agricultural sector as a thoroughly useful fertiliser will now be forced to go to landfill. In short, it is alleged that the EA posted some details on its website without any adequate consultation, which had the effect of frightening off the customers of the company. Those customers were fully satisfied with the product that they were purchasing but did not wish to risk the wrath of the EA, which can be very dangerous indeed. However, the company had the benefit of the opinion of one of the absolute experts in that field, the leading QC Stephen Tromans, and other expert legal advice, which stated that it was complying with the European directive that governs this area. It appears that the EA takes very little notice of the European directive’s spirit and purpose. Instead it follows entirely its own agenda, leaving its target businesses to let the issues be tested in the courts. Such actions are sometimes lost by the EA and sometimes not brought by the business due to the vast cost of litigation and because the EA appears to have bottomless taxpayer-funded pockets. This is disgraceful. These are small businesses that are struggling to survive.
Add to this sorry tale the bureaucracy and red tape involved by the agency, with the very lengthy times of turnaround of applications for end of waste status, and it is easy to see that the agency’s actions, repeated in numerous cases throughout the waste recycling industry, are holding back opportunities for the employment of hundreds of people while sending thousands of tonnes of perfectly recyclable material to landfill. That is bad for the economy, bad for the environment and bad for employment, and thoroughly bad for the nation’s finances.
In the case of a company with which I frequently discuss matters of this nature, the agency’s intransigence and plain obstructive behaviour regarding the classification of a recycled material which enjoys the support of major cement manufacturers in the UK has cost the business around £4 million in potential profit over the past three years, with the consequential loss of tax revenue to the Treasury and potentially an extra 15 to 20 jobs in a region that needs them badly.
In conclusion, the examples I have given point fully in the direction that the Government need urgently to commission a root and branch review from the very top to the bottom of the Environment Agency, to investigate its practices and culture and fix whatever is wrong. Until that is done, job creation and profitability in the recycling industry will suffer, and with it the economic well-being of this country.
Lord German
My Lords, I apologise to the House for missing the first few moments of this important debate. I congratulate my noble friend Lady Brinton on bringing it to the House.
From a perspective looking at the figures behind what is happening in the field of employment and unemployment, there are of course some very welcome signs of improvement. It would be wise to note at the beginning that the direction of travel is correct. For example, unemployment in the UK over the past year has fallen faster than in Germany and the G7 as a whole.
Since the 2010 election, the number of people who claim the main out-of-work benefits has fallen by more than 300,000, while the youth claimant count—a very important figure—fell by 2,500 this month and is lower than it was at the May 2010 election. The other side of the coin is that private sector employment is up 46,000 on the latest quarter, which more than offsets the 22,000 jobs that were lost in the public sector. If you take that as a whole since May 2010, private sector employment is up by 1.3 million jobs, while of course public sector jobs have fallen by 423,000 over the same period.
The direction of travel is good and encouraging but there is no reason for complacency. It is important that we continue to tackle what is of fundamental importance for our people. For those of us who want a fairer society, ensuring that people can get into work will have dramatic effects on health and well-being and on future life chances, for them and for their families. For those who want to see a stronger economy—of course the subject of this debate covers both those topics—each new job adds an average of about £9,000 to the economy. For those who just want to reduce welfare spending, the best way to do that is to get people into sustainable, well-paid work, not to slash support for the vulnerable.
I will concentrate on the demand side. Today we have clearly had some important news. This morning we published the latest figures on the UK Government’s Work Programme, the Government’s main vehicle for getting long-term unemployed people into work. The key headline message that I take from today’s figures is that the Work Programme’s performance has significantly improved. It is designed to help people who are at risk of becoming long-term or very long-term unemployed. Many of those supported by the Work Programme are in receipt of benefit for nine or 12 months before joining and are then supported for a minimum period of two years. The Work Programme has not yet been running for two years, so today’s signs are very encouraging.
The Work Programme not only supports people into employment, but is also designed with the crucial aim of keeping them there. It encourages long-term private sector employment and is not just a short-term fix. Today’s figures show that 132,000 people have escaped long-term unemployment and got into lasting work, normally for at least six months. This is a large increase compared to the first year of the scheme. However, that is not the whole story. Far more people have started work but have not yet reached that target point of six months in work. Therefore, today’s figures from the Government are only for those who have been in work for six months or longer. However, figures from industry that were published last week showed that 321,000 people who were on the Work Programme have now started a job. The Work Programme is helping people who would otherwise have been consigned to the unemployment scrapheap.
There has been a significant and very welcome improvement from the providers. About half of the contract holders are now getting more jobseekers into lasting work than the level to which they were contracted by the Government. Last year not a single one managed that. We also know that, unlike the short-term job focus of previous schemes, which left many people on benefits after they had been completed, most people now stay in work well beyond three or six months.
The evidence of that improvement is clear. Figures this morning show that contractors are measured on how many participants they get into work each year, as a proportion of people who are referred to the scheme in that 12 months. As I just said, in year one of the scheme, not a single provider met its contractor level of getting 5.5% into work for that period. However, in the second year providers got an average of 31.9% of jobseeker’s allowance claimants below the age of 25 into sustained work. They were contracted to get 33%, so it is very close. For jobseekers aged 25 and over, the providers got an average of 27.3% into sustained work, against their contracted level of 27.5%—almost exactly bang on target.
More people are getting into work within a year of joining the Work Programme. The UK Statistics Authority has said that it was wrong to claim that only 3.5% of people got into work in the first year of the scheme. It says that the performance is best measured by counting how many people got into sustained work in their first year on the scheme. While on this measure just 8.5% of those who started the programme in June 2011 completed at least six months of work in their first year, this success rate dramatically increased to 13.4% for the more recent recruits who joined in March 2013.
This is a clear and demonstrable improvement. If you join the Work Programme now, you are more likely to get a lasting job. Of course, the Work Programme is also designed to give taxpayers a good deal. Providers are paid when they get jobseekers into work, rather than getting most money up front, regardless of success. Significantly, more people being helped by the Work Programme are moving off benefits and into work, and providers are keeping them in sustained employment. Most claimants have been on benefits continuously for nine or 12 months before even joining the Work Programme. Now providers are either exceeding or hitting the level set out in their contract for getting jobseekers into long-term work after substantial improvements in performance.
Last time it was too early to say whether the programme was working. Today’s figures reinforce the point that we now know where we stand. Unfortunately, the figures also reveal some weaker parts of our agenda, mainly related to the people who move into the Work Programme from employment and support allowance. The numbers of ESA claimants moving off benefit and gaining a job are lower than I would have hoped. Previous attempts to help these claimants into work were not successful. We still have a lot to learn about what works for ESA claimants. We have to work with those providers to improve performance for this group and build expertise in supporting those who are hard to help.
There is a ladder of helping people back into work. The rungs may be very short, and it may take a long time to get to the top of the ladder and into employment. First, people may have to be encouraged into self-belief. They have to have confidence in themselves and know their self-worth. We have to learn from those who have experience and expertise in that area. The term that is used for this in the Work Programme is the “black box”. I always thought this was rather a strange term to use when talking about a work programme. It gives me the impression that when you open the lid there is darkness inside and you do not know what is there.
