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Employment Subsidies

– in the House of Commons at 10:16 pm on 29th April 1986.

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Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale 10:16 pm, 29th April 1986

I beg to move,

That this House authorises the Secretary of State to set up, in accordance with section 1(1) of the Employment Subsidies Act 1978, a scheme, the cost of which is expected to exceed £10 million for the year ending 31st March 1987, for making payments to employers to enable them to take on as new employees young people with earnings below the limits specified in the statement laid before the House on 22nd April 1986. The motion authorises the Secretary of State to set up the new workers scheme, announced by my right hon. Friend the Chancellor in his Budget statement on 18 March. The Employment Subsidies Act 1978, to which it refers, as renewed by order in 1985, empowers the Secretary of State to set up schemes to give financial assistance to employers, to enable them to take on new employees and to maintain or enlarge their labour force. This is the aim of the new workers scheme.

The Act states that a resolution of the House is necessary if the scheme is expected to cost more than £10 million. The Chancellor announced that this scheme is expected to cost about £26 million between 1 April 1986 and 31 March 1987, and it is, therefore, necessary to pass the motion that we are debating. A similar scheme will be run in Northern Ireland.

The other requirements of the Act—that the Secretary of State should consult such organisations as are considered appropriate, which in this case have included the TUC and CBI, and lay a statement before the House explaining the proposals—have been fulfilled.

Tonight's debate is about jobs for young people. That is our goal in proposing the new workers scheme. It will be an important strand in the comprehensive package of measures that we have developed to support enterprise and employment. The scheme will encourage employers to provide more job opportunities for young people—primarily those who have completed training on the youth training scheme—at realistic wages which sensibly reflect their age and their inexperience of the world of work. It thus delivers help where it is needed and where it can work. It forms part of the most imaginative and comprehensive approach ever devised to give young people a proper preparation for work and a start in a job.

Sixteen-year-old school leavers will now be able to receive two years' training and 17-year-old leavers one year under YTS, leading to a recognised qualification. Already about 60 per cent. of YTS leavers go into a job afterwards and more into further training. The new workers scheme will help to maintain or even raise that proportion by giving employers an extra incentive to take them on. It will contribute to the increasing awareness of economic reality—that wages which are too high and do not bear a close enough relationship to the contribution people are able to make to a business—lead only to fewer job opportunities. Young people do not naturally expect to earn a high proportion of their parents' salary as soon as they start work. That leaves them nothing to aim for and work towards. In the early 1970s, their expectations about wages were inflated and then dashed because young people had been priced out of jobs.

We have made a lot of progress since then. We have introduced YTS, to give young people proper training; we have successfully run the young workers scheme; we have reduced the national insurance costs of employing someone; we have introduced proposals about wages councils and young people and our enterprise, training and employment policies have borne fruit. There have been around a million extra jobs in the past three years. Now we have two year YTS, and to complement it, the new workers scheme.

Photo of Mr Dave Nellist Mr Dave Nellist , Coventry South East

In listing those measures of which the Government are unjustly proud, is the Minister aware of two facts? First, school leavers' wages, relative to adults' wages, have dropped over the past six years by 12 per cent. for boys and 13 per cent. for girls at a time when youth unemployment has trebled? There is no relationship between cutting youth wages and increasing youth jobs, except more poorly paid youth.

Secondly, the young workers scheme, which the Minister has just appraised, was analysed in research paper No. 42 by Mr. W. Wells of the Department of Employment, which showed that eight out of 10 jobs created by the young workers scheme were at the expense of adult workers. It may well create a few jobs for young workers but that is at the expense of putting workers in their 40s and 50s on the dole queue.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

The hon. Gentleman is wrong. The figure was not eight out of 10 but eight out of 100–8 per cent. of adult substitution—a much lower figure As for the trend of youth wages in relation to employment, most of the fall in youth wages has taken place in the past three years, and that is at a time when youth unemployment has been falling, as I shall illustrate shortly.

I should like to describe briefly the way in which the scheme will work. Its aim is to encourage employers to take on more young people into full-time, permanent jobs, at rates of pay which realistically reflect their age and relative inexperience. To achieve that, a payment of £15 a week will be made to the employer, for up to 52 weeks, in respect of each young person involved. The scheme will be open to all employers except those in the public services or private households. Young people must be paid £55, or less for employees aged 19 or younger on the date they start in the job, or £65, or less for those aged 20 on the day they start in the job. As for the young people themselves, they must be under 21, in their first year of employment, no longer eligible for YTS or unable to find a YTS continuation place.

The resolution seeks the approval of the House for making payments to employers on that basis. Clearly we cannot be precise about the number of applications employers will make under the new workers scheme in the coming year, but our estimate is that some 100,000 successful applications will be made before 31 March next year, on which date there should be, perhaps, 63,000 young people in jobs supported by the scheme. In that case, the estimated expenditure would, as I have said, be some £26 million.

The scheme will be administered by Department of Employment staff in our employment measures office in six regional centres. Staff in jobcentres and careers offices will of course give every assistance to employers who wish to take advantage of the scheme.

We are determined to make the procedures as unbureacratic and straightforward as possible, as it is employers, many no doubt in small businesses, whom we shall be encouraging to offer extra opportunities to young people and who need to feel confident that they will not be caught up in delays and red tape.

We shall be taking steps to make sure that information about the scheme is made available to employers and businesses and we have already included an outline of the new scheme—making clear that it remains subject to the approval of the House—in our new "Action for Jobs" booklet. The new workers scheme is a significant part of our policy for providing the opportunities—or, rather the means for others to provide the opportunities—for employment.

That, then, is an outline of the proposed scheme and I should like to go on to describe the context in which it is set and the way in which it fits into our policies. The House will recognise that the new workers scheme is not dissimilar to the young workers scheme, which as my right hon. Friend the Chancellor announced in his budget a year ago, closed on 31 March this year. By that time, 435,000 applications will have been approved under the young workers scheme and, in view of some of the points made in this House when we sought authority for that scheme, and its similarity to the new workers scheme, I think it is worthwhile reminding the House about its success. I am glad to say a full evaluation of the young workers scheme will be published in an article in next month's Employment Gazette. I commend this to the hon. Member for Kingston upon Hull, East (Mr. Prescott).

The evaluation over the four years of YWS suggests that the scheme has been creating more and more jobs per unit of expenditure over time. We think that this has been due both to more employers, and particularly smaller employers, learning about the scheme and creating new jobs for young people under it, and to the fact that more, better trained young people have been available as they left the old youth opportunities programme and, now, YTS. In fact, about two thirds of young people in jobs supported by YWS have previously been on YTS, and the proportion of jobs supported which were created directly as a result of the young workers scheme has risen to its current level of some 27 per cent.

As the percentage has steadily increased since the scheme began, we now estimate that some 90,000 jobs for young people have been created directly by the scheme. These were not jobs that would have existed anyway, not jobs in which young workers on YWS are substituted for other workers at the same firm, not jobs which perhaps displace workers in other businesses, but new, additional jobs.

There are always difficulties with any sort of scheme involving payments to employers for employees they might have recruited anyway. We believe that the careful design and administration of YWS and its direct link to YTS meant that is provided valuable, cost-effective help. It is exactly what we are aiming to achieve for a slightly older, more mature age group with the new workers scheme, which should build on our experience and that of employers in using the scheme, and which will, in its turn, complement the new, developed YTS.

Another important aim of the young workers scheme was to affect the rates of pay of young people so as to achieve a more realistic relativity with adult wages. There is a large and growing consensus of academic studies which shows that the high cost of youth labour relative to adults has adversely affected the job opportunities of young people. In other words, as one would expect, in a labour market in which the demand for young labour had fallen from previously high levels, young people's relatively high wages were increasingly handicapping their search for work. Some success seems to have been gained in this area. Since 1982, when YWS was introduced, relative earnings of under-18s have fallen and so has unemployment. Of course, several factors will have influenced both youth earnings and unemployment, including the introduction of YTS and demographic movements. But no doubt the young workers scheme will also have been influential, as we expect the new workers scheme to be.

