New Deal programme may be heading for a crisis

On 6 April 1998, the UK Government unveiled plans for the nationwide launch of its "New Deal" programme to get young unemployed people back to work. However, on the same day a leaked document indicated that the scheme may already be heading for a cash crisis.

6 April 1998 saw the national launch of the Government's GBP 3.5 billion "New Deal" programme of "welfare to work" aimed at putting young unemployed people into employment (UK9707143F). The first stage of the programme will involve up to 118,000 young people aged 18-24, who have been unemployed for more than six months, being interviewed for participation in the scheme. Over 4,000 private sector companies have signed up to participate in the scheme (UK9710175N). However, the launch was overshadowed by a leaked document which indicated that the scheme could run into financial problems because not enough young people are finding unsubsidised jobs.

Under the scheme, people aged under 25 who have been out of work for at least six months are given four months of intensive help and advice, including literacy and numeracy lessons. At the end of this period - known as the "gateway" - if the young people have not found work they take up one of four options: a subsidised job; full-time education or training; voluntary sector work; or a place on an environmental taskforce.

Leigh Lewis, chief executive of the Employment Service, the agency responsible for overseeing the scheme, warned ministers in the leaked document that he could face major problems delivering the New Deal within the available budget unless more people on the scheme find unsubsidised work. The scheme was piloted in 12 areas and results suggest that 16,000 people have entered the "gateway" so far. Of those 16,000, 1,690 have gone on to the next stage of taking up one of the four options. Of these people, 645 (38.2%) have found subsidised jobs, while only 531 (31.4%) have found unsubsidised jobs. The budget for the scheme was based on the premise that at least 40% would obtain unsubsidised jobs.

The Government says that it had expected some mismatch. However a more worrying development may be that many commentators feel that an economic slowdown is imminent, which would affect both the number of young people graduating through the programme who find work and the number of employers participating in the scheme. According to the Financial Times, the New Deal relies too heavily on the view that there are jobs simply waiting to be created, whereas it is claimed that in reality it is precisely in those areas of long-term unemployment that it is most difficult to create jobs. The emphasis of the scheme is on skill deficiencies and individual "employability" rather than on direct employment creation. This may well account for the high numbers of subsidised jobs and is worrying in assessing whether or not there will ultimately be real job creation as a result of the scheme.