What it really means—and the purpose of the black box approach—is that it allows providers helping people back into work to use whatever approaches they find work for those groups of claimants: localised results helping people individually. I hope that the Minister will tell us in his summing-up what approaches have been the best. Which are the ones we have to learn from, because these particular groups on employment support allowance are the most difficult to help? It is important that we learn lessons from the best providers and learn them rapidly.
The other area that is still of concern is youth unemployment. It is good to note that it has fallen, but it is still far too high. I know that we have to use the international comparators, which include all full-time equivalent students, so full-time students are included in the figures. However, if they are stripped out of the figures there are still 659,000 unemployed people in that youth category. I know that this is down 13,000 over the last quarter, but it is still a great problem because it has a scarring effect on young people. It is a distinctive scarring effect, because it is caused solely by the single experience of being unemployed. This brings a loss of personal esteem and of earning potential and can persist for decades. Youth unemployment, of course, can also lead to an increased crime rate.
This is not a new phenomenon. Over the years from 1993 to 2011, the figures show a substantial growth in the unemployment rate for 18 to 20 year-olds. Crucially, the bar of five GCSEs or more shows the level at which young people can escape from youth unemployment in a large way. One of the crucial things we have to do is ensure that people reach that standard of skills. That is why the apprenticeship programmes are also crucial to building up those skill levels. That five GCSE bar, the bar between level 1 and level 2, is the one that distinguishes between those who gain employment and those who do not.
There was some interesting analysis by the think tank CentreForum last year, which simplifies some of the issues. It stated:
“Academic research has been unable to find any robust evidence to substantiate the claims that rising levels of immigration or the introduction of the National Minimum Wage is responsible for the rising levels of youth unemployment”.
We should bear that in mind. This Government have focused their attention on universal credit and helping people back into work. It is work in progress and I hope that there is even better to come in the months ahead.
Baroness Sharp of Guildford
My Lords, I join others in thanking my noble friend Lady Brinton for introducing this timely debate. The subject is the importance of sustainable jobs to the Exchequer and the British economy, and there is a certain truism in that statement. Obviously the more jobs that we can create, the more tax revenues there are for the Exchequer, and the less it has to pay out in welfare payments—so it is very good for the Exchequer—and the more jobs that we can create the more we add to GDP and therefore to measurable growth, which is the yardstick by which we currently measure success in the economy.
What do I mean by sustainable jobs? There is in fact considerable churn among the unemployed. Some 70% of those who register as unemployed find jobs within six months. However, there are differentials between different quintiles of income distribution. Of the lowest-earning quintile, the bottom 20%, 30% of those who were unemployed had spent less than a year in their current job. This compares to only 7% of workers in the top quintile spending less than a year in their job. Of those in the bottom quintile, 24% were in temporary, not permanent, jobs. One-third of those claiming jobseeker’s allowance claim benefits again within eight months of starting work; 8% of them work less than 16 hours a week.
The good news that we heard from my noble friend Lord German about the way in which the Work Programme is becoming effective perhaps makes one a little more optimistic about what Jobcentre Plus can achieve. However, to some extent its role is to place people in jobs, with the emphasis on getting them off welfare and into work, and perhaps too many of the jobs are short-term and non-sustainable. This is disproportionately the case for the bottom 20%, many of whom have very low or no qualifications, a point again picked up by my noble friend Lord German.
The group I am particularly worried about comprises young people in the 18 to 24 age bracket who now find it extremely difficult to find jobs. As my noble friend Lord German mentioned, the group that experienced unemployment in the 1980s and the 1990s is now referred to as the lost generation, as the unemployment had knock-on effects on their self-confidence and their ability to hold down jobs. Many of them have experienced substantial periods of unemployment since then. It is noticeable that in this recession there has been relatively less unemployment. Nevertheless, 12% of the 22 to 24 age group who make a new claim to Jobcentre Plus have spent at least half of the past four years on benefit, so while there is good news here we also have to address problems, such as the paradox raised by my noble friend Lady Brinton in introducing the debate, of there being very high levels of skills shortages in some industries. Currently, 16% of vacancies exist because employers cannot find people with the critical skills. As I think she mentioned, this applies particularly to intermediate skill levels—the three-year apprenticeships for craftsmen and the two years on top of the three-year apprenticeships to gain the equivalent of higher national diplomas or foundation degrees. We are particularly short of people qualified at technician level.
As my noble friend Lord German mentioned, although there is no relationship between youth unemployment and immigration, it is certainly true that many employers are importing people with these skills because we are not growing them ourselves. As I say, a somewhat difficult paradox exists at the moment, as we know we have these crucial skills shortages, which are limiting the degree to which some of our new industries can grow, yet we do not have the skilled people to fill the vacancies that need to be filled. We are failing to train our own people to fill these vacancies, so the apprenticeship programme is very important and is a great success story, and we are beginning to see some of these vacancies being filled due to that programme. However, that takes time. To train somebody to HND level can take five years. We are beginning to see this progression within the apprenticeship programme, but it is a slow process.
As I say, the fact that 1.2 million young people now have apprenticeships is good news. However, those apprenticeships are still disproportionately at level 2: that is, one or two-year apprenticeships whereby participants qualify immediately as plumbers, electricians, retail workers or workers in hospitality or care services. The level 2 qualification is now the minimum qualification that is required. We are seeing more young people going on from a level 2 qualification to gain a level 3 qualification, which is the craftsman qualification, but sadly not nearly enough are doing so. Of the 1.2 million, only about 300,000 are going on to the higher-level qualification. We need to see many more of them proceed to the level 3 qualification. Indeed, the Government have made it known that they would like to see most apprentices move on to a level 3 qualification.
The other problem that has arisen is that these apprenticeships have been taken up disproportionately by 19 to 25 year-olds, and indeed by those in the 25-plus group, as opposed to 16 to 18 year-olds. In many senses this is very good and reflects the fact that employers want to take on as apprentices those who have some experience of work and who they can rely on to get to work on time. Nevertheless, it creates something of a problem for the 16 to 18 year-olds. For that reason, the Government have created the trainee programme, which is a pre-apprenticeship training programme. Yesterday, we had the good news that this pre-apprenticeship training programme is now being extended to the over-19s. It had been concentrated on 16 to 18 year-olds, but its extension is good news. However, it is very important that we get more of these younger people into apprenticeships that not only provide them with very satisfactory training programmes but help them to get satisfactory, sustainable jobs over the longer term.
This raises three questions that I would like to put to the Minister. Are we doing enough to make sure that these young people know about the opportunities that are available in the apprenticeship field? Raising the participation age in schools means that next year those aged 17 will stay on in education or training. Training is very important, but many of them, perhaps too many of them, may be told by their schools that the choice is for them to stay on at school in the sixth form and take subjects that may or may not include some form of vocational training, rather than being told about alternatives such as apprenticeships or other more practical vocational college courses. We need to look to the schools careers service, but that is experiencing real problems. Indeed, it has collapsed to a considerable extent. Does the Minister feel that the careers service is sufficiently engaged in schools, particularly in advising young people aged 13 to 14 to know what opportunities are available, as they face crucial choices at that age?