YWS was successful because, in the vast majority of cases, young workers supported by the scheme continued in the same post or with the same employer at the end of the period of support—a survey of employers told us that this was their intention in 90 per cent. of cases. That is an impressive result, I think the House will agree.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

The vast majority, as far as we are aware, did just that.

Some hon. Members expressed concern that training would not be given under YWS. Again, there is evidence from surveys that employers have provided a significant amount of training for those young workers for whom they were claiming support.

Now the new two-year youth training scheme is with us, it offers two years' training for 16-year-old school leavers and one year for 17-year-old leavers—training in greater depth and in the occupational skills which industry and business need. There are around 360,000 entrants each year and up to 500,000 in training at any one time. The new workers scheme will boost the employment prospects of those leaving YTS or who are too old for it by giving employers a positive incentive to recruit them.

The age group we are catering for with the new scheme is thus the 18 to 20-year-olds. They, the post-YTS age group, will have prepared for the world of work, acquired a recognised qualification and now need the opportunity to prove their worth to an employer. For them, NWS will thus be, as I have said, part of a highly imaginative and comprehensive package of measures towards a start in work with the prospect of two years of high quality training followed by a year's supported employment at sensible wages.

Young people need a sensible start in which they can find their feet, learn skills, prove their value to themselves, their workmates and their employer. What they do not need are expectations of being able to leave school without a skill or the qualities employers are looking for and being able to walk into a job earning the same as an experienced adult. Those expectations are false and too often frustrated.

YTS and the new workers scheme together offer a sensible progression in earnings from the first year's YTS allowance of £27·30, the second year's allowance of £35, and then a wage of up to £55 in a new workers scheme job for an 18-or 19-year-old recruit, or up to £65 for a 20-year-old new worker. That is a sensible progression, in reasonable stages. Crucially, NWS gives a young person the opportunity to earn more, as their contribution to an enterprise increases and their skills and experience develop.

Just as the new workers scheme complements YTS, so too it fits directly into our wider policies to support employment and enterprise opportunities. We have introduced to the House our proposals for removing from the scope of wages councils young people below the age of 21, so as to increase their employment prospects. If those proposals receive the approval of the House, as I am confident that they will, there will be all the more opportunity for employers to create more vacancies for young people new on to the labour market without the concern that they would have little chance of contributing as much to the enterprise as they are required to be paid.

Moreover, it is precisely at levels of earnings similar to those which will apply under the new workers scheme that the positive effects of my right hon. Friend the Chancellor's changes to the rates of national insurance contributions will work most effectively, increasing the attractiveness of young people to employers.

Taken together with the effects of our other policies for employment and enterprise, the new workers scheme will provide a significant extra boost to the prospects of young people entering work. It follows on from a successful and proven scheme, the young workers scheme, which complemented YTS and provided job opportunities for 435,000 16 and 17-year-olds.

Now we have gone on to develop and introduce an even more effective and relevant preparation and training provision in the two-year YTS, which the new workers scheme will tie into exactly, by encouraging employers to take on young people leaving YTS or no longer eligible for it. It is right in line with the changes that we are proposing for wages councils and young people. It is supported by changes in national insurance rates.

Photo of Mr John Evans Mr John Evans , St Helens North

The Minister has been extolling the virtues of the scheme at some length. He will recall that at the outset of his remarks he said that he was called upon to consult both the employers' organisations and the TUC. He has spoken at length about the attitude of the employers. Will he explain that the TUC, the body responsible for organising over 11 million workers, completely rejects the scheme?

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

I am sure that the hon. Gentleman will have an opportunity to do that soon. We consulted both the CBI and the TUC. The CBI supported the scheme, and the TUC opposed it. He will be able to enlarge on the reasons that the TUC gave, and I shall be happy to reply to them.

Photo of Mr Geoffrey Lawler Mr Geoffrey Lawler , Bradford North

In one draft of the statement that I have seen, it says that applicants should normally have exhausted eligibility for YTS. Will my hon. Friend confirm that they must have done so, to prevent employers poaching people half way through the YTS, much to the detriment of the skill training?

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

The object is that a YTS leaver should go into a new workers scheme. In the first year of that scheme, there will be those leaving the one-year YTS who are unable to get continuation places on the YTS, and will want to move to the new workers scheme, which will make specific provisions for that. The object of the exercise is that the one scheme will lead on to the other, thus helping young people to a graduated progression into employment. It will be cost-effective and carefully administered, so as to deliver positive financial encouragement where it can do most good, with the minimum of fuss.

I believe that the new workers scheme to be a sound and useful addition to the Government's comprehensive series of measures in the interests of jobs for young people, and I commend the motion to the House.

Photo of Mr John Evans Mr John Evans , St Helens North 10:35 pm, 29th April 1986

In any debate about employment or employment creation schemes, which we are discussing tonight, it is important for the participants to keep three sets of figures very much in mind.

The first figure to keep at the forefront of our minds is the 3,323,776 registered claimants receiving benefits in the United Kingdom now. Of course, "registered claimants" is the Government's definition of the unemployed. The second figure or set of statistics to keep at the forefront of our minds is of about 200,000 men and women currently employed on the Government's community programme. It is one of the Government's major job creation schemes. An important fact to bear in mind is that no fewer than 1,500,000 unemployed people are eligible for a place on that programme.

The third figure is probably the most important in the context of the debate. It relates to the level of unemployment amongst the under-25s. It is obviously germane to the introduction of a scheme that affects young workers. Unfortunately, there are not any unemployment figures for the under-21s, so I must make do with unemployment statistics for the under-25s. There are no fewer than 1,246,892 of them: that is, 36·6 per cent. of the total unemployed people are under 25 years of age. By any standard that can be described only as a crisis. It is even more of a crisis when we appreciate that hundreds of thousands of those youngsters have never had a job since they left school.

All of the figures that I have given were used by the Minister on Tuesday 22 April during employment Question Time. His answers can be found at columns 99, 100 and 104 of the Official Report for 22 April.

The other figure that we must think about is the missing figure, that is, the difference between registered claimants the Government's favoured definition and all those who are unemployed, who would gladly accept work if there was any available for them. This is a grey area. The Government have consistently fiddled the unemployment figures for the past six years.

My estimate—of course, anyone can join in this game—is that more than 1 million unemployed are not being measured by the statistics. They would accept employment if it was available to them.

We must bear in mind that each of those figures represents a human being. Many of them are young people. Their efforts and abilities are being wasted. They are probably the greatest wasted resource in our country today.

A further factor to bear in mind in our debates about employment and job creation schemes is the curious contradiction of the Prime Minister and other Ministers that is evident whenever the Tory party gets round to discussing one of the schemes. They claim that the Government cannot create jobs. Yet here are tonight discussing a scheme that the Government tell us is a job creation scheme. I believe that the Prime Minister is cynical about all these schemes. That contradiction is the reason that the Government's job creation schemes are in a mess. They are cosmetic exercises. Often they are designed more to depress wages than for any other reason. That is certainly true of the young workers scheme and the scheme we are discussing tonight.

A consistent feature about the schemes is a desire to do something—anything—about the unemployment statistics rather than tackle the real causes of unemployment. I am sure that the House would appreciate the comments that were made last week during employment Question Time when Tory Back Bencher after Tory Back Bencher suggested to the Minister various methods and means of having another fiddle of the unemployment figures.

Photo of Mr John Evans Mr John Evans , St Helens North

Yes, another fiddle of the unemployment figures. They suggested ways to reduce the total of unemployed claimants. This new wheeze—the new workers scheme—reflects that philosophy perfectly, because all the evidence of the past few years shows that it will not increase employment and will do nothing to benefit young workers. I put it on the record immediately that the next Labour Government will scrap this scheme, just as we would have scrapped the young workers scheme which it replaces.

The Employment Subsidies Act 1978, under which the Government must come to the House for approval for the new measure, provides explicitly in section 1(1): The Secretary of State may … set up schemes for making payments to employers which will enable them to retain persons in employment who would or might otherwise become unemployed, to take on new employees, and generally to maintain or enlarge their labour force. The new scheme, as with its predecessor, will not maintain and will certainly not enlarge the labour force.

