Welfare to Work

HC Deb 19 December 1997 vol 303 cc557-630

[Relevant documents: Second Report from the Education and Employment Committee, The New Deal (HC 263); First Report from the Social Security Committee, Tax and Benefits: An Interim Report (HC 283).]

Motion made, and Question proposed, That this House do now adjourn.—[Ms Bridget Prentice.]

9.34 am

The Minister for Employment, Welfare to Work and Disability Rights (Mr. Andrew Smith)

I welcome this first opportunity that the House has had to debate the new deal for the young unemployed. I want today to set out the enormous progress that we have made and to listen to colleagues' comments on how things are going in their areas.

The new deal for the young unemployed is an important part of the much wider welfare-to-work strategy promised in our manifesto, in which we made very clear our determination not to continue with a permanent have-not class, unemployed and disaffected.

Welfare reform is essential, given the position that the Government inherited. There are 3.5 million families of working age with no one in work—nearly one in five households, compared with one in 12 in 1979. Long-term unemployment is almost double the 1979 figure. Youth unemployment is twice the national average. Two million people are on incapacity benefit; many of them would like to work but lack the opportunity to do so. Hundreds of thousands are denied child care. One million pensioners do not get even the help to which they are entitled.

Faced with that inheritance, we must modernise the welfare state. We do so according to the principles of opportunity and fairness that inspired its creation, by promoting work for those who can work and providing a better and fairer deal for those who cannot. We must provide skills for work, make work pay and create new job opportunities. Our starting point is that, for those who are able to do it, work is the best form of welfare.

The Government have moved fast and decisively to put welfare to work into effect. We have done so with the new deal for 18 to 24-year-olds, the new deal on the way for older people out of work for more than two years, the new deal for lone parents, the tax and benefits review, progress towards employment zones, and the new deal for disabled people and those with long-standing illnesses. That is a huge and radical programme of work, which will help to change people's lives for the better. There will of course be hard choices along the way, but the Government will not be deflected from reform which is essential for a stronger, fairer society in which we tackle social exclusion, open up opportunities to work and match rights with responsibilities.

Let me deal straight away with the anxiety and speculation that there has been about the review of benefits for sick and disabled people. Let me assure the House that it will be driven not by a cuts agenda but by our clear objectives of getting the right support to people who want to work and the right mix of cash and services to people who cannot work, so that they can live with independence and dignity. No one is talking about taking away benefits from those who need them.

Mr. Stephen Dorrell (Charnwood)

The Minister has just touched on an issue of great importance and interest to many people inside and outside the House. Can he give the House a categorical assurance that the Government will not table proposals to cut benefits in payment to qualifying disabled persons?

Mr. Smith

I have just made it clear that nobody is talking about taking away benefits from those who need them. With such a wide-ranging and fundamental review, it is important to set the right principles and objectives for it. Let me say what they are, because they underpin not just the review but our approach to welfare to work more generally.

Mr. Dorrell

The right hon. Gentleman may have heard Lord Ashley saying in Wales on the radio this morning that it is perfectly possible to have as the starting point of a benefits review the principle that qualifying disabled people should not suffer a cut in the benefits paid to them. Is that the basis on which the Government's review is taking place; or is that a reassurance that the Government are unable to give?

Mr. Smith

I say again: no one is talking about taking away benefits from people who need them. In a searching review, of course, the terms on which particular benefits are paid in particular circumstances have to be examined.

As the right hon. Gentleman will know, with disability living allowance, for example, on inquiry, a quarter of assessments were found to be incorrect. Some people are being paid too little and some too much. In those circumstances, we cannot say that, as a consequence of a review, no one's benefits will decrease, but it is a question of getting and doing it right, according to principles that help people into work where they can work and, of course, provide the support that people need when they cannot work. Frankly, we will not take lectures from the right hon. Gentleman and his hon. Friends, whose party cut benefits to disabled people, blocked their civil rights and was clearly happy for disabled people who wanted to work to be trapped on benefit.

