FactCheck: Clegg’s Youth Contract vs Labour’s Future Jobs Fund
The claim
“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
The background
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.”
The verdict
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
There are 12 comments on this post
In this rush to sort out the youth, everyone else has been screwed over.
If you’re over 21 it’s difficult enough to get entry level jobs as employers favour the lower minimum wage of under 21′s
But now if you’re over 24 and looking for a job & someone who’s under 24 is going for the same position the employer is being bribed to take on the younger, it’s also more likely that the over 24 has a family or house of their own to support.
The scheme is being paid for by essentially taxing people on up to £28k by reducing a credit, who are already probably struggling to make ends meet at the end of each month.
there is also the question of employable the British youth is, after years of expensive mis-spending under Labour, young people have never been so ill-prepared for a life of work according to the world of business.
there are many jobs the young just won’t do, these tend to be manual or physical jobs, not just low level one’s but also skilled ones as the UK has essentially outsourced its Labour to eastern Europeans as the the youth sip their Starbucks whilst Tweeting about how there’s no jobs
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Cathy/Emma,
Even one of London’s druid spivs, Alan Sugar, has said it means employing somebody for six months…..then getting someone else in for another six months as replacement…..then getting……
See where I’m going here?
When someone like Sugar says it’s a ripoff you better listen. When it comes to such con tricks dear Alan knows whereof he speaks.
Prediction: in, say, nine months you’ll be doing a FactCheck on the statistics of Why It Failed. In fact you could write it now – might save you time later.
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And whether it will have any more lasting benefits that the previous scheme remains to be seen. It really is a pity that politicians can’t be grown up enough to admit that they are building on what their predecessors have tried & not rubbish what went before. We will do better through being prepared to learn rather thantrash & to compromise than the yah boo sucks we keep getting from a bunch of people who’ve never run anything in their lives until they find themselves running our country. By and large they mix a staggering incompetence with amazing arrogance which they attempt to mask with a level of spin of which Alastair Campbell would have been proud. They still don’t hget that until they display honesty, humility and openness they will continue to forfeit any respect
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So, they pledge huge amounts of money to get people in work, yet fuel remains alarmingly high, strangling industry and threatening jobs because businesses are struggling to afford it – go figure?
I’ve been through these systems under Labour’s ND, and in my experience, these subsidies are of precious little interest to the “genuine” employers – a genuine employer wants to keep someone there, permanently, regardless of Gov’t subsidies. It’s the ones who are interested in cheap labour and / or rely heavily on temp / agency staff who’ll use it because it cuts the wage bill. Indeed, one complaint I heard about assistance from DWP was that of bureaucracy in trying to actually claim the money due.
As for Work Trials / Work Experience Initiatives, I can (and usually do) offer to do 4 weeks (whether paid or unpaid) – I don’t need DWP / FJF / ND to do it for me.
Apprenticeships: both Labour and the Coalition claim to be “increasing Apprenticeships” – but a lot of it is by covering sectors not previously covered (eg an office junior is now an Apprentice Administrator), and in my mind is simply an excuse to lower wages, rather than increasing skill levels where the skills…
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How can people be so cynical to suggest the poor will pay for this with a cut in their benefits?
What will happen is that Philip Green will repay the £300m he avoided in tax to fund the first year and then others will follow suit.
Hey, did you see that pig fly past the window? Wow!
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A good piece Emma. However!…Barely mentioning the fact that a third of the non-new money will now go to employers, by way of a bribe to take people on, seems a little remiss. No thoughts on how this will work, or the outcomes, is a gaping hole in the analysis. For one thing, it’s highly unlikely that many small to medium enterprises, SME’s, will take advantage of the scheme for a number of reasons, not least of which is the capacity to invent work in a time of low demand. Larger organisations, already operating on the very edge of legal requirements,minimum wage, maximum hours, have the capacity to use additional staff to ease the burden on already worked to the bone workforces. The £300m or so, may well be used, especially with the new working regulations, to try out replacement staff for those perhaps unionised, or otherwise troublesome staff that can be sacked, without redress to a tribunal. The opportunity to reduce worker’s rights further, with the threat that replacements are already in place for those stepping out of line is unlikely to be forsworn. It’s another double whammy for Dave and his buddies in Big Business. Slap down the workers and get paid for it.