Many trade unions will provide proof that, in many cases, youngsters employed under the YWS merely replaced older employees on higher wages. The incentive to do that is great. By replacing an 18-year-old on the average wage with a subsidised YWS employee, the employer stood to save more than 40 per cent. on labour costs. Even when creating a new job through the scheme, such an employer stood to save more than 25 per cent. Under the new scheme, with the protection of the wages councils removed from under 21-year-olds—as the Government plan to do—an employer taking on an NWS candidate will benefit from a saving of about 60 per cent. on labour costs if he sacks someone else, and of about 25 per cent. if he creates a completely new job.

Photo of Mr George Park Mr George Park , Coventry North East

Is my hon. Friend aware that, in Coventry, 24 young people are chasing every job vacancy? The only way in which new jobs can be provided is for employers to sack other workers and take on what amounts to cheap labour.

Photo of Mr John Evans Mr John Evans , St Helens North

I am grateful to my hon. Friend for making that important point. I am sure that almost all of my hon. Friends from all parts of the United Kingdom could make similar points about their constituencies.

The argument that the scheme will benefit the economy simply does not hold water. There is no evidence that merely by depressing wages we can reduce unemployment. The net effect on job creation—supposedly the rationale for the scheme—will be almost nil. In 1984, a study conducted by Sussex university estimated that the young workers scheme subsidised jobs that would have existed in 94 per cent. of cases anyway. Even the Government—in a Department of Employment commentary for the Select Committee on Employment entitled "Young Workers Scheme: Survey 1985"—estimated the figure to be 73 per cent. That estimate was taken from a tiny sample of 960 workers interviewed, of whom only 754 were young people.

I recall reading an article in the Financial Times in 1982, when the YWS was at its peak, stating that the scheme created only one job in 10 of those that it subsidised. I remember the article vividly because of its punch line. It arrived at the conclusion that the YWS would make our young people the most expensive shelf stackers in the history of British business. My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) and I have often been attacked by Right-wing commentators for making similar points, but we believe that the new scheme will make matters even worse.

For the youngsters who are taken on by employers under the new workers scheme, there is no guarantee of a full-time job and no guarantee of training. The youngster who, through no fault of his own, cannot find a job—the simple fact is that in many areas no jobs are available—will be rewarded for his willingness to be employed on the scheme at less than standard wages with a job that offers no training, no prospects for the future and only the scrap heap once again when his year is finished. I have a son who spent one year on YTS and a considerable time on the young workers scheme. I can therefore speak with some family knowledge of the position of the young people concerned.

The scheme is an open invitation for employers to practise job substitution. I fear that the scheme will become an adult workers substitution scheme, especially among adult female workers who earn between £70 and £100 a week. None of those female workers is likely to be on the employment register or able to claim benefit and they will often be substituted by a young female who will be on the register earning about £55 a week. The employer will therefore save money by employing the younger woman and, as far as the Government are concerned, the employment statistics will decline.

I should like to ask the Minister a question about the earnings ceiling which, according to paragraph 3 of the glossy document, is determined by the age at entry. As I read the document, young workers who are aged 19 years and 11 months will qualify for a wage of £55 a week or less. As I understand the scheme, they will not be entitled to a rise on their 20th birthday. The Minister nods in agreement, showing that my understanding of the position is correct. Therefore, the obvious time to recruit a young worker would be just prior to his 20th birthday. That means that for 11 months on the scheme, they will be earning £10 less than even the miserable maximum that the Government prescribed of £65. That is grossly unfair.

I reiterate that the scheme will not create new jobs, at least not enough to warrant the substantial expenditure that the Government are committing to it. The real intention of the scheme, which the Government have not even bothered to hide, is to depress wages in the hope that that will allow employers to afford to take on more employees. That fantasy—I hesitate to credit the Government with a legitimate policy—is as discredited as the economic guru, Mr. Alan Walters, who dreamt up the original YWS. The fact that the Government have spent more than £190 million over the past four years simply to allow unscrupulous employers to force down the wages of young people is, I suggest, an obscene waste of taxpayers' money.

The entire concept of high wages creating high unemployment is defunct. Among young people, wages have fallen by 11 per cent. relative to adult wages over the past six years. In the meantime, youth unemployment has increased much faster than the rise experienced among other age groups. While 18 to 20-year-olds in employment earn on average two thirds of the equivalent adult wage or less, they experience unemployment rates of more than 24 per cent. It is noticeable that the NWS will not apply to the public sector and is targeted at the low paid, unorganised sector of the economy. It will have no effect on the organised highly skilled sector of the work force where youth wages have risen in line with adult wages. The Government's plans under this scheme will lead to the creation—if it does not already exist—of an institutionalised low pay sector, resistant to wage increases and to changes in wages structures.

That raises another question relating to paragraphs 20 and 25 of the glossy booklet about the way in which gross weekly earnings are calculated. The heading in the booklet is "How are earnings calculated?" According to my understanding of those paragraphs, if any young worker employed under the scheme receives overtime, shift payments, commission, bonuses, productivity payments, paid travel time or London or large town allowances, merit or skill payments, and these additional payments take the young worker's earnings over the maximum amount prescribed, no payment will be made to the employer. The Minister nods, so I presume that again I am correct. The young employee will not be permitted to refuse to work overtime or to demand night shift payment, piece work or any of the other matters that I have outlined, because there will be plenty more employees where they came from if the employer chooses to sack them because they refuse his request. They will have to do the work and they will not be paid for it.

When the coverage of the young workers scheme fell from its peak of 137,000 in 1982 to its present level of 55,000, the Government decided to merge the scheme with the youth training scheme in a two-year programme. I thought that the Government had learnt their lesson. However, with the introduction of this scheme—similar but, in my view, more damaging and less effective—I wonder how long it will be before the Government learn the biggest lesson of all: that real jobs will be created only if the Government invest in industry and expand the economy. The charity Youth Aid, commenting on the new workers scheme, said: The Government is not offering a solution for the young, but a further incentive to unscrupulous adults to exploit and cheat them. That is a bitter comment, but in my view it is a fully justified complaint.

In conjunction with the plan to revitalise the economy and to invest in the infrastructure, such a scheme would be more acceptable if it were open to unemployed workers of all ages and if it were not pegged to a specific maximum earnings level. That would be genuine job creation.

There should also be a condition, which there is not in this scheme, that an additional job will be created each time an employee is taken on and that employees will be guaranteed at least a year's employment, with an element of training to be incorporated in the job. If the criterion of an additional job were met, it would kill the scandal of adult substitution which is far, far higher than the figure given by the Minister. If training were incorporated as a condition to be imposed upon employers, it could lead to what my right hon. and hon. Friends and I would support—a Government-sponsored and financed three-year apprenticeship based upon acquired standards: two years of YTS and one year of training and work.

Most craft unions are increasingly prepared to accept apprenticeships that are based upon training to standards rather than upon a time-based apprenticeship. One of the leaders of my trade union, the Amalgamated Union of Engineering Workers, Gerry Russell, was reported in the Financial Times of 22 April 1986 as having said: Leaders of the Amalgamated Union of Engineering Workers, Britain's largest craft union, believe that its policy of including a time-based element in apprentice training should be abandoned. Mr. Gerry Russell made this clear in his chairman's address to the AUEW's policy-making national committee, which opened in Eastbourne yesterday. I stress that that will not happen under the proposed new workers scheme. No training conditions are laid down in the scheme.

There is the additional difficulty of this anti-trade union Government being unable to obtain any co-operation from the British trade union movement, particularly since it has made it clear that it will reject root and branch the scheme that has been put before the House by the Minister.

The scheme, as it will operate if the Government have their way, does not have the backing either of the trade union movement as a whole or of the trade unions that are involved in the industries that are concerned with the scheme. As I have already said, it is targeted at those areas of the economy where union representation is minimal. It should be an additional condition of the scheme that applications will be accepted only where rates of pay, standards of safety and employee protection are high enough to be acceptable to the recognised and appropriate union and where its acceptance is given. However, as there is very little union participation, one has to ask, in view of the abolition of wages council protection for those tinder 21 years of age, why paragraph 10 of the explanatory booklet was printed. What does paragraph 10 mean when it says: It is the employer's responsibility to ensure that these obligations are met and approval of an application or payment of a claim does not imply acceptance by the Department that they are being met. Surely it is the Department's duty to ensure that any employer who is receiving a subsidy from the taxpayer is meeting any legal requirements that the Department has laid down.

