Welfare-to-work New Deal: the company role

August 01, 1997

Since the mid 1970s, a succession of employment and training schemes have targeted young people, with variable success rates. If the latest government plans are to work, the private sector must be an active participant.

p>At the start of July the government formally announced details of its “New Deal” to get 250,000 young people into work, one of their five key election pledges. Conscious of the scale of the task and the tight timescales, it has been energetically consulting, trying to get the private and voluntary sectors involved. In June a summit for business leaders and trade unionists was held in Downing Street, attended by representatives of some 40 companies. A programme of 20 regional conferences was underway in during July and August, with more in the autumn. At the start of August, the government even invited bids directly from the private sector to run a local partnership in one area.

The effort is being overseen by a 15 strong Task Force (1), led by Sir Peter Davis, chief executive of the Prudential and chairman of Business in the Community. Although the current trend in unemployment is downward, the task is still challenging: in January 1997, 460,000 18 to 25 year olds were unemployed, with 180,000 out of work for more than six months (40%). This compares with 1.8 million of all ages on the unemployment register, 53% longer than six months.

More challenging than the numbers is the need to avoid short-term make-work schemes, only to put people back in the dole queue when the money runs out. Training must achieve a step-change in skills levels among today’s young unemployed and the next generation now coming through the system. Higher skills and greater productivity may then expand economic activity and create demand for new jobs – otherwise existing work is simply reshuffled.

New Deal programme

The New Deal concentrates on young people but a separate element also helps the long term unemployed. For the 18 to 24 year olds, the programme goes nationwide in April 1998, with 12 ‘pathfinder’ areas starting in January: Tayside, Swansea and West Wales, Sheffield and Rotherham, Eastbourne, Lambeth, Harlow and Stevenage, Cumbria, Wirral, South Derbyshire, Black Country, Gateshead and South Tyneside, and West Cornwall.

For young people, the programme begins with a ‘gateway’ period, during which they are offered counselling and advice, helped to find a job, or given specific training or a booster on basic skills. Those still without work must choose one of four options – if they refuse, they will be required to take a place identified by the Employment Service or ultimately lose their entitlement to benefits.

The four options are:

a job with an employer, with a wage subsidy of ?60 per week for up to 26 weeks; release for training to achieve an accredited qualification of at least one day a week; ?750 grant towards training;

six months on a new Environmental Task Force, with day release for education and training; the individual keeps their benefits and gets up to ?400 as a grant; programme delivered through a wide variety of private and voluntary providers;

six months with a voluntary sector organisation, again with day release for accredited qualifications; payment is benefits plus up to ?400 as a grant; voluntary projects must achieve social and economic objectives, such as crime prevention, with a special emphasis on childcare: an extra 50,000 new trained childcarers are planned;

full time education and training on an approved course for a qualification, with the ’16 hours’ benefit rule, which hinders unemployed people undertaking full time education and training, being relaxed.

The second part of the New Deal is for those over 25 years old who are long term unemployed (two years or more). Two options are on offer, with the detail still be developed:

a wage subsidy to employers of £75 per week for 26 weeks;

up to one years full time study on an employment related course.


The government wants local consortia to come together to put in place vehicles to deliver this programme, involving the private and voluntary sectors, TECs, the careers service, local government and other agencies.

The TECs have welcomed the initiative, even through their role is focused only on local delivery, as responsibility for devising the scheme has gone to the Employment Service. TECs believe that the key to success will be developing local partnerships which can make a coherent and integrated offering from 16 years old onwards, levering extra funds from Europe, private companies and other TEC programmes. An isolated new scheme, cutting across other programmes, will hinder progress. The critical constraint is in identifying quality employment places, providing genuine work and proper training.

Reaction in the voluntary sector is mixed: some fear that the voluntary and environmental options may become seen as second best; others see this as an opportunity for new resources to address their core mission. But voluntary involvement is vital, as they are uniquely able to reach those young people who simply are not ready for the world of work, perhaps lacking basic abilities, social skills, or the right disposition, or with a record of petty offending.

In June the homelessness charity, Shelter, warned that lack of housing is often a block on young people getting work. It made a series of proposals on benefits, buildings and training, costed at 10% of the windfall tax budget. Also in June, the Foyer Federation launched proposals to create 20,000 bedspaces in foyers, one in every town, combining housing, training and job search. Another housing charity, Centrepoint, has said that six month placements are not long enough for some people to be trained and develop.

The Black Training and Enterprise Group has said that black youngsters will be disproportionately represented in the target group, as unemployment among black young people is nearly three times the level among white 18 – 24 years olds.

The Prince’s Trust, in a report published in June, What Work? Jobs for Young People, says that young people currently unemployed are not the only ones in need: many others are caught up on a ‘carousel’, going from training scheme to temporary employment and back to unemployment again. The Trust warns that the multiplicity of current programmes is causing confusion and wants a one-stop-shop approach, with an expansion of volunteering schemes and more help for young people starting businesses.

Private companies

The private sector’s biggest single contribution is to pay for the programme through a retrospective ?5.2 billion tax on the utilities. Some companies will be able to offer trainee places and permanent jobs, taking advantage of the wage subsidy and training grant – the government wants the majority of places to be in the private sector. But the trend in large companies is away from creating new jobs. The small and medium sized business sector is where the growth will be. So many large companies will direct their main contribution to supporting others to participate, including small businesses in their area, the voluntary sector generally and new projects for the Environmental Task Force.

John Griffiths, policy and research manager at the London Enterprise Agency (2), says that large companies will not get involved unless they can see some practical benefit. He has argued that the local partnership consortia must be ‘bureaucracy free’, with groups of small firms participating, perhaps with a sector focus. (But where large companies do participate, they need to be able to negotiate a single national contract, not a series of local ones.)

Large companies should consider offering mentors, a valuable development tool both for the individual young person and for the mentor him/herself. The £750 allowance must contribute to this.

Existing partnerships, such as single regeneration ‘challenge’ schemes and town centre management projects, need to consider how to build in a New Deal element, perhaps through common recruitment and environmental schemes. Likewise existing small business support arrangements, through the TECs, Business Links and FE colleges need to consider packaging a range of services for companies, including New Deal elements with modern apprenticeships and Investors in People accreditation.

Given the need to involve small and medium sized enterprises, LEntA is suggesting that Peter Davis’ Task Force needs to look at incentives, perhaps with matching funds along the lines of the arts sponsorship incentive scheme. Some companies may also want to identify themselves publicly as participants in the New Deal.

Whether or not companies get involved directly, its clear community affairs managers will need to keep abreast of developments and ensure participation in what is soon to become an important new dynamic to local economic regeneration.

(1) The Task Force includes from the business sector: Shami Ahmed, Joe Bloggs Jeans; Christopher, Haskins Northern Foods; Ian McAllister, Ford UK; Stephanie Monk, Granada Group; John Roberts, Post Office; and Michael Wemms, Tesco. From the voluntary sector: Helen Edwards, NACRO; Tom Shebbeare, Prince’s Trust; Alison Millward, Groundwork Black Country; Victor Adebowale, Centrepoint. From the unions: Rodney Bickerstaffe, Unison; Bill Morris, TGWU. From the public sector: John Harman, Kirklees Council; Jenny Shackleton, Wirral Metropolitan College.

(2) John Griffiths can be contacted at LEntA, 4 Snow Hill, London EC1A 2BS (0171 236 3000)

Corporate Citizenship Briefing, issue no: 35 – August, 1997