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The emphasis of these schemes should be public sector work, not private sector, and they hould be done with the full participation of public sector unions, so that these jobs do not replace existing ones in the public sector.
This is much closer to Prof W Mitchell’s orginal plan for the Job Guarantee.
The private sector should only ever be used temporarily when unemployment would be otherwise very high, as companies will simply use it for cheap labour.
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Youth unemployment, more than anything else, highlights how hideous the sum total of our ruling class really is. The Youth Contract and the Future Jobs Fund skip the over the fundamentals, deliberately so.
This is “a deep underlying problem with the British economy” these are the words of David Cameron in Saturdays Guardian. He points this out by way of excuse for current numbers. As if anyone listening didn’t know normal service has accepted significant numbers of young unemployed year on year. An underlying problem = a structural problem with the economy, but thirty + years of numbing the general populace into submitting to a dishonest separation of the economic from the political has allowed this deeply damaging failure to become politically acceptable, within bounds; and worse, for blame to settle on the unemployed individual or consequently damaged family . A blame which undermines, discourages, and ultimately punishes with a reduction in their means to subsist.
Our ruling class is morally blind to the worth of those they don’t know or morally bankrupt, who knows? Whatever, year on year they are damaging more and more of our children, which in turn…
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Part of the cause of high youth unemployment is that companies no longer think long term.
We’ve seen it with bonuses for the top workers, paid on a single year’s results which often lead to short term fixes – laying off staff, cutting standards – that in the long term damage the company by which time the execs have moved on.
I left school 45 years ago, part of the post-war baby boom. Yet most of us went straight into work. In those days (God, I swore I’d never write that!) companies accepted that there would be good years and not so good years. There might even be bad years, but as long as the long term trend was profitable, they lived with that.
To have to reduce staff to salvage a business was considered a sign of failure. Now it is the first item on the agenda and seen as wise, even though it means the money that has been invested in training those people will be lost and need to be invested again if things look up.
I wonder, when the history of our era’s business comes to be written, how many ‘genius’ directors will be shown to have destroyed the business for which they were acclaimed?
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Almos Justice….As a small business trying to grow in a difficult market I welcome the scheme and will look to use it in the spirit it is given unlike some larger organizations who may look to abuse it. The cost of employment is a huge hurdle and risk for small businesses especially with the difficulty obtaining business loans to help growth.
More help is needed for small businesses who will help the recovery of the failing economy and not the fat cat companies who look to squeeze every resource they have to satisfy shareholders for their short term financial gains with not too much regard to the social damage that is left in the wake.
The short term get rich quick mentality of the country and the wave of the youth who have grown up with it around them has left them expecting so much with giving so little (or nothing at all). I previously worked for a privatised welfare to work company delivering various youth employment schemes and the amount of time you would hear “I want to do as little as possible for as much as possible” across the offices was regular place. I must also point out the advisor I met who worked hard to reengage people into employment do an amazing job
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“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”
Except you haven’t costed in the following.
The Department for Work & Pensions focused on the fact that the £1bn scheme will offer subsidies of £2,275 to businesses who take on long-term unemployed 18-24 year olds.
But less emphasised was the figure of £3,800 – the amount per person that Work Programme providers themselves will get for placing youths into sustained jobs.
In other words, for every youth found a job – £3,800 goes to work programme providers and another £2,275 to businesses who take them on.
That would take the total payment per job to £6,075, not far short of the £6,500 per person that Labour’s Future Jobs Fund cost.
Add to that Grayling’s admission on World AT One that there was no guarantee under the scheme that those participants would still be in employment a few months after the end of the programme, although the provider will have been paid.
And you call this a fact check site?
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