EU: Youth Unemployment (EUC Report)

Lord Freud Excerpts

Tuesday 17th June 2014 Lords Chamber

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

My Lords, as always, this has been a very high-quality debate, which I have very much enjoyed. I am very grateful for what has clearly been really hard work from this committee to put together a really interesting summary of these issues. I need to add my thanks to my noble friend Lady O’Cathain for running that work so well; I heard the tributes and the appreciation from the rest of her committee.

As noble Lords know, we have responded formally to this report and several noble Lords were able to pick out what we were saying, despite the fact—I need to apologise for this; I only discovered it this afternoon—that we actually sent out to colleagues a completely unformatted version of the response. I have taken steps to repair that so there will be something noble Lords can actually read. I am very impressed that many of them managed to do so anyway. I am sorry and I shall ensure that they get appropriate hard-copy versions. I do not know quite how it happened, but it did.

Let me start off by setting out where we are today. We have made really good progress on youth unemployment, and that has been particularly the case over the past year. As the economy begins to pick up, we are starting to drive out the cyclical rise in youth unemployment that we saw in the recession. The youth claimant count has fallen for the past 30 months and overall youth unemployment has been falling since last summer. Excluding students, it now stands at 565,000 youngsters. Of those leaving JSA—in response to the question of the noble Lord, Lord Haskel—about two-thirds go into work; others go elsewhere because the young move very dynamically.

We still face really big challenges. Long-term youth unemployment has risen in the recession and it remains at more than 100,000 people above the pre-recession level. We have, though, seen a welcome drop in that particular figure over the past seven months, but it is vital that we maintain the trend. Through the Work Programme and Youth Contract, we have put in place about the most comprehensive response to long-term unemployment that has ever been seen.

As the noble Lord, Lord Brooke, said this evening, this is actually a structural set of issues with really deep roots. Even before the recession, more than 1 million young people were neither working nor in full-time education. That is why we are addressing those long-standing structural issues through our reforms to education and skills and by improving access to apprenticeships.

As the report explains, unemployment among young people is a really serious problem in many pars of the EU. Clearly the source of this is diverse and is different in different countries, with origins in structural or cyclical effects, or some combination of the two. It is important, as many noble Lords said tonight, to recognise that the structural causes of unemployment are issues that are most effectively tackled by individual countries and not by a one-size-fits-all solution.

Just to pick up the related point on what is happening in different parts of Europe and the point made by the noble Lord, Lord Roberts, on regional differences, 90% of the fall in the year that we have very happily seen in the youth claimant count has been outside London—so we are seeing some real regional responses.

There was concern, particularly from my noble friends Lord Liverpool and Lady O’Cathain about a skills mismatch. In 2010, we were left with a system that was simply not delivering what it should have for our young people. I know that noble Lords will have heard me talk about the Wolf report, which is one of the most interesting and disturbing reports that I have ever read about the situation in this country. It concluded that the system that was in place was,

“failing at least 350,000 of our 16-18 year olds, year on year”,

with substandard vocational training.

Improving access to quality training remains a key challenge, and it is one that we are facing up to. We are improving the standard of vocational training in this country and we are expanding apprenticeships. We are committed to tackling youth unemployment. Taken together, our package of labour market interventions, programmes and reforms tackles both structural and cyclical unemployment. This programme is supporting young people to equip themselves with the right skills to succeed. As the noble Lord, Lord Haskel, said, we need to be more ambitious—and we are not complacent. We cannot be complacent at this stage. There is more to do to support young people into work, and we are committed to building on some pretty outstanding improvements.

On the numbers issue raised by my noble friend Lady O’Cathain, we now have 65,500 youngsters starting a job based on the work incentive programme. The payments come a little bit later. We have 275,000 young people taking part in our work experience and pre-employment training, with 146,000 taking part in work placements and 48,000 in sector-based work academies. Some 390,000 young people have joined the Work Programme, and 89,000 have now got sustained employment.

On the point from my noble friend Lord Liverpool on entrepreneurs, the figures for that were just published today. There are now 8,280 18 to 24 year-olds with mentors on those schemes, and 3,370 are on the allowance.

Clearly, there is more to do. Universal credit, because of the way it is structured, will give young people under 25 in-work support for the first time and will encourage young people to try their hand at different jobs, while providing responsive and continuous support as they move in and out of work. That will become a really important support for youngsters as they do that necessary experimentation to find out what they enjoy and want to take forward as a career or job interest.

The Government will reduce the cost of employing young people by abolishing from next April basic rate employer national insurance contributions for people aged under 21. We are trialling new help for young people, including intensive support for 16 to 17 year-old NEETs not in receipt of benefits. We are piloting new, day 1 help for unemployed 18 to 21 year-olds to improve English and maths skills. To help schools to better meet their duty to provide independent careers advice, we are strengthening statutory guidance and developing the role of the National Careers Service. Ofsted will also be giving a higher priority to careers guidance in school inspections. We accept the point from my noble friend Lady Hooper that employers have an important role in course design by providing placements, sponsoring students and so on.