Mr. Nick Gibb (Bognor Regis and Littlehampton)

Will the right hon. Gentleman give way?

Mr. Smith

Let me make just a little more progress, as I am coming to the important question of the principles that underpin our review and the wider approach to welfare to work.

The first principle is inclusion. We want to enable people to make the most of their potential and to play a full part in society. Our approach is built around what people can do, not what they cannot do, so the benefits review will reinforce the steps that we have taken, for example, on civil rights for disabled people.

Mr. Gibb

With regard to his previous outburst, will the Minister answer this question: which Government passed the Disability Discrimination Act 1995 and introduced the disability living allowance?

Mr. Smith

Which Government left enforcement out of the Disability Discrimination Act, which this Government have pledged to rectify, by moving as quickly as possible to set up a proper disability rights commission to advise and enforce, and to ensure that disabled people can use their rights?

I was going through the principles that apply to our review. The second is fairness. We want to ensure that people receive help that is right for their individual needs. Thirdly, people should have independence and self-reliance, opening up opportunities to work for those who are able to, while, fourthly, effective support is provided to sustain and improve the quality of life for those who are incapable of work. Fifthly, there should be consultation. We shall not make changes without consultation. In particular, when we have options to consider, we shall consult disabled people, their organisations and others with an interest in the proposals before any changes are made.

The steps that we have already taken on disabled people's rights—our establishment of a ministerial task force and our pledges to implement part III of the Disability Discrimination Act and to establish a disability rights commission—have been widely welcomed. The new deal builds on that by opening up new opportunities for disabled people. In applying the £195 million that my right hon. Friend the Chancellor of the Exchequer earmarked in the Budget, we have undertaken consultation and invited bids for innovative projects to improve personal advice and training support for disabled people moving into work and staying in work. They can include improvements to support for access, work trialling and job coaching. The projects will be carefully evaluated for more general application, and represent a big investment in opportunity for disabled people.

What is more, the new deal for the young unemployed gives particular help for disabled young people, including the choice of early entry into the programme, without waiting six months in unemployment, and advice and support that are tailored to the young person's needs. That flexibility and responsiveness to individual needs is a key characteristic of the new deal for the young unemployed as a whole. It is but one of a number of features that make the programme different and better than anything before.

I stress the importance of the gateway—the period of up to four months before taking up a new deal option, with the assessment, careers advice and help with basic skills that it offers, along with the availability of mentoring for people who can benefit from it most. To open up opportunity to all, help with child care will be available in all new deal options.

The new deal is different, because it offers tasters of the options—the chance for a young person to take up a place for a short trial period, to find out whether it is right for them. It is different, too, because it offers young people real work—work of real economic and social value: the best way in which to build the confidence and self-esteem that many young unemployed people need. The new deal is better resourced, with provision for personal advisers, the range of options that it offers and the offer not only of the subsidy to employers of £60 a week for six months, but of the contribution of £750 to train participants towards a qualification.

The new deal recognises that some people will need help to improve their basic skills before they can move into employment or further education and training. There is dedication to quality throughout, with proper monitoring systems and quality assurance, to make absolutely certain that high standards are achieved. The new deal is different, too, because it places real emphasis on improving employability. Each young person will have a personal action plan, with providers and trainers helping and, indeed, with the incentive to achieve it. From the start, we have emphasised that partnership is crucial to the new deal's success. Partnership was the foundation of the development of the new deal framework, and partnerships are the building blocks of its delivery.

The Employment Service has been charged with overall responsibility for the delivery of the new deal, and I have been struck by the energy and enthusiasm with which it has approached this huge enterprise. In its report on the new deal, the Select Committee on Education and Employment commended the continuing culture change that is being effected in the service.