Secondly, is Jobcentre Plus geared too much towards finding short-term jobs rather than helping young people into training to enable them to get sustainable jobs? I, too, was present at the APPG meeting at which two principals from FE colleges gave evidence that indicated that a number of young people were taken off college courses by Jobcentre Plus in order to fill short-term job vacancies. Rather than thinking holistically about what was necessary to train the young people, they were pushed into short-term jobs that were jobs not careers, if you like, and were not given the opportunity to develop a career. Should we not learn rather more from the Scandinavians, who see unemployment as an opportunity for people of all ages to upgrade their skills and move into higher levels of employment within their range?
Finally, it is entirely in this country’s interests to minimise unemployment and maximise job creation, but in doing so it is also vital to upgrade the skills profile of the population. We have succeeded in encouraging a lot of young people to go on to university, but far too many still leave school with no, or low, qualifications. They are the ones who find it difficult to find jobs. I suggest that for these young people unemployment should be seized upon as an opportunity to undertake training to gain a career and a sustainable job and should not be seen just as time out before being pushed into another short-term job.
The Lord Bishop of Bristol
My Lords, like other speakers in your Lordships’ House this morning, I would like to thank the noble Baroness, Lady Brinton, for introducing this significant debate about the importance of sustainable jobs to the Exchequer and to the British economy. To this, I would add their importance to the millions of people whose lives are currently blighted by unemployment, and the communities in which they live. With the noble Lord, Lord German, and the noble Baroness, Lady Sharp, I am thinking in particular of the nearly 1 million young people who are out of work.
I want to use this opportunity to highlight the potential contribution that co-operatives and other social enterprises have to offer to sustainable job creation. In delivering the spending review yesterday, the Chancellor talked about the need for growth, reform and fairness. The growing social enterprise sector meets all three of these criteria, providing a business model that delivers sustainable economic growth while fostering innovation and social change.
Damage to the reputation of the important parts of the UK economy in the wake of the financial crisis and concern about the social impacts of the recession and public spending cuts have brought social enterprise to the fore. People want a different way of doing business that is about creating shared value, not just profit—where the motivation is more than just making money, where the proceeds are reinvested locally for the benefit of the whole community and where employees and customers are actively engaged in decisions that directly affect them.
Here are a few statistics that demonstrate the potential of this sector, courtesy of Social Enterprise UK. At present there are around 70,000 social enterprises in the UK, contributing at least £24 billion to the economy and employing more than 800,000 people. Social enterprises are twice as likely to have grown in the past year as other small and medium-sized businesses, and 82% of social enterprises reinvest their profits in the communities where they operate. Social enterprises create more jobs relative to turnover than mainstream businesses, and 39% of all social enterprises operate in the 20% most deprived communities in the United Kingdom, helping to create jobs where they are most needed.
This is a dynamic and fast-growing sector with the ability to create and sustain employment. One in seven social enterprises is less than two years old, more than three times the start-up rate for small businesses generally. At the same time there is a core of older, well-established social enterprises. Nearly half of all social enterprises have been trading for more than 10 years.
Jobs created in this sector are sustainable in other ways, too. Research shows that employee engagement correlates with increased productivity and performance. Engaged employees are much less likely to leave their organisation and are more likely to report high levels of job satisfaction. For a voluntary sector organisation, income from social enterprises can provide a more reliable source of income than external grants.
Enough of the statistics. Now for two examples that I hope will show why I believe that social enterprises have so much to offer. The first is an initiative set up by Portsmouth’s Anglican cathedral to support entrepreneurs and business start-ups. The Cathedral Innovation Centre provides entrepreneurs with office space, start-up loans and mentors, helping to create jobs at the same time as providing a new purpose for underused buildings. There are already nine businesses at the Portsmouth Cathedral Innovation Centre, including a computer games firm, a catering company and a business that redevelops old land for wider civic use. Together they occupy 14 desks and are currently recruiting three new apprentices with support from the centre. With hardly any resources, they have levered in-kind support worth around £500,000. The initiative is also being funded by local people who are being asked to invest £75 or more as shareholders. Discussions are already taking place to open similar centres in Derby, Cheshire, East Anglia, Bournemouth and the north-east. As the noble Baroness, Lady Berridge, who attended the official launch in May of this year, said:
“This isn’t just one cathedral innovation centre, but the start of a movement. It’s about providing jobs, which is the best expression of hope [and] providing a real sense of self-worth”.
The second example is Worth Unlimited, a Christian charity based in Birmingham, which has established a family of social enterprises offering skills training and employment opportunities for disadvantaged young people at risk of social exclusion. One of these social enterprises is the DevenishGirl Bakery, which produces a range of home-baked cakes using locally sourced, organic and fair trade ingredients, as well as vintage tea parties and picnic hampers. Young unemployed people are given accredited training in how to run a small business, as well as practical cookery and personal development skills. The six-month programme is specifically designed to help move the young people they work with into sustainable employment, whether through job creation within the organisation or other opportunities outside the enterprise.
These two examples illustrate that, as a church, we are not just about high-flown rhetoric; we are very much on the case and very willing to partner with others who seek to meet the noble goal of sustainable jobs for the young. I am also encouraged that the Government, too, are beginning to see the huge potential of the social enterprise sector. I urge the Government to do all they can to maximise the contribution of social enterprise to economic growth and sustainable job creation.
Lord Kirkwood of Kirkhope
My Lords, it is a signal pleasure to follow the right reverend Prelate because I agree with every word that he has said. He was absolutely correct to concentrate on the contribution that social enterprises can make to our economy. I can say that as a non-remunerated, non-executive director of the Wise Group in Glasgow, which is a social enterprise that has been involved in employability for the past 30 years. It adds value to the provision of support for unemployed people in a way that I think other more statutory government bodies struggle to do. I am very pleased to endorse everything that the right reverend Prelate has said.
This is a very timely debate. I add my congratulations to those already offered to my noble friend on securing the time. I want to take a slightly different approach to the debate and I want to start by making a political point. I hope I can carry the House with me on this but I am very concerned about the potential stigmatisation of the unemployed. In my experience, which is mainly derived from my work in the Wise Group, people in households that suffer worklessness are strivers as much as anyone else and they try to better themselves and their families.
Of course, I have been in politics long enough to know that a game is played but I do not say that pejoratively. I know that there are points to be scored in the public debate in trading positions and policies as part of the coming and going of politics, but I am worried. I have been concerned about this policy area for some time and I have never known the psychological effect to be so bad on people who suffer unemployment. My plea to my noble friend on the Front Bench—this is certainly not directed at him personally, as he knows—is that he will take the message back from me, if from no one else, that we need to be careful about our use of language.
The second thing that I want to talk about is the environment of unemployment and welfare-to-work, which has substantially changed, certainly since I was initially elected to the House of Commons in 1983, and whose development I have been following during that time. It is now harder to make work pay. Colleagues are probably now familiar with the substantial change that is encapsulated by the fact that the majority of poor, working-age adults and children in the United Kingdom now live in families containing at least one worker. That is a hard prospect for policymakers and none of this is easy. The adage that we all used to hide behind, because it was true 10 or 15 years ago, that you could work your way off benefits and out of poverty is not necessarily true at all. We therefore need to weigh that in the balance when we make changes.
The environment that we are now in is characterised by no guarantees of secure work in contracts of employment. The labour market that we now face has a problem about low wages, temporary jobs and zero-hours contracts, which used to be peculiar employment devices used in proper circumstances and for understandable reasons in industries such as hotels, catering and entertainment. These contracts are now being used much more widely, including in education and health. If we do not recognise that, we are not properly doing our job as policymakers. It has also been suggested to me that a massive 20 million hours a month of underemployment persists in the United Kingdom labour market. That is completely new and none of us has properly started to address it in a way that is necessary.