There is one further vital question that the Under-Secretary of State must answer. On Friday 24 April, the Minister for Social Security, slipped out a written answer, the effect of which was to increase disqualification from six to 13 weeks for anyone who voluntarily leaves employment without just cause; refuses or fails, without good cause, to apply for a suitable job".—[Official Report, 25 April 1986; Vol. 96, c. 241.] Does that apply to the new workers scheme? If so, the scheme will rapidly become known as the forced labour scheme, especially if young workers are directed to employment outside their own area—for instance, from impoverished areas in the north, where it is doubtful that there are enough employers to take on unemployed people, to the more prosperous south. Young workers will be denied the right to leave low-paid employment which is either mind-bendingly boring and repetitive—for example, shelf-stacking—or injurious to health. I am sure that the Minister will appreciate that many Labour Members could give him plenty of examples of jobs which are injurious to health.

Surely even this tyrannical Government will not deprive our young people of every liberty. Surely our young people will not have to be subject to 13 weeks' loss of benefit if they refuse low-paid employment, or if they find that they cannot live with certain conditions. I hope that the Minister will clarify that point.

That is the Tory part of the story. The good news for young people is that a Labour Government would scrap the scheme as it presently stands and incorporate it into a strategy for the general reflation of demand and output in the economy. Employment and training measures will back up this growth in a co-ordinated way, to create jobs where they are most needed, and make up the present deficiency in skills. A package of job creation measures under a Labour Government would ensure proper training for the future, adequate conditions of employment and wages which do not exploit the work force, in a realistic bid to benefit those who require jobs and the country as a whole.

Plainly, the scheme as presently constituted does not meet any of those criteria. It is a mean and contemptible scheme. It is damaging to Britain's young work force. I urge the House to reject it.

Photo of Mr Geoffrey Lawler Mr Geoffrey Lawler , Bradford North 10:57 pm, 29th April 1986

Any scheme that increases opportunities for young people must be welcomed. I believe that the new workers scheme will be welcomed. It is not short term but seeks to alter long-term entrenched attitudes which have depressed employment opportunities for youth in the past few decades. During the 1970s, the level of youth employment fell. Over the past 30 years or so, youth wages have risen consistently. It is no surprise that, in 1972 under 18-year-olds received an average wage which was 32 per cent. of an adult's wage. In 1979, they received 40 per cent. of the adult rate. That illustrates the problem for young people.

Since 1981, relative youth wages have been static. Again, it is no surprise that, in the under 20 age group, unemployment has declined in the past two years. In January 1984, the proportion of those unemployed in the 18 to 19-year-old age group was 27·4 per cent. In January this year, the figure was 25 per cent. The level of youth unemployment is going down. The figures are more dramatic for those under 18. The link is clear. It is common sense to anyone involved in industry that, if young people demand high wages, employers cannot afford to take them on. They must be paid a realistic wage.

Youth unemployment is not totally related to wage levels. Other factors govern why youth unemployment increases proportionately more than adult employment. The first thing an employer does when he enters a recession is stop recruitment. The second thing he does is lay off the people recruited most recently. For those reasons, youth tends to suffer disproportionately during a recession.

It is tragic that 153,948 people under 19 have not had a job since leaving school. Of course, there is scope for further initiatives. The immediate scope can be seen in current average earnings. An 18-year-old man commands a wage of £89·50 a week on average. That cannot reflect the true value of youth labour, given their inexperience and lack of skills and given that people are receiving training and investment. The wage rate is totally unrealistic in general for a large number of young people.

The problem is not so much the attitudes of young people. I sincerely believe that they are prepared to accept their true worth to society. Anyone who doubts that need only look at the success of YTS. About 84 per cent. of those on the scheme have said that they are happy with it. The problem lies with the unions and employers, who too readily agreed high wage levels for young people and cobbled together agreements which, over the years, excluded increasing numbers of young people from the opportunity of employment.

The problem lies also with parents. They, perhaps more often than not, influence their children and instil unrealistically high expectations. Over the past 30 years, those parents have consistently bid up the price of labour. They have placed us in our present position where youth labour in many industries is priced unrealistically high. It is priced far higher in Britain than in many of our competitor countries which have much lower youth unemployment rates.

The scheme will be of maximum benefit in three respects. First, it will be of benefit in those industries where unrealistically high wages still predominate. They are generally the most heavily unionised and have come to terms with employers and fixed high youth wages relative to adult wages. If the scheme is adopted in those industries, I hope that there will be a change of attitude and that the unions and employers will get together and use the scheme positively and constructively.

Secondly, the scheme will help those people leaving YTS with a qualification that is not particularly good. They will be at the end of the queue. The scheme will be especially helpful in encouraging those who are least well qualified to get work after YTS. It will ensure that a far higher proportion of YTS leavers find employment. It is not a coincidence that nearly half those people who have not obtained a job since leaving school have no qualifications.

Thirdly, the scheme will encourage more trade associations, employer associations and individual industries to put together three-year training schemes. The first two years will comprise YTS and the third will be the continuation year leading to apprenticeships and skill qualification. That has already happened with great success with the electrical contractors. They have increased threefold the number of young people taken into their industry—a real measure of the extent to which restructuring wage rates to more sensible levels can be of great assistance and create jobs. The construction industry is now doing the same thing. I hope that the scheme will be widely adopted by more employer groups and industries.

Of course it is of concern if any wage subsidy scheme produces an element of substitution, a certain part of which is bound to be unnecessary payment. The Government must monitor this scheme to ensure that the money goes where it is most needed. If necessary, the Government should introduce extra conditions and make the scheme more selective. That would ensure that the scheme achieves its objects and that the money is well spent.

This scheme offers many young people the first step on the employment ladder. If young people remain unemployed they have no chance. When young people get the first step on the employment ladder it does not matter what their wage is. The important thing is that they have a job and a chance to prove themselves. They can work up the ladder and achieve good wages.

Photo of Mike Hancock Mike Hancock , Portsmouth South 11:05 pm, 29th April 1986

On 23 April this year the Paymaster General answered a question concerning the net possible gain in jobs from this scheme. He said that there would be a gain of about 27 per cent. That begs the question of what happened to the other 73 per cent. The answer is that the Government were massaging the employment figures.

The Comptroller and Auditor General carried out a survey on the special employment measures which were administered by the Department of Employment which helps to answer the question I have posed. The report stated: Thus, the pay of young people is insignificant in terms of the economy as a whole. The DE suggested that whilst wider differentials must in theory help to transfer some jobs from older to younger workers, there was a risk that this might be at the expense of other vulnerable groups such as ethnic minorities, women and disabled workers. If borne out in practice, this could have significant consequences for the cost of Young Workers' Scheme: substitution of older workers by under-18s would be likely to mean increased benefit payments since older workers can be expected to have on average a higher level of benefit entitlement. The Comptroller and Auditor General recognised that these schemes do nothing more than massage the situation and that the net gain is extremely small.

Earlier in the debate we heard of the horrific figure of 1·25 million people under 25 who are out of work and we must all be conscious that anything that looks like an opportunity for young people to have a chance of a job should be considered carefully. Experience has taught most people that these schemes hold little hope for the ambitions which, I hope, all young people have when they embark on a career.

The hon. Member for Coventry, South-East (Mr. Nellist), who intervened in the Minister's speech, spoke of the ratio of 25:1 of young people who are out of work in Coventry. In Portsmouth, that ratio is 20:1, and in the travel-to-work area it is 15:1. In an area on the south coast, a place which does not spring to mind when people discuss unemployment black spots, there are legions of young people lining up to fill any vacancy. The problem is repeated time after time throughout the country.

This proposed scheme will not hold any hope or salvation for those who so desperately look to the Government and the House to offer them the chance to fulfil their ambitions harboured over the years. A scheme such as this can have three effects on youth unemployment. The subsidy may be claimed simply because it is there and not specifically for the purpose of creating additional jobs. Some employers will look to recoup what they can in the form of the subsidy.