Of course, the Employment Service cannot do it alone. The active support of local authorities, voluntary and environmental organisations, employers, trade unions, training and enterprise councils, further education colleges—in fact, the support of everyone in the community—is essential to make a success of the new deal, and we have been delighted with the commitment and enthusiasm that we have encountered.

I challenge the right hon. Member for Charnwood (Mr. Dorrell) to tell the House whether he and his colleagues will now pledge that they will support making the new deal a success in changing young people's lives. I shall give way to him if he would like to tell us now that the Conservatives will support it. We look forward to him giving that commitment later, but with him or without him—

Mr. Graham Brady (Altrincham and Sale, West)

rose—

Mr. Smith

I look forward to the hon. Gentleman's support.

Mr. Brady

On that point, will the Minister join me in congratulating the previous Government on having achieved so much for young people, by dramatically reducing the number of young unemployed over the past couple of years?

Mr. Smith

We had record unemployment among young people under the previous Government. When they left office, unemployment was twice the level that they inherited and youth unemployment was twice that in the rest of the population, so the best contribution that the hon. Gentleman and his colleagues can make is to join us in supporting the new deal and truly to make it a whole community effort. That is what it needs to be and that is what it is, given the amount of support that we are receiving throughout the community from all sections of society and, I have to say, from some Conservative Members who, in their feedback forms on the new deal's progress in their constituencies, are making it clear that they are committed to its objectives.

However, we want that to be matched by a commitment from the Conservative Front-Bench team, so that there will truly be a whole-nation effort behind a project that can transform the opportunities and prospects not merely for young people, but for their families, the communities in which they live and the economy as a whole.

Partnership is at the heart of the new deal and, of course, one of the most important partnerships is between society and the young person. We all have a responsibility to help young people to find a way out of unemployment through the provision of high-quality training and work, but the young person must meet us part way. We need to make young people aware of their responsibilities and, as we have said, there will be no fifth option of a life on full benefit.

Young people must give the new deal a chance. They will have a voice in shaping their own future, and the help needed to do it. They need to believe that the new deal will have something to offer them as individuals; something that will make a real difference to their prospects; something to renew their confidence and self-esteem. That is why every aspect of the design of the new deal must have quality built into it. For example, we have ensured that every participant has access to high-quality training—everyone must work towards an approved qualification.

We are determined, too, that every effort should be made to enable young people to build on their new deal experience. We have built in a follow-through strategy to help them improve their employability and to secure a job, if they have not already got one, once they have completed their new deal option.

As we have carried the project forward, it has been greatly informed by consultation at every stage. More than 600 firms attended the national events, and 3,500 individuals and organisations attended regional consultation, as well as many more at local level. That consultation was real; it made a difference. The views of those who attended those events made a significant difference to the design of the new deal, including greater emphasis on mentoring, the development of the self-employment opportunity and the involvement of the public sector in the employment option.

The new deal has benefited greatly from the work of the advisory group and the new deal task force, which includes several representatives from business, as well as from the voluntary sector, local government, trade unions and education. Ably led by Sir Peter Davis, they have been instrumental in helping us to develop the high-quality framework for the programme. They are also assisting with marketing and will be involved in helping to monitor the quality of delivery.

From business, we have seen enormous good will and enthusiasm for the ideas behind the new deal and an understanding that it will be good for business, as well as for our young people and the country as a whole. Employers have already made a superb contribution. They have contributed ideas and expertise to the detailed design and implementation planning of the new deal at national, regional and local levels. They have seconded key managers to help us to take the work forward-17 private sector secondees are now working with the Employment Service. At board and senior management level, they have been helping personally with the assessment of local delivery plans.

What is more, an impressive range of major British employers have expressed their support for the new deal. That runs across all sectors—from manufacturing, including Rolls-Royce, Unipart, Rover and British Aerospace, to services, including British Telecom, British Airways and the Business Services Association; from utilities such as Thames Water and General Utilities, to retailing, including Tesco, Sainsbury, Littlewoods and Marks and Spencer; from food and drink, including Northern Foods and Allied Domecq; to financial services such as Prudential, Abbey National and NatWest.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

That is all very valuable and encouraging, but have the Government had any success in trying to get below the level of some of the blue-chip companies? Of course the Government are right to start with the bigger, better organised businesses, but will the Minister give us an assurance that, once that has been done, he will move on, because the vast majority of employers in this country are small or medium-sized enterprises?