I wish to make a final point about the context because I have noticed from working with a client group in Glasgow that the level of uncertainty about being in work has changed significantly. Even if you can get people off benefits—and you can if you give them proper support—they go into a world of work that is full of uncertainty. It has one of the most destabilising effects on households because you never know just how long it will be before you are going to have to switch back to benefits, low-hours contracts or low-pay contracts. I accept that universal credit will help, at least in theory, if we can introduce it safely and as soon as possible. However, we need to do more to address uncertainty in the workplace, which is a serious problem.
I listened carefully to what my noble friend Lord German said about the Work Programme, of which I have some experience. I am interested to hear that the figures for the second year of the programme are now available. I should be grateful if my noble friend, if he has the figures, could differentiate between the minimum performance levels that are in the contracts for the prime providers—levels that I have always thought were unrealistically high; and the DWP was not sensible in setting them at these levels. As far as I can recall, the JSA 25-plus minimum performance level for providers was 27.5% of the referred group, the JSA 18-24 cohort figure was 33%, and the ESA caseload was 16.5%. These are not targets. DWP expectations were much higher. I have not had the benefit of access to the latest figures and I look forward to studying them as soon as the debate concludes because I am interested, but I should be reassured if my noble friend could confirm that if the minimum performance levels are not reached by prime providers their contracts will be re-examined. That was the promise made: if they did not reach these levels in year two, the contracts would be at risk, and rightly so because the figures for the first year were de minimis. That was perhaps understandable in year one but we would be looking for serious progress in year two. I am not satisfied that we are looking at only minimum performance requirements. We should look at the DWP expectation levels for these client groups in order to test whether we are making progress in the Work Programme.
It is also foolish for the DWP to offer people who have done their two years on the Work Programme and have still not found work to the Troubled Families programme run by the department. These client groups are chalk and cheese. The Work Programme people are there because they are required under the jobseekers commitment to be there. The Troubled Families initiative, which I support and was pleased when it was given extra money from the Government in the past few days, is a voluntary programme. In my experience, you cannot put conscripted people into a programme that was originally designed for volunteer clients and have any expectation that it will succeed. That idea needs to be rethought.
Finally, given the £248 million underspend on the Work Programme—I think we can all understand that an underspend might be a consequence of not having as many people on the unemployment lists as we had anticipated in the first year—can my noble friend confirm that the full amount for the programme will be spent supporting moving people from benefits into work? It is a flagship, essential and crucial programme, and I wish it well. I support it but I have some serious concerns about how it is being implemented. In fact, it may well be that we should talk to colleagues on local authorities about increasing their involvement in delivering and implementing some of these national programmes, some of which have been more successful than others.
I wish briefly to raise two other matters before I sit down. First, can we work more with employers? It is absolutely right that we concentrate on supply-side measures, upskilling people, and helping people who are furthest from the market. There remains a problem of “parking and creaming” in some of the schemes and I understand that we will need to address that issue. However, can we get alongside employers more systematically? They need help as well if they are offering contracts of employment to people who have sometimes been out of the labour market for more than two years. That would be a development that would help the Work Programme to improve and be more successful.
Finally, there are three priorities, all of which have been touched on by colleagues in their excellent speeches in this debate in which I am pleased to take part. The three priorities for me include youth unemployment, which affects just shy of 1 million young people. They in particular suffer from the precariousness of unemployment—and employment, even when they get jobs. We really need a concerted cross-party approach to youth unemployment. Also, nearly 36% of the caseload is made up of people in long-term unemployment. It is a proxy for household distress, which the Troubled Families programme is beginning to address. If people are unemployed, have been through the Work Programme for a full two years and still cannot find their way into the labour market, we should treat them more holistically. A multiagency approach such as that provided in the Troubled Families programme—it is a horrible name and I wish we had a different one—is important. Finally, there is the hard-to-reach group, who are the third category of clients whose chances we need to do more to improve in the future.
Lord Cotter
My Lords, this debate is timely and essential, as noble Lords have said, and we thank my noble friend Lady Brinton for introducing it.
We need jobs—at least, many people of all ages need them—but I am particularly concerned about young people’s jobs, and for those we need growth in this country. This is a widely held view. As the CBI said just the other day:
“We believe that the government’s priority must be to protect spending that promotes growth”.
At one time this nation of ours was a great manufacturing country. The tide has changed, but we still have the potential. However, in recent years we went off the rails for many reasons, some of which were in our control, some of which were not. We are a great country when it comes to innovation and imaginative ideas. Many great inventions stemmed from the UK. It is therefore welcome that in the spending round that has just been announced, protecting and thus encouraging investment in science is the right thing to do, and the Government intend to do that.
I welcome the Government’s stance, but can the Minister say as a matter of record what our level of investments in R&D in this country is? Among the G7 at one time we were at the bottom, or second to bottom. Can the Minister clarify that? It is only through growth that we in this country are going to turn the corner and increase jobs. We are living in a time when much is changing in technology. We need to be in the forefront, which means that it is key that we maintain science resources and capital budgets. That is a good story, because the Government intend to do that.
In the struggle that our young people are having to find jobs, there is not such a good story to be told. Time and time again, as noble Lords have already said, when the issue of careers advice and guidance is raised, the message is still that this is just not being done effectively. Only yesterday I was a meeting and was told that once again apprenticeships—this route to jobs—are still not being mentioned in schools. This has been going on for years and years. In many parts of the country, certainly when I have had meetings with educators in the south-west and elsewhere, the message is the same: the advice and preparation for work are just not good enough. I get this from employers as well, who say that sometimes young people are not prepared for the work ethic. This is of great importance.
To go back to the point about manufacturing, we have not been encouraging enough pupils to go for the hands-on vocational jobs over the last few years. If I had a pound for the number of times I have heard the cry, “We need more engineers”, I would be quite well off. It happens time and again, and it is going to take a while correct it, but we must do just that. It is my contention that it is just not adequate to say that our young people can look up the opportunities for jobs on the computer. As has been said already, they need more face-to-face encouragement and help to find jobs.
Incidentally, on the practical side of life, it is welcome that the Government are planning more university technical colleges. Further education is a vibrant and vital sector in many parts of the country, as I can attest. In Weston-super-Mare, for example, our local college, Weston College, is spearheading apprenticeships, which my colleagues have referred to before, is successfully working with local employers to create local partnerships, and is in all senses providing a hub of activity. I know that this is also happening in further education colleges throughout the country.
The Government have a number of schemes to try to help people into jobs, but to assist in this they need to concentrate on growth and on encouraging various sectors to provide the necessary jobs. I will mention one sector in which for a number of reasons I have a personal interest, and which, like other colleagues, I have raised in this Chamber: the hospitality and tourism industry. This offers jobs over a complete range of abilities, from the unskilled to those with top skills. For that reason, and because it is a major source of jobs throughout the country, we look to the Government to encourage people to come to this country as tourists. On a little negative note, I regret to say that it is an area that needs more sharpening up.
I have in my hand Travel GBI, which has the headline:
“Tourists put off from UK visits by ‘wall of tax’”.
