Youth Unemployment

Lord Freud Excerpts

Thursday 14th June 2012 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, I thank the noble Lord, Lord Adonis, for the tone he set in introducing the debate, which noble Lords have followed. This has been a very thoughtful debate. The noble Baroness, Lady Sherlock, got it right when she said that we are all against youth unemployment but the question is how we solve it.

Before I get on to some of the meatier stuff, I ought to deal with the moral dimension introduced by my erstwhile fellow student, the right reverend Prelate the Bishop of Chester. I reassure him and my noble friend Lord Roberts that there is good evidence to show that there is a positive correlation between having both more older people and more younger people in the workforce. The person who has done the best research in that area comes from the Benches opposite in the shape of the noble Lord, Lord Layard, who is not present but has done excellent research on this matter.

Clearly, the recession has had a major impact on the participation and unemployment rates of young people. As other noble Lords have pointed out, the relevant figures, having been broadly stable since about 1998, started to go up again in a very disturbing way from about 2004. I remind noble Lords of the underlying figures. In 1997, the number of youngsters who were unemployed or inactive was 1.14 million. By the time that this Government came in, the figure stood at 1.39 million and it has gone up a little since; it is now 1.42 million. Therefore, we are looking at something that stems from much more than a recession; we are looking at a structural factor in our economy and the failures of our education system to keep up with the changing economy and ensure successful transitions for all young people, as so many noble Lords have pointed out.

The noble Lord, Lord McFall, asked whether there should be a statutory target for youth employment. We do not think that that is the right answer. The noble Lord, Lord Giddens, asked where the jobs are coming from. The Government seek to turn round the economy to get those jobs provided by the private sector. Indeed, private sector employment overall has gone up by 45,000 in the quarter, a quarter of a million in the year and by 634,000 since the election.

The figure for youth unemployment is over the emotive 1 million mark. However, a lot of them—30%—are full-time students who are looking predominantly for part-time work. Rises in unemployment have been driven by longer-term factors. People who bear the brunt of those changes in the labour market are those who are trying to get into the market; that is a natural factor. However, joined to that is significant demographic change with a larger number of young people entering the labour market than was the case 10 years ago.

The noble Lord, Lord Adonis, talked about the Wolf report. Like him, I read that report with some astonishment and was shocked by its finding that at least 350,000 16 to 19 year-olds were getting little or no benefit from post-16 education. That report has been adopted in its entirety by the Government and we are trying to make the wholesale changes in the vocational education system that it recommends.

We also have lower productivity than many other nations, which is partly explained by the lack of skills in the working population. Increasing participation is designed to make a significant contribution to economic growth. However, it is easy to get too gloomy. A large number of youngsters succeed in education and make a successful transition into the world of work. The number of young people not in full-time education and unemployed is around 10% of all 16 to 24 year-olds, which is lower than after previous recessions. The noble Lord, Lord Adonis, talked about the long-term unemployed in this age group. One of the things that was distorting the figures was the fact that as youngsters moved into the long-term category, they were taken off on to training courses and were not classified in that way.

When you look through the figures at the underlying position, you will see that there has been an increase in the number of long-term unemployed since the election, but it has not doubled. Today, it stands at 167,000. If you calculated it on the same basis, it would be some 153,000 at the time of the election. Therefore, there has been an increase, which is not satisfactory in any way, but it is not a substantial, horrific figure. If you look at the total number and not just the long-term figure, there are signs that there has been a small decrease—again, this is not good enough—in the number of young people on jobseeker’s allowance and other forms of temporary support.

The right reverend Prelate the Bishop of Chester asked about the EU and the other moral question of the movement of labour. We are looking at this issue. Interestingly, over the past year, in contrast to before then, the employment rate of UK nationals has held up better in this market than that for non-UK nationals, which has fallen.

The noble Lord, Lord Giddens, and the noble Baroness, Lady Prosser, asked whether we should increase the number of young people in higher education. We have not changed the principles that date from 1963: namely, everyone who can benefit from higher education should be able to get it.

Clearly, too many young people are not in education, employment or training. However, most young people spend only a short time in that NEET category. The ones to worry about are those who spend a long time in it. As I think the noble Lord, Lord Wood, said, the longer-term impact of spending too long out of the workforce affects many factors. I endorse all that he said about the economic effect. That clearly concerns us as a Government, just as it concerns him.

The programme of education reforms, including increasing the freedom of schools, will help to raise attainment for all pupils by the age of 16. This year, we are increasing our investment to a record £7.5 billion to fund education and training places for 16 to 17 year-olds. Regarding the question of my noble friend Lord Roberts on careers guidance, through the Youth Contract we are putting in place extra adviser support for 18 to 24 year-olds, including referrals to careers interviews delivered by the National Careers Service.

We are also implementing a £180 million scheme to target financial support to young people who need it. This will provide guaranteed bursaries of £1,200 a year to help young people to overcome barriers to participation. Our approach to supporting unemployed young people into work is based on an individual’s need for short-term or more intensive, long-term support. For those who are closer to the labour market, the focus is on engaging young people in real work with employers and keeping them active in looking for a job. The options are work experience, skills, advice on apprenticeships and support with job search. My noble friend Lord German asked about working with the CIPD. We are working closely with it, particularly on finding employers who can offer work experience. Jobcentre Plus is working in every part of the country, placing thousands of young people in work experience.

Regarding the youngsters who need more support, the noble Lord, Lord Adonis, had a little bit of fun over how we are trying to make sure that the resources go towards the people who really need it by getting them into the Work Programme early. The aim is to get these people in at the three-month stage and the rest at nine months. As the noble Lord will be perfectly well aware, one way that we achieve efficiency through the Work Programme is by concentrating on payment by results. Clearly we will be able to improve the programme as it develops by refining the payments as we isolate those who are harder to help.

Last April we launched the new £1 billion Youth Contract, which has been discussed. Regrettably, the cost of intermediate labour market interventions is very high for what they achieve, and we think that there are other ways of going about this. In answer to my noble friend Lord German, who asked whether the Youth Contract is enough, I can say that it has a very good take-up rate.

We are pushing out a lot of apprenticeships, with 256,000 having started in the first six months of the academic year 2011-12. In answer to a question put by the noble Lord, Lord Adonis, of those 256,000, 79,000 were for 16 to 18 year-olds, although I am afraid I do not have the data for 16 to 21 year-olds. We have introduced grants to encourage, particularly, smaller employers to take on youngsters in the 16 to 24 year-old age group.

Again in answer to the noble Lord, Lord Adonis, we have placements for work experience and apprenticeships in the DWP and across government. We have already put 49,000 people through work experience, and about half of them are now off benefits after taking part in the scheme. The success rate is virtually identical to that of the future jobs fund, but the difference is that the work experience scheme has cost £325 per placement, whereas the future jobs fund was running at around £6,000 a place.

Clearly, young people have borne the brunt of long-term structural and demographic changes in our economy and our society and also of failures in our education system. Noble Lords pointed out that other countries were rather more successful. Youth unemployment is too high and it has long-term negative consequences for individuals and for wider society. We are working across government to minimise the long and short-term impacts of young people being NEET and to ensure that they get the opportunities and support that they need.

We are determined to increase the participation of 16 to 24 year-olds in education, training and work to make a lasting difference to individual lives, improve social mobility and stimulate growth. We are interested not in quick fixes but in lasting change and we are changing the structures to help people on that basis. The change is aimed at helping young people to succeed in their careers and to make a much needed positive contribution to our future economic success.