Mr. Smith

Indeed, and I am about to deal in the next part of my speech with the enormous progress that we are making on that level. I cannot resist saying that I welcome the hon. Gentleman's recognition of the value of the employer support that we are receiving. If the Liberal Democrats had had their way, with their opposition to the windfall tax, there would not have been the resources to pay for the programme, and it would not have been carried forward, with large or small employers.

The hon. Gentleman is right to say that it is important that we get support from the full range of businesses—small as well as large. An enormous effort is being made, and will continue to be made, to build up still more involvement. We have established national account managers in response to requests from large employers, so that there is a single point of contact nationally. We are working systematically through the top 500 companies.

We are also working with employer organisations to agree arrangements for particular sectors such as construction and tourism. The Institute of Personnel and Development is working with us to distribute a special fact sheet on the new deal to 80,000 personnel and training managers. The national insurance and tax packs, which will go out to 1.2 million employers early in the new year, will all include new deal information.

The small and medium-sized businesses which are crucial to the success of the new deal will be receiving information, and there will also be a local marketing effort. We are paying particular attention to getting the message across to firms at local level. Local plans are building on the links that the Employment Service, chambers of commerce, training and enterprise councils and others have with small firms. That will be backed up by information and advertising.

To date, local partnerships have already contacted 60,000 employers through events, visits and letters. Already, 9,000 have undertaken to employ people through the new deal. We shall have contacted more than a quarter of a million employers by the end of February.

There has also been a high level of interest from the voluntary sector and environmental groups. We are seeking to build alliances between the smaller organisations, which might not have the capacity to deliver the options alone, so that they can also play a role. We have provided funding to support smaller voluntary organisations in the bidding process and, as contracts are awarded, we shall encourage the larger organisations that win them to work with the smaller ones, to ensure that the widest range of opportunities is available.

Energetic efforts have also been made to engage education and training providers in new deal delivery, both for the full-time education and training option and to provide the training that is an essential part of each of the three work options. The Further Education Funding Council has been a key partner in the development of the programme, and strong links are being built with the Association of Colleges and the Further Education Development Agency. The further education sector is well represented on local partnerships.

The spirit of involvement and working together is the spirit of the new deal. It characterises the other employment initiatives that we are taking as part of welfare to work, such as the employment zones that will help those over 25 who have been unemployed for a year or more. That is a new and innovative approach that will start in five pilot areas in February.

In those areas, local partnerships will tailor help to individuals, rather than simply imposing standard programmes, so that those individuals have the best chance of getting into work. Those employment zones are about people, not programmes. Each of the zones will include new proposals, decided locally, for improved training, work projects to benefit the community and business enterprise.

Despite falling unemployment, there are still concentrated pockets of high, long-term unemployment. Those are often areas where a lot of public money is already spent in the form of benefits, education, employment and regeneration programmes, the European social fund and money from local authorities. As well as providing extra resources—some £58 million across the five pilot areas—employment zones will enable local people to co-ordinate more effectively the use of the existing money, bringing new coherence and effectiveness to tackling concentrated unemployment. We shall be looking closely at the innovative features in employment zones, so that we can apply more widely the lessons of what works best in getting people into jobs.

We have achieved a lot in a few months, but we are by no means complacent. We are on course to deliver the new deal—a fortnight from now in the 12 pathfinder areas and in 15 weeks' time right across the whole country. But with a programme as complex and ambitious as this, there is always more to be done to ensure that we get it right. The invaluable work that so many hon. Members have been undertaking as ambassadors and advocates for the new deal will be even more important in the months ahead.