In response to my noble friend Lord Liverpool’s very pertinent point, the DfE is strengthening the teaching of digital skills in schools by replacing ICT with computing from September this year. We have introduced traineeships, which are available for young people aged 16 to 23 inclusive. These consist of pre-employment training, a work experience placement with an employer and English and maths training to GCSE level 2 for those who need it.

We have now got NEETs down to the lowest level since we started to count them in 2001, so the number now sits at 53,000 16 to 17 year-olds. I know that the noble Lord, Lord Brooke, wanted to get hold of that figure, produced by the ONS from the Labour Force Survey, and I am quoting the fourth quarter of 2013, which is the latest figure. There is a big change coming in that area. That young area has been a weakness as we raise the participation age. That is, in the spirit of new bipartisanship of the noble Lord, Lord McAvoy, something that both sides have agreed on. Participation age goes to the end of the academic year in which people turn 17, and from summer 2015 this will be until their 18th birthday.

We are giving young people support when they need it most, referring 18 to 24 year-olds to the Work Programme early to keep them from becoming long-term unemployed. We have talked a lot tonight about apprenticeships, which already stand at 1.7 million with a goal of 2 million. I am not being complacent but we are not in the same situation as much of Europe. Our youth unemployment rate is well below the EU average and, for those who have left education, the UK has the second highest youth employment rate of the major EU economies, behind only Germany. I should point out that Germany does not have a Youth Guarantee but has developed its own approach. While we learn about good practice, a point made by several Peers, we know that member states of the EU with the lowest youth unemployment, such as Germany and the Netherlands, have good vocational training systems. We know from their experience that our reforms to apprenticeships and broader vocational training are the key to our reducing our youth unemployment in the longer term. That is why we are putting so much emphasis on that.

Let us look at the EU Commission’s proposed Youth Guarantee. Our view is that this is a response with its eyes too much on the past, dealing with the immediate consequences of the recession and not addressing the structural problems that it is vital we tackle now. That is why we do not believe that this is the way forward. The Youth Guarantee is the type of rigid approach that we have tried and has failed us in the past. It has not been fully implemented elsewhere—except, recently, in Finland—and it has not worked here when we have looked at schemes such as the Future Jobs Fund, which have performed no better than the work experience schemes but at much higher cost. Therefore, we are not clear that the guarantee represents good practice.

It is vital that we help young people to experiment in the labour market and try out different jobs. All our policies, from universal credit to the Youth Contract, embody this approach; the Youth Guarantee does not. It is not flexible and does not meet the test we set ourselves of offering the right help to the right people at the right time.

I assure noble Lords that the Government do not intend EU funds to subsidise existing national measures but to complement them by addressing local needs. In England we are allocating the majority of relevant EU funding to local enterprise partnerships—so the funding will be used locally—which we think are best placed to offer that tailored support to young people. I think there is common ground there between us and the committee’s report. We believe that this decentralised and flexible approach is the best way to target young people who are most at risk. Indeed, noble Lords will have heard me talk about our local support services framework, in which the DWP is working with local authorities to build the partnerships that will provide holistic support for people who need help before they can enter the workforce, particularly as regards their underlying problems. We are expending enormous effort in doing that and using funds from a variety of places, including the ESF.

The noble Baroness, Lady Uddin, referred to Untapped Talent, our autism initiative introduced a couple of years ago, which she remembers so well. Our Disability Confident campaign, which she may remember, embraces a wider context and seeks to ensure that employers are aware of this valuable labour resource, which they may not have concentrated on enough in the past. We are ramping up support for the disabled within Jobcentre Plus and the Work Programme. One of the things that I am most keen to get right is our support for people with mental health issues, and we have introduced a series of mental health pilots.

I should like to take a moment to reflect on the EU Commission’s views of our programme. The Council of the European Union agreed to the Youth Guarantee recommendation in April 2013, one year after we had implemented the Youth Contract. We responded to this recommendation, setting out in detail how the Youth Contract and other policies address the important aim of reducing youth unemployment.

The European Commission recognises the success of our programme. In its annual draft country-specific recommendations this month, the Commission noted:

“The United Kingdom continues to address the challenges of unemployment and underemployment as well as the specific issues related to youth unemployment”,

and urged us to,

“maintain commitment to the Youth Contract”.

While I am not in the habit of looking first to Brussels for inspiration, I am happy to receive such an acknowledgement of the path we are taking.

I again thank noble Lords for their excellent contributions. I think that I have covered all the issues that were raised. I hope noble Lords agree with me that it is clear that we need to stay the course with our programmes to tackle youth unemployment. We have a long-term economic plan and it is working.