The Minister will know that this problem has been raised many times and that the Government say time and again that they are aware of it. I will raise it again, because I think it is so important, particularly because I have an interest as secretary to the All-Party Parliamentary China Group and in the difficulty that Chinese tourists have in coming here. When they come here they spend something like 10 times as much as the average tourist from other countries, yet we lag severely behind even a close neighbour, France, where the tourism level is 10 times higher than it is here. I do not want to end on a negative note, and I hope the Minister will reassure us again that we are looking at this serious issue.
The tremendous increase in apprenticeships is very welcome, and has been mentioned by many colleagues. Apprenticeships are, of course, a direct way into work. My noble friend Lady Sharp and others have said that there are concerns about ensuring that this is the real route to real jobs.
Finally, I know that the Minister shares the view, as we have talked about it before, that we must talk about apprenticeships and training, but I make the plea that in training and for all who are concerned with it in this country we give a very high priority to training for management. Sometimes we do not attain the very best level of management, and we are seeing this increasingly day by day in various spheres of activity. Without good management, we cannot create and keep good jobs.
Lord Shipley
My Lords, I thank my noble friend Lady Brinton for initiating this important debate on sustainable jobs, in which the word “sustainable” is of crucial importance. This is about creating growth and long-term employment opportunities for everyone who wants to work.
We should note some helpful trends in the overall position on jobs in the past year or so. There are almost 30 million people employed in the UK, which is up by 432,000 from a year ago. Unemployment remains stubbornly and worryingly high at 2.5 million. It is, however, down by 88,000 from a year ago. More than a million jobs today are held by the over-65s. Nearly 10% of those aged over 65 are now employed, which is the highest level since records began in 1992. I welcome that. It is in part a sign of the times and, no doubt, with the rise in the pension age that figure will continue to rise.
In vacancies, there has been another helpful trend. In the latest quarter, there were 518,000 job vacancies, up 48,000 year on year, which is the highest number of vacancies since 2008. In March—the latest figures we have—there were 24 million private sector jobs, up 46,000 from December 2012, and 5.7 million public sector jobs, down 22,000 from December 2012. We can see a reduction in public sector jobs but an increase in private sector jobs, and we should note that, despite the loss of public sector jobs, 1 million private sector jobs have been created since 2010.
Nevertheless, there are major disparities. The employment level in the south-east outside London is 75% but in my home region, the north-east of England, it is 67%. There are some 458,000 people who have been unemployed for more than two years. I agree with my noble friend Lord Kirkwood of Kirkhope about the stigmatisation of those who are unemployed through no fault of their own. We need to be very careful about our use of language. There are 458,000 people who have been unemployed for more than two years, and we need to get that figure down. There are 401,000 people aged 18 to 24 who are on jobseeker’s allowance. That figure is down 63,000 since May 2012. There are 950,000 unemployed people aged 16 to 24. That figure is down 60,000 since the previous year, but it is still worryingly high. The Government have recognised the geographical and sectoral imbalance across the country that needs to be addressed.
Sustainable jobs depend on growth. Skilled people are needed to do the jobs that drive growth, and can drive exports and reduce imports. As we know, with more people in employment, tax revenues will rise. I shall address the first of those four statements on growth. I have no doubt that government actions are helping. The funding mechanisms include: the regional growth fund that my noble friend Lady Brinton referred to, and I declare that I am deputy chair of its advisory panel; the single local growth fund which was announced yesterday by the Chancellor; the £500 million committed for superfast broadband in rural areas; the Green Investment Bank; the business bank due next year; and, as announced in the Budget, the reductions in national insurance to give employers a £2,000 cash payment to make it easier for them to take on staff.
We should note the success story on apprenticeships. This Government have created more than 1 million apprenticeships. We want to double to 200,000 the number of businesses that offer apprenticeships. There are 5 million businesses in the UK, but only 100,000 offer apprenticeships. I feel optimistic that the Government are doing a lot to deliver growth, but one of the barriers is skills and vocational education. We need to enhance the offer in vocational education to give people skills to do jobs rather than, as we have done in the previous decade, encourage very large numbers of people to go to university, at the end of which they may not have the skills to undertake some of the jobs we need done. For example, there is a critical shortage of engineers at senior levels.
I shall make a point about gender: there is a shortage of women in business. Just one in 10 engineers is a woman and just one in 20 engineering apprentices is a woman. Something needs to be done about encouraging girls at school and in education to become scientists and engineers. When I read that in half of state secondary schools not one girl is doing A-level physics, I become very concerned about the career pathways that are being discussed with pupils.
We need to understand why we have unemployment at the same time as we have skills shortages. Employers in all parts of the country say the same thing: there are serious difficulties in recruiting skilled staff in engineering, processing and manufacturing. We have a large number of young people who are unemployed—410,000 of them in receipt of JSA—but at the some time we are being told by employers that there are many jobs that they want to fill but they cannot find qualified people to fill them. We have to get a far better balance between those two things.
My noble friend Lord Teverson talked about the language issue in imports and exports. It is a major barrier for firms exporting from the UK. Another problem has emerged in a recent survey undertaken by the British Chambers of Commerce. It is the lack of knowledge about regulation in other countries. That chamber of commerce survey showed that 60% of chamber members say that they do not export. We need more companies to export, and that means that UKTI, local enterprise partnerships, British embassies and local authorities have to make it a greater priority because exports drive growth. I am proud to live in the one region of this country that has a positive balance of trade. The north-east of England exports more than it imports. We should build on the potential of that record.
One of the problems we have is that we import too much because our indigenous supply chain is not strong enough. If we imported less by building up our own supply chain, we would reduce the amount that we buy from overseas. I particularly pay tribute to the Government for the fact that we now have an industrial strategy in place, with a British supply chain as an important element.
I mentioned the number of long-term unemployed young people. Sustainable employment is part of social inclusion. We have to make sure that everybody is able to take part in the future growth of this country. That means that jobs need to be created, preferably though apprenticeships, for everybody. It is an obligation not just on government but on the private sector, the voluntary sector, the third sector and the public sector. We all have to do everything we can to get everybody who wants a job into one. There have been many schemes in recent years: the Community Programme, Employment Action, the Community Action Programme, the New Deal, Step Up, the Community Task Force and the Future Jobs Fund. History suggests that it is difficult. There have been so many of these schemes, but I was somewhat surprised to discover yesterday that there are 33 different funds and schemes supporting young people in England at a combined cost of more than £15 billion per year. There are two ways of looking at 33 schemes. You can say that each one has a specific aim and is doing a specific job, and that may well be true, but it is also possible that it simply confuses the landscape so that those who want to employ more people find it more difficult to do so and young people find it difficult to engage because they do not know where they should be engaging. We need to look at that very carefully.
I am absolutely convinced that apprenticeships are the way forward. I believe that we can double their number to 2 million. Giving people skills through an apprenticeship builds a trained workforce and the skills of employability enable an individual to move on into sustainable work.
I shall just mention self-employment. I am chair of the Prince’s Trust in the north-east of England, and I am excited by a number of projects now taking place across the country that encourage self-employment and enterprise skills in young people. A lot can be done.
My final question for the Minister is whether he agrees with me that doubt over EU membership does not help inward investment and the creation of sustainable employment, not least through the single market and access to EU trade agreements with other parts of the world. This is not helping our need for sustainable employment and I hope that the Government will do all that they can to fight for the case that membership of the European Union is absolutely central to the delivery of sustainable employment.