There can also be a displacement effect which was made clear by the hon. Member for St. Helens, North (Mr. Evans). The Minister has admitted that the displacement effect has an overwhelming effect on people in work. People are pushed out by the schemes.

Photo of Mr John Evans Mr John Evans , St Helens North

Is the hon. Gentleman aware that the likely displacement effect of the new scheme will be far worse than under the young workers scheme? It related only to 17-year-olds, but this one includes youngsters of 19 and 20 right up to their 21st birthday.

Photo of Mike Hancock Mike Hancock , Portsmouth South

The hon. Gentleman is right to be so pessimistic about the future. Experience must lead all hon. Members who have followed the matter carefully to see that the higher the age, the greater the effect of displacement on those in work. All hon. Members must accept the displacement argument.

My third point relates to job creation and the ability of the schemes to provide training. This measure will not expand the job market, create jobs or give people an incentive. I have read and reread the statement in the hope that I would find something that would lead me to believe that the Government were committed to investing in training. Surely, if we are ever to get to grips with the problem of 1·5 million under 25, hundreds of thousands of whom have never had a job to call their own, we must get to the nub of the problem.

I am sick to death of hearing chambers of commerce say that they do not get the right sort of people coming for jobs, that school leavers are semi-literate, and that people leave technical colleges with no skills. That is the problem. It is no use trying to bribe employers to keep down unemployment figures. The problem is that we are not providing people with the skills and ability to make them a worthwhile prospect for employment. The answer is not to bribe employers to take people off the dole queue. That will only add to and deepen the despair of many youngsters.

We shall not get out of the trough through solutions such as the one before us tonight. It is too deep for that. Until the Government recognise that significant point, unfortunately, night after night and day after day, our young people will feel frustrated, our streets will overflow with resentment and the Government will suffer from a backlash from our youth for the way in which they have been sold short. The Government can expect nothing else from people whom they have betrayed.

The hon. Member for Bradford, North (Mr. Lawler) spoke of ambitions being raised by the parents of these youngsters. Does he suggest that it is wrong to want to better oneself, to gain more for one's sweated labour and endeavours, or to try to get a bigger slice of the cake? During the 1960s and 1970s, when I was working as an engineer, my employer did not say to me, "We shall take a smaller cut in profit so that our product will be more competitive". That did not happen. But as a trade unionist, fighting for better conditions in factories, I was repeatedly told by the men, "If management can make more, surely we are entitled to a bit ourselves." Unfortunately, the hon. Gentleman is living in that rarefied atmosphere that Ministers must occupy because he seems to miss the point completely.

Is it not right for people to grow up with the ambition to have a job, and to earn a wage which will allow them at 18 to support a family and a home? Many of my constituents now aged 20 have never had a job but are still married and having children.

Photo of Mr Geoffrey Lawler Mr Geoffrey Lawler , Bradford North

My point was that many parents say to their children, "Don't take a job unless you are paid £80 or £90 a week for it." That means that one is not destroying ambition; one is destroying opportunity, because many of them will not get jobs if they expect to get £80 or £90 a week at the age of 17 or 18.

Photo of Mike Hancock Mike Hancock , Portsmouth South

That sounds even more absurd the second time. The hon. Member has not just missed the point; he was never in a position to grasp it if he genuinely believes that to be the case.

The debate is about the failure of the Government to create a more prosperous economy. Instead of throwing more money into a scheme that only temporarily postpones unemployment, we should surely seek to train our young people for the future. We would do far better by investing the £26 million in training that would give people the skills that employers will want to use.

The Minister spoke about his concern for the unemployed. Perhaps at the end of the day, if there is real conviction in what the Government are saying, they will be prepared to put their money where their mouth is and provide training in skills that young people need to get out of the Catch 22 situation. Employers might then not have any option but to take on people in real jobs created for the purpose of giving us a prosperous economy.

Photo of Mr Ron Leighton Mr Ron Leighton , Newham North East 11:16 pm, 29th April 1986

The idea in this statement is not a new initiative: it is a re-hash of the old and discredited young workers scheme that was recently stopped because it catered for the under-18-olds who are now covered by the two-year YTS. This scheme will pay employers £15 per week for a year—provided they restrict pay to no more than £55 per week if the employee is under 20 and £65 if he is 20. It is a bribe, an inducement, to employers to pay low wages. Its sole purpose is to exert a downward leverage on pay. Together with the exclusion of young people from the orbit of wages councils, it is part of a comprehensive strategy for reducing the incomes and the standard of living of the whole of the young generation from the age of 16 to the age of 21.

Young people leaving school will be expected to go on an under-funded youth training scheme and then to go on to the low-paid new workers scheme until the age of 21. Both these schemes are brought together as a continuous whole. We now have a picture of the Government's intention and policy for youth, covering permanently the expectations of a whole generation.

Let no one delude himself that the new workers scheme will solve youth unemployment. It will produce no new jobs. It will only redistribute exising jobs. I spoke about the young workers scheme, of which this is merely an update, as discredited. It was discredited by expert ananlysis by the Public Accounts Committee and by the Institute of Manpower Studies, which said that 85 per cent. of the take-up of the scheme was "deadweight"—that is to say, that the subsidy was being claimed for jobs that existed anyway. In addition, there is the substitution effect—the subsidy causing cheaper young workers to be used at the expense of adult workers who would be displaced as a result of this deadweight because it created so few new jobs.

The Public Accounts Committee said that in 1983 the net cost of each person taken off the unemployment register by the YWS was £5,355—by far the highest net cost of any special employment measures because of the negligible employment effect. When the YWS was abolished we thought this had been recognised, but it had not; it was abolished because it clashed with two-year youth training scheme. It has now been revamped to take over after YTS and to continue low-paid employment.

There would be something to be said for an employment subsidy if it were paid for those workers who it could be demonstrated were additional, and, most importantly, if it were not attached to a particular and very low level of wages—in other words, if the subsidy were not part of a concerted policy of reducing the pay of the lowest paid, not part of the misguided nonsense of pricing people into jobs. But that is what it is; this is what we have to consider. The Government are deluded. Their sole policy for tackling unemployment is reducing wages. That is the only idea they have in their head, and it is a fatally flawed one, as all experience shows. This is why they abolished the fair wages resolution which said that workers on Government contracts should have fair wages. It is why they abolished schedule 11 to the Employment Protection Act. It is why they are attacking wages councils and excluding young people from their jurisdiction.

What has been the practical effect of all this? Despite these measures, unemployment has continually increased. It has trebled since the Conservatives came to office. They can think only of more of the same. They believe that the only way to get people off the dole is to move them into sweat shops. Working people are being told that they are the cause of unemployment and that unless they take lower wages, to price themselves into jobs, unemployment will continue to rise.

That is the central plank of Government policy, strategy based on a flawed theory which is causing widespread poverty and hardship, for only the poorer people are having their wages reduced. The latest earnings survey showed that in 1985, the bottom 10 per cent. had pay increases of less than the rate of inflation, while the top 10 per cent. had increases of well above that. It is no accident that the rich are getting richer and the poor poorer. It is happening because of Government policies such as the measure we are debating tonight.

Nor do the Government's polices lead to more jobs. For example, the Contract Cleaning and Maintenance Association said in May 1984 in its submission to the Select Committee about the effect of abolishing the fair wages resolution: A directive from the Treasury shortly before the recession pointed out that the Resolution would no longer apply to public sector contracts, and provided guidance. In some cases, individual contracts were actually renegotiated (rather than waiting for the existing contract to expire) with two results: (a) an increase in productivity and a reduction in number of cleaning staff employed; and (b) reductions of wages and of other terms and conditions of employment for cleaning staff. These results were the inevitable consequence of the requirement imposed on the cleaning contractors concerned to reduce contract prices. With regard to the renegotiation of contracts, either at the end of the contract or before, the Association believes that there is a very real possibility that the employment of staff at lower rates of pay than those currently obtaining could, through a parallel reduction in the quality or motivation of staff, lead to a lower standard of service. Thus, the effect of abolishing the fair wages, resolution has been threefold. The first has been a reduction in wages; the second, a reduction in the numbers employed; and the third, a lower standard of service. What an appalling collection of results.