The test of welfare to work will be in its delivery and in its impact on the employability, and therefore the lives, of all the unemployed individuals it aims to help. Welfare to work and all the initiatives that are part of it have mobilised the support and enthusiasm of people from all walks of life. It also demonstrates our belief in a society in which we do not simply pursue individual aims but hold many goals in common, working together to achieve them.

Our welfare-to-work strategy will attack unemployment and the despair that it brings. It will break the spiral of escalating spending on social security, and it will be of lasting benefit to those taking part, to the community and to the economy. I commend it to the House.

9.59 am

Mr. Stephen Dorrell (Charnwood)

Opposition Members are very pleased to have this debate, and I am sure that every right hon. and hon. Member agrees that reducing dependency on benefit and enhancing people's opportunity to work are important objectives. The Minister asked me whether the Opposition were committed to enhancing opportunities and enabling people to leave dependency. Of course the official Opposition—like, I suspect, all right hon. and hon. Members—share those objectives.

Mr. Andrew Smith

Will the right hon. Gentleman give way?

Mr. Dorrell

I have not made much progress yet, but I am happy to give way.

Mr. Smith

I am sorry to interrupt the right hon. Gentleman so early, and I am grateful to him for giving way. I welcome his support for the Government's overall objectives. Will he tell us, therefore, whether he and other Opposition Front Benchers will pledge their support for the new deal for young unemployed people?

Mr. Dorrell

I have a speech to make yet, and not every element of it, the right hon. Gentleman will not be surprised to hear, is uncritical endorsement of everything that the Government are doing. He has asked me to endorse the objectives of getting people off benefit and enabling them to return to work. I am very happy to do so, because that is a very widely shared objective. It is important that such objectives should be endorsed, because they are most critical for those who have endured long periods of unemployment.

Achieving those objectives is critical not only for young people—as the Minister stressed again in his speech and as the Government repeatedly stress as part of their welfare-to-work programme—but for those in later life and for lone parents. Those groups form other aspects of the new deal, about which he said rather less in his speech and about which I shall want to say more.

The key question that every right hon. and hon. Member must ask about the Government's new deal and welfare-to-work packages is not whether we share the objectives—we can take that as read—but whether, given the inevitable competition for resources, they are the most effective way of achieving those objectives. We should realise that the issues that we are debating today are important not only to those who will benefit from improved labour markets and job opportunities but to the wider politics of Britain.

The Prime Minister has made it clear that achieving radical reform in the welfare system is a centrepiece of the Government's programme. He has stressed that point on several occasions this week. He is inclined to suggest, however, that reforming welfare is the same objective as achieving welfare to work, reducing welfare dependence and enhancing job opportunities. As he and the Secretary of State for Social Security discovered yesterday, the process of reforming welfare is broader than can be summed up in the rather glib soundbite "welfare to work".

The Prime Minister's difficulty was underlined in this week's New Statesman by the chairman of the parliamentary Labour party, the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Soley), who wrote: It is self-evident that the majority of people, whether lone parents, the disabled or other groups, would prefer to earn an income than rely on state benefits. But work will not always be a realistic option and this is what went wrong on lone parents … As a strategy, welfare-to-work is quite well thought out and understood. Modernising the welfare state is not, and that is our central problem. That was written by the chairman of the parliamentary Labour party.

The Prime Minister has no one but himself to blame for the difficulties in which he finds himself in trying to secure the consent and support of his Back Benchers for his programme for reforming the welfare state. The Government's and the Prime Minister's entire approach to the subject—particularly in much of what he has said about the new deal for the young unemployed, which is one of the Minister's specific responsibilities—has been typified by superficiality and naivety.

The Prime Minister has consistently implied that welfare-to-work programmes—the Minister's programmes—are self-financing. In February 1997, the Prime Minister said: we will reduce spending on the costs of unemployment and increase it on education. We will begin with the programme taking 250,000 young people off benefit and into work". He tried to establish a link between increasing education spending and the welfare-to-work package by implying that implementing welfare to work will bring revenue savings that will allow him to increase spending on education.

