“The previous government had something called the Future Jobs Fund, which had very good intentions but it failed because it created jobs which were, sort of, here today gone tomorrow…what’s different about this is it gets young people into proper, lasting jobs in the private sector.”
Deputy Prime Minister Nick Clegg, announcing the Youth Contract, 25 November 2011
Youth unemployment sailed past the million mark last week, and within days Nick Clegg has a billion pounds and a plan. The same thing happened in April 2009: youth unemployment hit an all-time high, and Labour rushed out the Future Jobs Fund, pledging a £1bn.
Splashing out £6,500 of taxpayer’s money on every job, Labour’s plan was axed by the coalition in March for being too expensive.
But this time it’s different, says Mr Clegg – this time taxpayers will get value for money and the jobs will last longer.
Is he right or is FactCheck having a déjà vu?
What was the Future Jobs Fund?
The aim of the Future Jobs Fund (FJF) was to create temporary six-month job opportunities for young people on Jobseeker’s Allowance. The initial target was to create 150,000 posts by March 2011, later expanded to March 2012 with the aim of creating 200,000 jobs.
Was it successful?
The FJF fell behind target on the number of jobs created, with official statistics showing that when the scheme closed in March, just 105,220 people had filled FJF vacancies. A Select Committee report however deemed it a “significant number of jobs on a national scale”.
An early DWP study concluded that the scheme was generally successful in preparing youngsters for work and had some positive long-lasting effects. However, the DWP did criticise the scheme for a lack of job-search support. And latest figures quoted by the House of Commons Library show that 60 per cent of FJF participants that took up jobs in October and November 2009 were claiming jobseekers allowance 14 months later.
Mr Clegg’s main gripe about the FJF was that it didn’t do enough to get people into lasting, private sector jobs. And he’s right – the Select Committee concluded that the “overwhelming majority” of the jobs created through the FJF were in the public and voluntary sector.
Paul Gregg, a Professor of Economics and Social Policy at Bath University told FactCheck: “It’s a totally legit (complaint), but Labour’s intention was always to push it out to private companies, it was just because it was set up so quickly that it was easier at first to go through the public sector.”
How is the Youth Contract different?
Firstly, it’s not a new plan – it’s a bolster to three existing schemes: Work Programme, Work Experience and apprenticeships. Prof Gregg pointed out that essentially these cover the same territory as Labour’s New Deal for Young People from 1997/8: subsidised jobs, training and work placements.
The key difference between the FJF and the Youth Contract initiatives is that the private sector has been targeted with a wage incentive of £2,275 per job. That’s a third of the cost of the FJF, and it goes to the private sector – not the public. Mr Clegg hopes this will be enough to convince employers to take on an extra 160,000 18-24 year olds, who are already on the Work Programme.
Meanwhile, the Work Experience initiative – similar to Labour’s 3-week “Work Trial” programme – offers 2-8 week placements that can be taken while claiming job seekers allowance. The DWP recently announced that 13 weeks after starting the Work Experience initiative, 51 per cent of people came off benefits, and between January and August 16,360 youngsters have taken part.
Sounds good – though the TUC has warned that expanding the Work Experience programme is a “much less positive” move, as there are already widespread reports of young people being exploited. And indeed, Prof Gregg told FactCheck the worry is that companies will just take advantage of the scheme, rolling over these short-term workies, rather than taking them on full-time.
Prof Gregg also raised alarm bells over the boost to apprenticeships – which have been criticised for handing out money and training to people already in jobs. This is confirmed by a report from the Institute for Public Policy Research (IPPR) that 40 per cent of apprenticeships last year went to over 25-year-olds last year, the vast majority of whom were existing employees.
Value for money
The government scrapped the FJF on the basis that it was too expensive and similar results could be achieved for less money. With each job costing £6,500, the FJF was considerably more costly than other interventions such as the New Deal for Young People (£3,480 net per job in 2004-05 terms).
Today, Mr Clegg has allocated a pot of £1bn “new money” to the Department for Work and Pensions, of which at least £150m will be given to the Department for Education – to boost funding for apprenticeships and programmes for NEETs (16-17 year olds who are not in education or employment).
That’s on top of the £3bn – £5bn that Chris Grayling expects the Work Programme to cost over seven years. He said earlier this month that it would be “funded largely out of the benefit savings it delivers”.
A House of Commons Work and Pensions Committee report in May concluded funding the Work Programme from future benefits savings was a “bold decision” by the government as it was an “untried method of funding” based on savings “the scale of which is as yet unknown”.
It also warned of a “risk that the expected savings will not be realised if too few people gain full time work or it the number falling out of work rises”.
Labour’s shadow work and pensions secretary Liam Byrne said today: “If the government is slashing working families tax credits to pay the bill for this new scheme, it beggars belief.”
Comparing the Youth Contract to the Future Jobs Fund is a smart move, because the FJF was an emergency quick fix that barely got off the ground before it was axed, and for which there is very little cost-benefit analysis kicking around to judge it on.
That said, Mr Clegg is spot on about its failings – and today’s deal offers very definite improvements, particularly concerning the private sector.
But to hail it as a “very big new initiative” is somewhat stretching the truth. It’s not new, it’s a shot in the arm for three key schemes that have already been announced – and which were around in some form under Labour’s New Deal.
One crucial element of the New Deal was the push in 2009 to keep 16-17 year olds in education and training. Does today’s deal do enough for these ‘NEETs’ (not in education, employment or training)?
Not really, says the children’s charity Barnardos. For only around 10 per cent of 16-17 year olds are eligible for benefits, and therefore eligible for the Work Programme.
Finally, concerns over where this £1bn was plucked from remain. Will the government push its “bold decision” to raid the benefits pot? We’ll be scouring the Autumn Statement next week for the answer.
By Emma Thelwell
Read more: FactCheck: Can Labour save the economy?