Has the House noticed what is happening at the driver and vehicle licensing centre, Swansea? A report appeared in The Guardian on March 3—a similar story appeared in The Daily Telegraph—saying: Women cleaners at the Government's Driver and Vehicle Licensing Centre in Swansea are protesting to their MPs about the new employment deal which will mean more work for less pay. The private contractors who employ them are proposing to reduce the workforce from 130 to 102. The women, who earn £27 a week, will also have to take a pay cut of 30p an hour, lose their holiday money and carry out their nightly work in two and a half hours instead of three. The firm, Exclusive Cleaners of Bristol, is out to save £132,000 on a new contract with the Department of Transport beginning on March 24. The firm has told the women that the employment deal is not for negotiation. The result of cutting these already pitiful wages is the employment of not more but fewer workers. Nor does it matter by how much wages are cut in our great public services, because the Government are setting out to rein back the numbers employed in the public sector and are limiting local authority expenditure in areas such as construction.

This measure, to reduce young people's pay, has no intellctual credibility. It is based not on evidence but on prejudice, dogma and the ideological spite of the hard Right. I was told in a parliamentary reply on January 16 last that between April 1979 and April 1984, the average gross earnings of males over 21 had increased by 79 per cent., that those of 18 to 20-year-olds had increased by only 63 per cent. and that those of the under-18s had increased by only 57 per cent. In other words, male youth wages fell by 23 per cent. compared with those of male adults, and young women's pay fell by 30 per cent. We have had the equivalent of a laboratory experiment in cutting youth wages. Did it work? Were more employed? We all know the answer. Youth unemployment has actually trebled and gone up disproportionately. So the argument is completely bogus, and there is no reputable basis for this spiteful measure.

In considering whether lower pay is the way to higher employment, we may note that this was not the approach taken recently with the higher-paid civil servants, the judges or the top brass in the armed forces. We may also note that unemployment in Britain is higher where wages are lowest, and vice versa.

The last piece of evidence that I want to consider is the working of the Equal Pay Act in the 1970s. In that decade its aim was to achieve equal pay for the same work over a five-year period. Had it been brought forward now, a decade later, I am sure that the Government would, under their present dogma, have claimed that lifting women's pay would damage their employment prospects. Although the law had loopholes, there was a sharp rise in the relative pay of women; but this did not stop the trend of increasing female participation in the labour force. Women's pay rose faster than men's and so did women's employment, thus denying and disproving the pricing-out theory about jobs.

The phoney pricing-out theory is used by the Government to attack the young and the low-paid, and to excuse and shift the blame from the failures of their economic policy. The new workers scheme, a low-paid scheme for young workers, is not the route to job creation; it merely impedes discussion of how to tackle unemployment. While others are enriched, it is an attempt to put the whole of the younger generation up to the age of 21 in a straitjacket of low pay. This will show young people who their enemies are and mobilise them for a change of Government as soon as possible, and hence a more hopeful future.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale 11:26 pm, 29th April 1986

When we started our debate tonight, I said that it was about jobs for young people. Various points have been made by right hon. and hon. Members on both sides of the House—I shall take them up in a moment—but I remain convinced that this is an issue on which there is no real division, on party or any other lines, about our objectives. We all want to see young people properly equipped for working life, with the right preparation and grounding and with their own particular aspirations and ambitions.

The hon. Member for St. Helens, North (Mr. Evans) referred to the unemployment levels for young people, and asked about some of the figures for the lower age range. He may like to know that in January 1979, when his party was in power, those under 20 represented 17·3 per cent. of total unemployed; in January of this year those under 20 represented 15·5 per cent. In the case of the under-18s—my hon. Friend the Member for Bradford, North (Mr. Lawler) also introduced some interesting figures—where unemployment was more than twice as high as the overall national rate in January 1979, when the last Labour Government was in power, it was down to less than 50 per cent. more by January 1986.

The hon. Gentleman referred to a report by Sussex university which I believe was undertaken in 1982, rather than 1984, and so was done at the very outset of the young workers scheme, when the figures and the impact were very unclear. It said that the net effect on job creation, he tells us, was nil—but, of course, the subsequent research carried out more recently has shown that the figure of new job creation has been steadily rising and is now estimated at about 27 per cent. Some 90,000 new jobs have been created.

I hope that the hon. Gentleman will believe that, if the Government did not think that there was merit in this scheme, we would not be contemplating putting taxpayers' money into a successor scheme, based largely on the outline of the original scheme.

The hon. Gentleman referred to the fact that there was no training, as he claimed, on the young workers scheme. I draw his attention to the fact that 22 per cent. of the members of the young workers scheme were on formal apprenticeships, 50 per cent. had some induction training and 72 per cent. had some informal, on-the-job training. As to gross weekly earnings, and the hon. Gentleman's anxiety about overtime, we have certainly set the earnings for the different age groups at specific levels, but if an employee rose above those limits he would leave the scheme; he would remain in the employment of the employer but the employer would no longer claim the £15 subsidy. Alternatively, instead of giving him increased overtime, the employer could take on another new worker and thus create another job.

Photo of Mr John Evans Mr John Evans , St Helens North

As many youngsters will be expected by their employers to work overtime, if a youngster works overtime, let us say, on a Saturday or a Sunday and is given overtime payment, and that takes his payment above the qualifying level, does that mean that the job subsidy will stop? If that is the case, the youngster will be expected to work overtime, and the employer simply will not pay him.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

The limit of £55 for 18 and 19-year-olds and £65 for 20-year-olds is an upper limit which must include such things as overtime or other additional payments.

The hon. Gentleman referred to the benefit position, but there is no change in the way that benefit sanctions are applied. The possible disqualification period is simply extended from six to 13 weeks. As for young people being forced into the young workers scheme, so far some 435,000 applications have been voluntarily made by the employers, and there has been no problem in finding 435,000 young workers to go on to those schemes.

Photo of Mr Dave Nellist Mr Dave Nellist , Coventry South East

I am sure that the Minister will appreciate this correction. When he opened the debate, I challenged him on job substitution, on an analysis made by the Department of Employment of the previous young workers scheme, predicting the same result for this scheme. Does he remember that his Department commissioned the Institute of Manpower Studies to analyse the young workers scheme and it showed that 94 per cent. Of the jobs in that scheme already existed and only 6 per cent. were created? His Department's evidence to the Public Accounts Committee on 28 February 1984 showed that 77 per cent. of the jobs on the young workers scheme were old jobs. Finally, research paper No. 42, commissioned by the Department of Employment and written by Mr. Bill Wells, shows on page 70 that for reduction of young workers' wages some 68 per cent. to 86 per cent.—not 8 per cent.—of any jobs created would be substitution. The scheme is elastoplast politics playing with the ages of the unemployed, shifting around the unemployment problem, not creating new jobs for workers.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

It is a pity that the hon. Gentleman did not remain for the debate to make his speech instead of intervening in my opening speech and then returning to intervene when I reply.

Photo of Mr Dave Nellist Mr Dave Nellist , Coventry South East

I went to the Library to get the figures.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

Several other points have been made by other hon. Members about substitution, but at present I am dealing with the point raised by the hon. Member for St. Helens, North. Young people whose wages were forced up by trade unions during the late 1970s in order to demonstrate their muscle, were exploited in the sense that, when reality set in and the demand for their labour began to decline, it was the young workers who were the first to lose their jobs because they were over-priced in the market.

My hon. Friend the Member for Bradford, North made a number of sensible points. He was right to emphasise the commonsense aspect of having a scheme which allows young workers to move into the world of employment at an appropriate wage rate, related to their experience and ability to deliver. I was interested in his proposal about a three-year training scheme and I can assure him that we shall be monitoring the new scheme carefully.

The hon. Member for Newham, North-East (Mr. Leighton) complained about the net cost to the Exchequer, and quoted a figure of £5,553. That figure is completely out of date. The figures published in the public expenditure White Paper show a net cost to the Exchequer in 1984–85 of £2,400 and in 1985–86 of £1,400 for the young workers scheme per person removed from unemployment and in a job. That figure takes account of the deadweight and the substitution to which hon. Members have referred and which they have exaggerated. Those figures compare interestingly with the £7,000 net cost to the Exchequer mentioned in the Select Committee's recent subsidy scheme.