Lord Wood of Anfield
My Lords, I thank the noble Baroness, Lady Brinton, for this debate. I have learnt a lot from the various excellent contributions over the past hour.
The economic downturn that followed the crash of 2008 has been the most severe since the great depression and the most protracted since the Industrial Revolution. However, a conventional wisdom about the crisis has taken root, that although it is a growth crisis and a living standards crisis, it is not an employment crisis. This excellent debate has shown how misleading that conventional wisdom is. It is of course true that the headline unemployment rate, although too high, has remained remarkably stable over the past few years, despite a very poor record on growth over that period. However, it would be complacent in the extreme to point to the headline rate, or to the new private sector jobs created, and think that that is the end of the story. The truth is that we should be concerned not only by continuing patterns of unemployment but also by dramatic changes in the quality and conditions of employment in Britain today.
I will start with unemployment, and with youth unemployment in particular. We may not have a crisis of the proportions of Spain or Greece, but youth unemployment in Britain is now at an all-time high. There are now just under 1 million 16 to 24 year-olds unemployed in our country. This sits alongside a continuing rise in long-term unemployment, as discussed by the noble Lord, Lord Shipley. The number of people out of work for over a year is now at 900,000, three times the figure of seven or eight years ago. Just under half of this group have been out of work for two years, not just one. It is cold comfort for this group to hear that unemployment in Britain is lower than many economists expected.
The coalition’s response to this problem was to scrap Labour’s Future Jobs Fund and introduce a new welfare to work scheme, the Work Programme, discussed in detail by the noble Lord, Lord German. Last year, not only did this programme miss its targets but evidence showed its success rate in placing the long-term unemployed was lower than the expected rate if there had been no programme at all. Recent evidence suggests that it is doing better. However, I am afraid that there is a big gap between doing better and doing well. More than 900,000 of the 1.2 million people who have gone through the doorway of this programme do not yet have sustainable employment.
The lack of urgency in relation to youth and long-term unemployment is baffling and should concern us all. We know that protracted spells out of work have stigmatising effects, as the noble Lord, Lord Kirkwood, described so eloquently, as well as lifelong effects on well-being and physical and mental health. They also rack up huge costs to the taxpayer. Therefore, preventing worklessness must be a priority as much for people concerned with social justice as for people motivated by fiscal prudence.
I now turn from the world of unemployment to the changing world of work. One of the reasons that overall levels of unemployment have been lower than many expected is that much of the burden of adjustment in this crisis has been borne by those in work. For millions, pay, conditions and security of employment have changed significantly for the worse in the past five years. Let us take pay. Workers in Britain have experienced unprecedented cuts in real-terms pay of, on average, 6% since the global financial crisis began. Over two-thirds of all workers have experienced real wage cuts. One consequence of this has been the rise of in-work poverty. More than 6 million people in poverty are in working households. Some two-thirds of poor children are in working households.
Related to this is the growth in underemployment, also mentioned by the noble Lord, Lord Kirkwood. My colleague Liam Byrne has called this,
“the untold story of Britain’s jobs crisis”.
One in 10 people in work are now unable to work the hours that they need to make ends meet. There are 1.4 million part-time workers wanting but unable to get full-time work. This is the highest figure in 20 years, double the figure from five years ago. Add to this the numbers of people who would like to work additional hours in their existing jobs and there are a million more underemployed workers than five years ago.
These figures show a growing problem in terms of sustainable employment. For millions of working people, having a job is no longer sufficient to keep their heads above water and they are unable to find the extra hours or better work that they need to do something about it.
The composition of employment is also undergoing significant change, with a marked shift away from longer-term, more secure work to shorter-term, more precarious work. First, the number of jobs that are temporary contract jobs has gone up by a staggering 76% since 2008. Secondly, we are seeing a substitution away from full-time work. Since 2008 the number of full-time jobs has fallen by more than half a million while part-time employment has risen by well over a quarter of a million and part-time self-employment—mostly among lower-income workers—has risen by the same figure. Thirdly, we have seen a dramatic rise in the incidence of zero-hours contracts. Official estimates are that more than 200,000 British workers—predominantly younger and unskilled workers—are now on zero-hours contracts. The real figure is undoubtedly higher than this. That is a 150% increase since 2005. In 2012 alone, there was a year-on-year increase of 25%.
These contracts are often used to abuse vulnerable workers. Here is an anecdote from a care worker in the north-west from a recent excellent Resolution Foundation report. She said:
“It’s the uncertainty that gets to me … These contracts only work one way—they don’t offer any flexibility even if you wanted it because if you turn down hours you suffer. One of the girls had her hours permanently reduced because she asked the line manager for a day off to take her child to the doctors. From that day on her card was marked”.
That kind of treatment cannot be tolerated. I welcome the fact that the Government have at last woken up to the scale of this problem and announced a review into the practice. I hope that this can be a priority across the party divide.
This is the new world of work for too many in our country: a shift from permanent to temporary contracts, a shift from full-time to more part-time work, a shift from more secure to more insecure work, a growth in self-employment and a growth in employment in less well protected sectors of our economy. I firmly believe that these developments should give us cause for concern whatever our political affiliation, and whatever we think the Government’s priorities should be.
Why is that the case? First, the effects of long-term unemployment and insecure work are becoming increasingly obvious wherever you look in Britain and they are imposing significant costs on us. The Trussell Trust, a charity that operates food banks in the UK, says that many of the 300,000 people that it is helping are low-income working families. The national helpline charity National Debtline says that almost half of the 250,000 calls that it received in 2012 were from people in work. The size of the UK’s payday lending industry has increased in size by about 150% since 2008. Paying less in more insecure jobs is far from costless for all of us.
The second reason that we should be concerned is that restoring strong wage growth and building more secure jobs is sensible fiscal policy if we are to relieve the ever-growing pressure on the social security system to support low-income families. We must aim to shift some of the burden of supporting lower-income workers from the state to the private sector over time. This is why, of course, policies such as the promotion of the living wage are so important.
The third reason that we should be concerned is that it is hard to see how Britain can compete internationally with an economy that is increasingly characterised by lower-wage jobs in more and more precarious conditions. We cannot hope to compete with China, India and emerging African economies over the next 50 years if our model of competition at home is one of a deregulatory race to the bottom. There is no low-wage, low-skill, low-investment route to our country succeeding in a world where labour costs are significantly cheaper and skills are being built up significantly faster, as they are in many developing and emerging economies. We will succeed only if we build a higher road to economic success, not one built on insecurity in our labour market or tolerance of entire cohorts of people in our country who will never engage in productive work.
What can we do to bring about more sustainable employment? In the short term, there is a lot that we can do. We could and should introduce a compulsory jobs guarantee to get the young unemployed into work and to get the long-term unemployed into jobs too. We should reform the Work Programme so as to have better integration with the employment and support allowance tests. Most importantly of all, the Government should realise that they are not powerless to get the economy motoring again and that they should take action now to get growth up and unemployment down.
