Unemployment
Opposition Day — [7th Allotted Day]
5:16 pm
Graham Brady (Altrincham and Sale West, Conservative)
I am afraid that the hon. Gentleman is right: worse is still to come. The trend in job losses continues to rise, and he has referred to a sector in the economy that has been especially harshly affected.
Beyond that, we await the so-called "second order" effects in the economic crisis. Another crucial reason why we have to care so much about the rise in unemployment is that people who lose their jobs are more likely to default on their loans and mortgages. That will add to the problems in the banking and financial sector that are already afflicting us.
Like a number of hon. Members who have spoken already today, I recently took the opportunity to visit my local jobcentre. I was hugely impressed by the dedication of the staff and managers, who over 12 months or so have had to cope with a dramatic increase in their work load. They are recruiting more staff, and are coping very well. They are acutely aware of the changing pattern and distribution of unemployment, and of the different kinds of clients with whom they have to deal.
On the subject of the little exchanges that took place earlier on the subject of job clubs, and the appropriate kind of provision for the executive or white-collar unemployed, I found that the staff at my local jobcentre were happy to accept that in the recent past they had not needed that kind of provision, and that it needed to be augmented. They are alive to the issue, and are very open to propositions, some made by constituents who have recently been made unemployed. They are working with staff to try to move forward, and that is very welcome.
David Taylor raised concerns about private sector welfare-to-work provision, but my local jobcentre is very relaxed about the mixture, and about the use of private sector provision, when it can be brought in most effectively. It is many years since I served on the Employment Sub-Committee of what was then the Select Committee on Education and Employment; I did so in the 1997 Parliament, when the new deal was first introduced. I vividly remember that when the Committee went to New York to see the nature of the active labour market policy being pursued there, we were astonished, even then, to see the quality of some of the provision from the private sector and voluntary organisations. They were delivering far better outcomes, in terms of people being placed in sustainable work, than was typically the case under the new deal in this country. They were also doing that work at a dramatically lower cost.
I have become less involved in that aspect of policy over the years, but I have watched with fascination as the Government have regularly said that they accept that that can be the case. They say that they are determined to introduce those different methods, and will move forward on that, but so little seems to happen. That is frustrating, because from listening to earlier exchanges it seems that Members on both sides of the House agree that the private sector can contribute. There is a huge amount of evidence internationally on ways in which that can happen, but we are still debating the subject all these years later. Organisations such as Wildcat, which I saw in New York, were brought before the then Department for Education and Employment to advise us on how the new deal might be improved, but there has been tragically little effect, compared with what we saw all those years ago.
The cost of the new deal has always been a significant concern. All that time ago, I made my own estimates; my very conservative estimate was that it cost £11,000 for every job created. The Minister at the time—I think that it was Tessa Jowell—estimated that the cost was more like £4,000. The Select Committee—I think that at the time, I was the only Opposition Member serving on it—noted in its report that we believed that the Minister's figure was a significant underestimate. The cost was certainly between £5,000 and £11,000 per job created through the new deal. Other programmes—not just internationally but in this country—have been shown to deliver better outcomes at significantly lower cost.
In the early years of the new deal, I remember seeing evidence submitted by the Greater Manchester Low Pay Unit; it flagged up, even then, the danger of young people, in particular, moving in and out of employment, becoming disillusioned as a result, and regarding themselves as being trapped in a revolving-door system. Over the years, I have followed the extent to which that revolving-door system appeared to be present in the new deal programmes, and I have periodically tabled written questions to establish how many people are passing through that revolving door.
Perhaps it is time to ask the question again. On
Earlier we heard the old claims about unemployment statistics and the method of counting being changed. It is important that we remember the effect of the new deal revolving door in the context of the Government's claims about long-term unemployment. They claim that long-term unemployment has fallen dramatically over the past decade or so, but once people have been through the new deal programme, they come off the long-term unemployment count. Even if they do not get sustainable work and go back into a new deal programme, they are no longer long-term unemployed.
We have in those figures the evidence that a huge number of people are, to all intents and purposes, long-term unemployed. They have not been finding sustainable, worthwhile, productive work. Instead, they have been kept off the statistics by being put through a programme that potentially costs up to £11,000, or perhaps more, every time somebody gets into employment. The cost per individual going through the merry-go-round is immense. We might not be too concerned about the cost if they were going through into genuine long-term sustainable employment, but when they are not doing so, the cost is unforgivable. In the current economic climate it is incumbent on the Government to look carefully at that, and to recognise that the cost cannot be justified at those rates of return.
It was recognised seven or eight years ago that 40 per cent. of people would never go into sustained jobs from the new deal schemes. The definition of a sustained job was remarkably easy to meet: it meant going into employment for a period of just 13 weeks. Being in employment for three months counted as moving into sustainable employment. That definition was inadequate for the purpose.
We know that the new deal was not a great success even in the boom years of the past decade. I vividly recall the number of witnesses who gave us evidence at the outset of the new deal, as we were trying to establish how it would be possible to evaluate the success or failure of the scheme. They said that it would be difficult ever to evaluate the success or failure of such a scheme, especially because all the evidence is that active labour market policies are more likely to be effective in a time of economic growth and tight labour markets, when people are getting work anyway. The schemes are much better at assisting people into employment when they might have got into employment in a little while in any case than they are at creating new opportunities that did not exist at all.
That is a serious concern for us. Programmes that have, at best, been achieving modest results at significant costs in the economic circumstances that best suit them may now achieve even worse outcomes in adverse circumstances.
In an intervention, I mentioned the Treasury Committee's visits around the United Kingdom in the past 10 days or so. Some of the themes that I have mentioned have come through clearly in the meetings. What we have found most striking is not only the level of unemployment that already exists, and the concern about that, but the palpable fear of unemployment. We visited Belfast, Edinburgh and Leeds, but we saw that fear most particularly in Halifax last night. HBOS has dominated employment in the town, and a huge number of people there are living in considerable fear for their future and their livelihood.
It is vital that we work to help the existing unemployed back into work, but I would like to emphasise a point that arose earlier. It is critical that we do everything possible to ensure that people who need not become unemployed are kept in work. That is much easier to achieve; it is less costly and gives us far better prospects of maintaining economic success in other regards as well. On the recent visits, Treasury Committee members have been hearing endless stories, especially from small and medium-sized businesses, about the Government schemes and guarantees that have been promised but do not appear to be there when people visit the bank manager. Those schemes, such as the enterprise finance guarantee, need to have a real and immediate effect. We have heard that there are massive problems with trade credit insurance. That is a huge difficulty for so many businesses, which may be faced with making redundancies if the problems are not overcome. Action needs to be taken, and quickly.
Finally, I emphasise again the importance of helping people, not only for their economic well-being, but for the wider economic well-being of the country. If unemployment continues to rise as it has been rising, that will rapidly compound our economic problems in a worrying way.