Economy: Sustainable Jobs

Lord German Excerpts

Thursday 27th June 2013 Lords Chamber

[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.