As for our estimate for the new workers scheme, that would be even lower than the £1,400 and might be in the range of £1,300. The generation of new jobs by the young workers scheme has been increasingly successful. Perhaps the Opposition cannot believe the growing success of our schemes because their schemes in the 1970s—the youth and adult employment subsidies—had such poor results.

The hon. Member for Portsmouth, South (Mr. Hancock) referred to the 27 per cent. new jobs created and seemed completely to dismiss them, although they amount to some 90,000 new jobs. He referred to the 63 per cent. or 64 per cent. deadweight like a pessimist who prefers to say that a whisky bottle is half-empty when an optimist would say it was half-full. I am bound to say that I find his whole approach profoundly depressing. As for the reference to displacement being overwhelming, I made no such reference. The displacement or substitution is around 10 per cent. As I pointed out to the hon. Member for Coventry, South-East (Mr. Nellist) the adult substitution is around 8 per cent., not the 80 per cent. figure that the hon. Gentleman tried to suggest to the House.

The rest of the speech of the hon. Member for Portsmouth, South was a mixture of woolly emotional nonsense, completely lacking in any constructive policy proposals, entirely out of touch with the trend of young unemployment, which is now down, and addressing itself to no specific details of our policies. It might have been more interesting for the House if he had offered one constructive policy of his own.

It is important to realise that we are introducing the new workers scheme into a situation in which, while we are deeply concerned about the scale of youth unemployment, nevertheless there are positive signs of progress. Taking the three years to January of this year, unemployment has fallen by 35,000—16 per cent.—among under 18-year-olds, by 28,000–7·5 per cent.—among 18 and 19-year-olds and by 63,000–11 per cent.—for all those under 20. Three years ago, those under 20 represented over 18 per cent. of the total unemployed. Now, that figure is around 15·5 per cent. of the total.

The position for young people, therefore, has improved in absolute numbers and vis-à-vis other groups. There are a number of reasons. Of course, the introduction of YTS has had an effect. So have demographic changes, as well as the general level of demand, which reflects the success of our wider employment and enterprise policies, generating 1 million extra jobs in the same period.

Photo of Mr John Evans Mr John Evans , St Helens North

Will the Minister concede that there are still 1 million fewer in employment now than there were in 1979 when the Tory Government took office?

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

The hon. Gentleman should look at the figures. Of course jobs were lost in 1980 and 1981 in large numbers when we picked up the tab for five years of Socialism and inherited an economy in which industrial relations were in chaos, inflation was rife, overmanning was rampant and jobs were waiting to be blown away at the first gust of the recessionary wind. Since 1981, we have been able to pick up the pieces and gradually generate new jobs. Year by year, we have had success in creating new jobs in increasingly large numbers. We now see not only over 1 million new jobs created since 1983 but youth unemployment, according to the figures that I have just given, steadily falling.

We have also seen, particularly since 1982—

Photo of Mr Dave Nellist Mr Dave Nellist , Coventry South East

Will the Minister accept that, of the new jobs that the Government claim to have created, some 574,000 are women's jobs? According to a written answer by his Department this week, 99 per cent. of those 574,000 new women's jobs are part-time jobs of less, or far less, than 30 hours. If one were to count the number of new jobs on a full-time equivalent basis, the 1 million figure would be seen for the chimera that it is.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

I am not sure what is wrong with women's jobs. Many women have decided to return to the labour market. That, in addition to the increasing number of school leavers coming into the jobs market as against pensioners retiring from it, has meant that we have had to move still faster to stand still. I do not see what is wrong with part-time jobs. Over 500,000 part-time women's jobs have been created in the last few years. These are jobs that people want—employers and women want them—jobs that create extra flexibility in the economy. I do not see any justification for the hon. Gentleman describing them in so derogatory away.

What we have also seen, particularly since 1982, is some movement towards a widening of the dangerously narrow gap between the pay rates of young people and adults. I am careful not to ascribe the happy effects of falling youth unemployment solely to this decline in relative pay. There are, as I have said, other factors, but the turning of the tide on young people's pay relativities has not come a moment too soon.

Less than 20 years ago, a school leaver joining a factory at 15, would expect to take up to six years to reach the adult rate, at 21. Since then, that six-year period has been compressed, in many cases, into a two-year period between 16 years of age and 18, with serious consequences for youth unemployment levels. We have had to work hard to try to get the message across that pay rates for young people that are too high are a handicap to them in convincing employers to take them on rather than other groups of workers.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

Does my hon. Friend agree that the German system of not paying school leavers any more when they leave at 16 than a young worker starting on a training period is a good one?

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

My hon. Friend makes an extremely sensible point. The German approach is realistic and sensible and may to some extent, account for the strength of the German economy.

We still have a long way to go. For example, engineering wage relativities are generally about 20 percentage points higher now than they were 20 years ago. The importance of the new workers scheme is that, like the YWS which it succeeds, it encourages employers and young people to be sensible about young people's pay, to offer jobs to more of them rather than unrealistically high wages to just a few. The young workers scheme was successful and had some effect. Relative pay rates for young people have declined since 1982. We also believe that the new workers scheme is the sort of help wanted by employers, many of them small businesses.

Photo of Mr Geoffrey Lawler Mr Geoffrey Lawler , Bradford North

Does my hon. Friend accept that, of the 1 million or so jobs created over the past three years, some 450,000 have gone to self-employment? Does that not offer great hope for future employment growth?

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

My hon. Friend is right, and I am glad that he recognises, as do all my right hon. and hon. Friends, the great importance of self-employment—that it has created new jobs. We now have the highest proportion of self-employed in the economy since 1921, and that bodes well for the future. It is also of interest that the vast majority of jobs on the young workers scheme went to small firms; that will be reflected in the development of the scheme.

Of course, the scheme will direct some jobs towards young people rather than older workers. That is our aim in singling out this age group for special help. It is, like the Government's other employment measures, carefully designed and cost-effective. It also fits into our broader strategies. It complements the two-year YTS, the national insurance changes and the wages council proposals. Young people know that our measures work— over 1 million through YTS—and a quarter of enterprise allowance businesses are run by under-25s. That bodes well for the continuing development of enterprise.

If only the number of new company starts under the 1974–79 Labour Government had equalled the level of company starts now, we would be facing a far more encouraging prospect for jobs. Over 435,000 jobs have been supported by the young workers scheme. The new workers scheme, too, offers practical help, where it is needed, for young people entering the labour market, and their employers. I commend the motion to the House.

Photo of Mr Dave Nellist Mr Dave Nellist , Coventry South East 11:33 pm, 29th April 1986

This measure is the latest example of class politics. It has nowt to do with creating jobs for young or old workers, but everything to do with the Government's essential philosophy of driving down workers' wages to allow the employers more profit. Every shred of evidence that has been examined, whether from the Midland Bank review, the Institute of Manpower Studies or the Department of Employment's research, shows that reductions in young workers' wages have not solved the problem of youth unemployment.

This measure carries all the hallmarks of the anti-youth, anti-working class measure that the YTS was. The real reason for the scheme should be written into the Official Report. It is designed to create a generation of youth on a conveyor belt. It is coming out of school used to £27 quid a week on the YTS. These workers would be on £44 a week if that allowance had risen with the general level of earnings since the scheme's inception in 1978. There has been a £17 a week cut in the training allowance given to young people. The general level of school leavers' wages has fallen by 12 per cent. for boys and 13 per cent. for girls since 1979, yet youth unemployment has trebled.

As Nye Bevan used to say in this place, "Why look in the crystal ball when you can read the book?" The Government's record shows that all they are interested in doing is driving down the wages of young people. Job creation will happen at the expense of older workers.

This is a cheap and nasty measure that ought to be thrown out by the House.

Question put:—

The House divided:—Ayes, 170, Noes 111.