In the longer term, we need to think about how we can reshape the way our economy works. Better jobs have to be created in the context of a different kind of economy. If we want to have a higher-productivity, higher-skilled, higher-wage economy, we cannot do that by pulling one or two levers alone. It means reforming our banking system and re-examining the rules that generate short-termism in too many of our largest companies. As the noble Baroness, Lady Brinton, discussed, we need to address the UK’s poor record on technical skills and ask how our education system and our employers who do or do not offer apprenticeships need to be challenged to turn this around. We should use the power of government procurement to say that any company that wants a contract with the Government has to offer training and apprenticeships to its workforce.
The Government talk constantly about the need to rebalance our economy, but as this debate has shown, the world of work in Britain today is rebalancing, but in ways that are making lives tougher and more insecure for millions. That is not just bad for social cohesion; it is bad for our economy and it undermines our competitiveness. If we really want to break from this, we have to abandon an approach to economic management that sees wealth creation as the preserve of the wealthiest and which mistakenly seeks to succeed by giving lower taxes to the best off and less protection to the vast majority of workers. That way lies national decline, not national success.
Lord Newby
My Lords, I thank my noble friend Lady Brinton and all noble Lords who have spoken in this extremely interesting debate. The Government remain committed to creating the right conditions for the private sector to grow and to create jobs. Despite the challenging economic context, employment has been increasing robustly and today it stands at record levels. While employment in the UK is higher than it was before the recession, it remains below its pre-recession level in the US, Japan and all the major European countries except Germany. Over 2012, UK employment growth was the strongest of all the G7 economies, and the Office for Budget Responsibility has forecast employment to continue rising, to reach 30.5 million by 2017. The performance of the UK labour market has also been strong compared with previous downturns. At this point after the recessions of the 1980s and 1990s, employment was still around four percentage points below its pre-recession peak.
Some of the increase in employment that we have seen since 2008 has come from an increase in part-time working and self-employment. While these increases have been part of a longer-term trend, the last few years have also seen an increase in those who are working part-time but would like a full-time job. The shift in the composition of employment during this downturn has been a testament to the flexibility of the labour market. This is something we have not seen to the same extent in previous recessions. While it means that some may be working fewer hours than they would wish, they are employed, keeping unemployment lower than it otherwise would have been and meaning that, as growth strengthens, we will be in a better place to benefit from the recovery. Over the past year alone, over 80% of the increase in employment has come from full-time employment.
Policies announced by the Government have increased the incentives for people on benefits to enter paid work. Participation in the labour market is now around its highest rate for 20 years and is in stark contrast to previous recessions when vast swathes became discouraged and gave up looking for work. From our experience in previous downturns, we have learnt the potential lasting costs of detachment from the labour market, a point that a number of noble Lords made clear, so we are encouraged by the flexibility and resilience of the labour market over the past five years. This flexibility has also been demonstrated as a result of relatively low earnings growth, which has supported the strength we have seen in employment. While earnings growth has not been keeping pace with inflation because of the strength in employment, household income has risen by 2.1% more than consumer prices over the past year, and that is not least because of the increase in the income tax threshold. With less flexibility and higher wages, employment would be lower and unemployment would be higher, and this would be a less fair way of making the necessary adjustment after the crisis.
When this Government announced the difficult decisions we had had to take to reduce the budget deficit and reduce employment in the public sector, we were told that the private sector would never replace the public sector jobs being lost. But, instead, private sector job creation has offset public sector job losses more than three times over. Nevertheless, as many noble Lords have pointed out, unemployment still remains too high, particularly youth unemployment. We are not complacent, but have introduced several policies to support those out of work back into employment, alongside the £3 billion a year the Government spend on employment support to job seekers through Jobcentre Plus.
This Government recognise that young people may be more vulnerable when the labour market is tough, and so last year we launched the £1 billion youth contract. This support brings together a menu of options to help young people build the experience and skills that they need to compete in the job market. These options range from getting young people into the jobcentre on a weekly rather than fortnightly basis to help focus their job search, to funding more work experience and sector-based work academy places so that we have at least 100,000 of these places to offer our young people, and offering 160,000 wage incentives worth up to £2,275 to an employer who recruits an 18 to 24 year-old who has been unemployed for at least six months. For an employer, this wage incentive covers four and a half times the national insurance contributions cost of taking on a young person. The point of this, and of the youth contract more widely, is to help provide young jobseekers with sustained job outcomes and to help them build their longer-term employment prospects.
We know that long-term unemployment can have potentially damaging effects on a person’s longer-term employment prospects. While 90% of those claiming jobseeker’s allowance move off benefit within the first 12 months of their claim, there is still 10% who do not. To help combat the cycle of worklessness and despondency that long-term unemployment can bring, the Government launched the Work Programme in 2011, the purpose of which is to provide personalised support to an expected 3.3 million long-term and vulnerable jobseekers over the next five years. The premise of this support is simple. We have given providers the freedom to design interventions that are better tailored to individual and local needs. The incentive is strong: to providers we say, “If you do not get these people into work and stay in work, you do not get paid”. Moreover, the concept is innovative. For the first time, providers will be paid partly out of the benefit savings that they help to realise by getting these people into sustained employment. This is the biggest individual payment-by-results programme ever attempted in the United Kingdom.
As my noble friend Lord Kirkwood observed and as we recognise, people coming out of the Work Programme who have still not found sustained employment are the hardest to help and many in this group face significant and multiple barriers to work. Building on the expert training and support that the Work Programme will have delivered, all claimants will receive flexible support tailored to their individual needs and underpinned by a core regime of face-to-face meetings. Those who do not take the necessary steps to prepare for work face a tough sanctions regime. These programmes replace much of the complex range of employment support that was previously on offer, such as the New Deal, employment zones and the Future Jobs Fund. Those programmes were overly prescriptive, failed to achieve enough sustained job outcomes, and did not deliver good value for money for the taxpayer.
My noble friends Lord German and Lord Kirkwood discussed the effectiveness of the Work Programme. As my noble friend Lord German pointed out, the figures released today show that since March this year, the number of people who have found lasting work through the programme has increased to 132,000. I am not saying that that is enough, but it is a very significant increase from the position in the previous year. My noble friend also pointed out that the outcomes in terms of ESA recipients were significantly below those we had expected. That is undoubtedly the case, but this is by common consent the most difficult group to deal with. We have a double problem here in that it is not just about getting recipients ready for work but about persuading employers to consider them as potential employees, particularly in an environment where many people are looking for a job. Lastly, my noble friend asked what we could learn from the black-box approach. As I said, we are allowing providers to innovate and test new methods. We are asking them to share best practice and we are doing our best to facilitate it so that when we can see that something is working, we can replicate it.
The noble Lord, Lord Kirkwood, asked what happens if providers do not reach their targets. We are taking decisive action with those who are not delivering the standards we expect. We have issued performance improvement notices on 12 contracts that we deem are not delivering the Work Programme to the agreed standards and we are also introducing the concept of market-share shift, which means that we will be increasing the proportion of claimants we refer to those providers who have outperformed their competitors by reducing the number of claimants we send to the lower-performing providers. We will be implementing this programme in at least 16 instances from August.
The noble Lord, Lord Kirkwood, also asked what happened to the underspend. Any underspend in the Work Programme will be subject to the usual budget exchange rules, which means that the Chief Secretary to the Treasury has the discretion to allow a proportion of a department’s budget to move across to the following financial year. I direct the noble Lord to my right honourable friend Danny Alexander because he is the man who can deal with that issue.