Division No. 162]11.45 pm
AYES
Alexander, RichardGriffiths, Peter (Portsm'th N)
Amess, DavidGround, Patrick
Ancram, MichaelGummer, Rt Hon John S
Ashby, DavidHamilton, Hon A. (Epsom)
Atkins, Robert (South Ribble)Hamilton, Neil (Tatton)
Atkinson, David (B'm'th E)Hanley, Jeremy
Baker, Nicholas (Dorset N)Hargreaves, Kenneth
Baldry, TonyHarris, David
Batiste, SpencerHarvey, Robert
Bellingham, HenryHaselhurst, Alan
Best, KeithHawksley, Warren
Bevan, David GilroyHayward, Robert
Biffen, Rt Hon JohnHickmet, Richard
Blaker, Rt Hon Sir PeterHiggins, Rt Hon Terence L.
Boscawen, Hon RobertHind, Kenneth
Bottomley, PeterHirst, Michael
Bowden, A. (Brighton K'to'n)Hogg, Hon Douglas (Gr'th'm)
Bowden, Gerald (Dulwich)Holland, Sir Philip (Gedling)
Boyson, Dr RhodesHoward, Michael
Brandon-Bravo, MartinHowarth, Gerald (Cannock)
Bright, GrahamHunt, David (Wirral W)
Brinton, TimHunter, Andrew
Brooke, Hon PeterJohnson Smith, Sir Geoffrey
Brown, M. (Brigg & Cl'thpes)Jones, Gwilym (Cardiff N)
Bruinvels, PeterJones, Robert (Herts W)
Buck, Sir AntonyKellett-Bowman, Mrs Elaine
Burt, AlistairKershaw, Sir Anthony
Butcher, JohnKey, Robert
Butterfill, JohnKing, Roger (B'ham N'field)
Carlisle, John (Luton N)Knight, Greg (Derby N)
Carlisle, Rt Hon M. (W'ton S)Knowles, Michael
Carttiss, MichaelLang, Ian
Cash, WilliamLatham, Michael
Chapman, SydneyLawler, Geoffrey
Chope, ChristopherLawrence, Ivan
Clark, Dr Michael (Rochford)Lennox-Boyd, Hon Mark
Colvin, MichaelLester, Jim
Coombs, SimonLewis, Sir Kenneth (Stamf'd)
Cope, JohnLightbown, David
Cormack, PatrickLilley, Peter
Dorrell, StephenLuce, Rt Hon Richard
Dover, DenLyell, Nicholas
Dunn, RobertMcCurley, Mrs Anna
Eggar, TimMacGregor, Rt Hon John
Emery, Sir PeterMacKay, Andrew (Berkshire)
Evennett, DavidMacKay, John (Argyll & Bute)
Eyre, Sir ReginaldMaclean, David John
Fairbairn, NicholasMcNair-Wilson, M. (N'bury)
Fallon, MichaelMadel, David
Farr, Sir JohnMajor, John
Fenner, Mrs PeggyMalins, Humfrey
Forsyth, Michael (Stirling)Malone, Gerald
Forth, EricMarlow, Antony
Franks, CecilMather, Carol
Fraser, Peter (Angus East)Maude, Hon Francis
Freeman, RogerMawhinney, Dr Brian
Fry, PeterMayhew, Sir Patrick
Gardner, Sir Edward (Fylde)Merchant, Piers
Garel-Jones, TristanMeyer, Sir Anthony
Goodhart, Sir PhilipMiller, Hal (B'grove)
Goodlad, AlastairMills, Iain (Meriden)
Gow, IanMiscampbell, Norman
Gower, Sir RaymondMitchell, David (Hants NW)
Gregory, ConalMoate, Roger
Montgomery, Sir FergusShepherd, Richard (Aldridge)
Moynihan, Hon C.Shersby, Michael
Nelson, AnthonySims, Roger
Neubert, MichaelSkeet, Sir Trevor
Newton, TonyStern, Michael
Norris, StevenStewart, Andrew (Sherwood)
Oppenheim, PhillipThomas, Rt Hon Peter
Osborn, Sir JohnThompson, Donald (Calder V)
Ottaway, RichardThompson, Patrick (N'ich N)
Page, Richard (Herts SW)Thurnham, Peter
Patten, Christopher (Bath)Trippier, David
Pawsey, JamesViggers, Peter
Portillo, MichaelWakeham, Rt Hon John
Powley, JohnWalker, Bill (T'side N)
Proctor, K. HarveyWardle, C. (Bexhill)
Raffan, KeithWatson, John
Rathbone, TimWheeler, John
Rhys Williams, Sir BrandonWood, Timothy
Ridsdale, Sir JulianYounger, Rt Hon George
Roe, Mrs Marion
Sainsbury, Hon TimothyTellers for the Ayes:
St. John-Stevas, Rt Hon N.Mr. Tony Durant and
Shepherd, Colin (Hereford)Mr. Peter Lloyd
NOES
Adams, Allen (Paisley N)Hogg, N. (C'nauld & Kilsyth)
Alton, DavidHoyle, Douglas
Anderson, DonaldHughes, Robert (Aberdeen N)
Archer, Rt Hon PeterHughes, Roy (Newport East)
Banks, Tony (Newham NW)Hughes, Sean (Knowsley S)
Barnett, GuyHughes, Simon (Southwark)
Beckett, Mrs MargaretJones, Barry (Alyn & Deeside)
Bell, StuartKennedy, Charles
Benn, Rt Hon TonyKirkwood, Archy
Bennett, A. (Dent'n & Red'sh)Lamond, James
Bermingham, GeraldLeighton, Ronald
Bidwell, SydneyLewis, Terence (Worsley)
Blair, AnthonyLivsey, Richard
Boyes, RolandLloyd, Tony (Stretford)
Bray, Dr JeremyLofthouse, Geoffrey
Brown, Gordon (D'f'mline E)McDonald, Dr Oonagh
Brown, N. (N'c'tle-u-Tyne E)McKay, Allen (Penistone)
Caborn, RichardMacKenzie, Rt Hon Gregor
Callaghan, Jim (Heyw'd & M)McWilliam, John
Campbell-Savours, DaleMadden, Max
Clark, Dr David (S Shields)Marek, Dr John
Clarke, ThomasMarshall, David (Shettleston)
Clay, RobertMaxton, John
Clelland, David GordonMichie, William
Clwyd, Mrs AnnMillan, Rt Hon Bruce
Cocks, Rt Hon M. (Bristol S)Nellist, David
Conlan, BernardOakes, Rt Hon Gordon
Cook, Frank (Stockton North)O'Neill, Martin
Cook, Robin F. (Livingston)Park, George
Corbyn, JeremyParris, Matthew
Cunningham, Dr JohnPendry, Tom
Dalyell, TamPenhaligon, David
Davies, Ronald (Caerphilly)Pike, Peter
Davis, Terry (B'ham, H'ge H'l)Powell, Raymond (Ogmore)
Deakins, EricPrescott, John
Dubs, AlfredRandall, Stuart
Duffy, A. E. P.Raynsford, Nick
Dunwoody, Hon Mrs G.Redmond, Martin
Eadie, AlexRobertson, George
Evans, John (St. Helens N)Sheerman, Barry
Ewing, HarryShore, Rt Hon Peter
Fields, T. (L'pool Broad Gn)Silkin, Rt Hon J.
Fisher, MarkSkinner, Dennis
Foot, Rt Hon MichaelSmith, C. (Isl'ton S & F'bury)
Foster, DerekSmith, Rt Hon J. (M'ds E)
Foulkes, GeorgeSpearing, Nigel
Garrett, W. E.Stott, Roger
George, BruceThomas, Dr R. (Carmarthen)
Godman, Dr NormanThompson, J. (Wansbeck)
Golding, JohnWallace, James
Hamilton, James (M'well N)Wardell, Gareth (Gower)
Hancock, MichaelWareing, Robert
Harman, Ms HarrietWigley, Dafydd
Hart, Rt Hon Dame JudithWilliams, Rt Hon A.
Haynes, FrankWinnick, David
Young, David (Bolton SE)Mr. Don Dixon and
Mr. Lawrence Cunliffe.
Tellers for the Noes:

Question accordingly agreed to.

Resolved,That this House authorises the Secretary of State to set up, in accordance with section 1(1) of the Employment Subsidies Act 1978, a scheme, the cost of which is expected to exceed £10 million for the year ending 31st March 1987, for making payments to employers to enable them to take on as new employees young people with earnings below the limits specified in the statement laid before the House on 22nd April 1986.