The noble Baroness, Lady Brinton, very astutely started with export, an area where we have seen and will see many new jobs. She talked about the need to build up the work that UKTI is doing. We are doing that. More resources are going into UKTI, as we announced in the Autumn Statement. We are redirecting people working for UKTI to the higher-growth markets and we are already beginning to see some improvement in that area. The British Chambers of Commerce survey of members which came out earlier this week showed that the proportion of its members who were exporting had increased over the year from 32% to, I think, 39%. That is a sample but over a year it is a significant shift. However, there are major barriers to exporting and one of the chilling figures in that survey was that 70% of BCC members who export do not have a single member of staff with the relevant language skills to undertake business. So language training, among many other things, is very important.
The noble Baroness raised the point that if we are going to get small businesses taking on more staff, we are going to need greater bank lending. This, as she knows, has been a huge source of frustration to the Government. We have introduced the Funding for Lending scheme with the express purpose of incentivising banks to lend to SMEs and in the last Budget we increased that incentive by introducing a 10:1 ratio in terms of the amount that banks can draw down under Funding for Lending for every pound they lend to SMEs. There is a bit of evidence that that is beginning to work. Much more encouraging is the growth of new, admittedly smaller, challenger banking institutions which are lending to SMEs. We have discussed in this House before the success of Handelsbanken and Aldermore. Cambridge & Counties is a very interesting new institution which has been set up by Trinity Hall and the Cambridgeshire County Council pension fund specifically to lend to SMEs in the east Midlands. It is new but it has grown at a rapid rate, which gives the lie to the argument that there is no demand from SMEs for borrowing. The more these challengers grow, the quicker we will see a more positive response from the larger lenders, who, in fairness, are trying to do more.
The noble Baroness talked about the importance of literacy and numeracy, not least in respect of apprenticeships. From next year all apprentices who begin an intermediate apprenticeship with level 1 in English or maths will have to take up study of level 2 in those subjects, and apprentices who begin their apprenticeship without level 1 in English or maths will be offered the chance, but not be obliged, to study at level 2. They will still be required to achieve level 1 in English and maths as part of their intermediate apprenticeship, so we are doing something about that. I will not repeat the extent to which apprenticeships have increased in numbers and the extent to which they are popular. I was very struck by the point the noble Baroness made about Jobcentre Plus pulling young people off college courses to go for job interviews so that they then lost their place. This seems short-sighted and I will certainly raise that with ministerial colleagues because that is not what we are seeking to achieve.
The noble Lord, Lord Teverson, talked about the possibilities of generating more jobs via the move to the green economy. I completely agree. The Government announced yesterday that we will be making an additional £800 million available to the Green Investment Bank, which is doing very well and is proving popular. We are already seeing a growth in employment in that sector and the Government will be doing everything in their power to promote that.
The noble Baroness, Lady Sharp, talked about the skills shortage paradox. There has been a skills shortage paradox for as long as I have been involved in these debates. I seem to remember as a student hearing about it. I was pleased that she talked about the trainee programme being expanded and felt that was a good start.
The right reverend Prelate the Bishop of Bristol talked about the value of co-operatives and social enterprises. I completely agree. I was pleased to be able to help pilot through Parliament the Public Services (Social Value) Act, which makes it easier for public sector bodies to take on co-operatives and social enterprises, and I hope very much that it has the effect that we wish. The most telling figure the right reverend Prelate gave was that 39% of social enterprises operate in the top 20% most deprived wards. I urge him and his fellow prelates and the church as a whole to build on the Portsmouth model. I cannot help saying that if the church spent more time doing that and less time worrying about sex and gender it would be to the benefit of the church and to broader society.
With that sideswipe I move quickly on to the noble Lord, Lord Cotter, talking about the importance of the hospitality and tourist industry. I agree with him. It is a very large and undervalued industry in respect of jobs. The visa issue has been widely discussed and we hope that we will move further in a sensible direction on that. I agree with almost everything that the noble Lord, Lord Shipley, said, and I certainly agree that doubt about EU membership generates problems in terms of international employers thinking about the long-term sustainability of jobs in the UK.
I want to finish by touching on the issues raised by the extremely thoughtful speeches by the noble Lords, Lord Kirkwood and Lord Wood, which were on the same theme. It is now a well established, if not hugely long-standing, trend that there is a decreasing proportion of jobs as we know them in the labour force as a whole. Instead, we are seeing jobs with no guarantees, temporary or zero-hours contracts and low wages, even for people in work. The noble Lord’s suggestion that we discuss this on a cross-party basis is extremely sensible because of long-term development. This situation may have been hastened somewhat by the recession but it was not caused by it. It predated it and it will undoubtedly carry on. There are so many examples of very successful companies operating like this. Amazon is a good example as one of its major distribution centres pays a penny more per hour than the minimum wage. There is very little job security. However, it is seen by the outside world as an immensely successful company and a company of the future, and the fact that it is doing that kind of thing is rather depressing.
We need to think about how we can engage with employers to ensure that they think, in some cases, rather more about the long-term implications for their employees of these extremely difficult economic conditions and how we can confront them with the uncertainty that these kinds of practices cause. It cannot, at the very least, be good for productivity. These are hugely important, long-term issues and we will definitely return to them.
I hope that I have gone some way to answering the points that have been made in the debate this afternoon and to reassuring noble Lords that encouraging job creation is a key priority of this Government. We will continue to build on the progress that we have already made to ensure that we are creating the conditions that businesses need to grow and create jobs and that we are providing people with the support that they need to get back into work.
Baroness Brinton
My Lords, I thank your Lordships’ House for a fascinating debate over the past couple of hours and for the contributions that noble Lords have made. My noble friend Lord Teverson rightly focused on the green economy and its critical role in creating sustainable jobs. The noble Earl, Lord Shrewsbury, highlighted the excellent JCB apprenticeship scheme and raised worries about bureaucracy and red tape in the Environment Agency. My noble friend Lord German rightly brought in the plight of the long-term unemployed and my noble friend Lady Sharp, in her usual insightful way, reminded us of the lost generation of 18 to 24 year-olds in the 1980s and that we must never let it happen again.
The right reverend Prelate the Bishop of Bristol talked about the key role of co-operatives and social enterprises in creating sustainable jobs and contributing to growth. Along with the Minister, I loved the idea of the Portsmouth Cathedral Innovation Centre. My noble friend Lord Kirkwood reminded us about careful use of language—the unemployed are strivers too. My noble friend Lord Cotter once again demonstrated his passion for supporting young people into work and talked about the lack of advice for young people in schools about apprenticeships. This must be remedied. My noble friend Lord Shipley spoke about the importance of the regional growth fund and reminded us that sustainable employment is key to social inclusion.
The noble Lord, Lord Wood of Anfield, rightly echoed the concern of my noble friend Lord Kirkwood about zero-hours contracts and part-time employment. I am grateful for the response from my noble friend the Minister on that. I believe that zero hours is a scourge, an abuse of the power of employment and needs to be addressed.
Finally, I thank my noble friend the Minister for all his responses to the varied questions that we have raised for him today, in particular the response about the level of English and maths in apprenticeships. It is lovely that they will be asked to study up to level 2 but my belief is that level 2 is not enough. I particularly thank him for taking up the issue of jobcentre staff pulling young people off courses and colleges to go for interviews. With that, I thank everyone for their contribution.