On 3 April 1997, at the Labour party manifesto launch, the Prime Minister was at it again when he said: Education will be our number one priority; and we will increase the share of national income spent on education as we decrease it on the bills of economic and social failure". Last week, an official in the Department of Social Security was at it again by writing the leaked memorandum that suggested that the Government's capacity to increase health and education spending depended on the welfare reform process releasing money for which the Department of Social Security is responsible.

Given such conjuring tricks, it is hardly surprising that voices are being raised against the Government on their own Back Benches. Some of the Minister's more battle-hardened colleagues realise that they are being offered an inherently implausible scenario. First the Prime Minister says that education will be paid for by saving achieved by the new deal, then the Minister for Welfare Reform says that increased charges for students will pay for £1.2 billion-worth of child care—

Mr. Roger Casale (Wimbledon)

Yes.

Mr. Dorrell

The hon. Gentleman says yes, but I thought that other parts of the Department for Education and Employment had give assurances that those increased charges would be spent on higher education and further education. Although I think that they should be spent only on higher education, the Department has at least given an assurance that they are for higher and further education. However, it appears that some Labour Back Benchers still think—with the Minister for Welfare Reform—that that money will go into child care.

Mr. Malcolm Wicks (Croydon, North)

Will the right hon. Gentleman give way?

Mr. Dorrell

I shall give way after I finish this catalogue.

As we discovered last week, the Department for Social Security is also being charged with the task of finding savings in the cost of benefits for the disabled and the elderly to finance the cost of growing health and education expenditure. I asked the Minister twice during his speech whether he could assure disabled people in Britain that the Government will not cut benefit payments to qualifying disabled people, and twice he avoided the question. The Government's objectives are not wrong, but they are simply not prepared to come clean to the British people about their different objectives and about the necessity of reconciling those objectives.

When the Minister talks about the new deal programme for the young unemployed, he is not taking about a programme that will release money for spending on other desirable objectives. He should have the honesty to say so. He ought to recognise that the programme for which he is responsible is a programme of spending which, in the Government's view, is designed to improve the operation of the labour market. That is not a view with which I entirely disagree; it would be strange if I did, because the previous Government spent money on many similar schemes.

The programme involves the net spending of taxpayers' money. It does not release money for spending on something else—quite the contrary; it pre-empts money which, if not being spent on this programme, could conceivably be spent on something else. Therefore, to represent it as a programme that allows the Government to spend more on health, education or other social provision is a conjuring trick, as it does nothing of the kind.

The Government should be clear about the fact that the justification for the programme for which the right hon. Gentleman is responsible has to be made on the basis of the benefit it brings to the labour market and in the enhanced job opportunities that result. That is the test that the right hon. Gentleman sometimes accepts and sometimes does not. However, the Prime Minister apparently still believes that his programme is part of a wider reform that will release benefit from one element of public expenditure so that it can be spent on another.

Mr. Wicks

I do not quite understand the right hon. Gentleman's difficulty. On 1 May we inherited a social security budget that was rising to about £100 billion a year, or one third of total public expenditure. We are having to grapple with that mess. Is the right hon. Gentleman saying that that £100 billion was being well spent? Is he pleased with the previous Government's distortion in spending all that money on the consequences of economic failure?

Mr. Dorrell

I am certainly proud of the fact that the previous Government enhanced spending on disabled people and provided them with a range and generosity of benefits that did not exist in 1979. I am not attacking the previous Labour Government, but those improved benefits were an element of the progress that we made during our 18 years in office. That is why I am now probing the Minister as to whether the enhanced benefits for disabled people, which we were responsible for introducing, are to be chipped away. If that is the case, it is about time that a Minister was prepared to defend that policy on its merits.

The key questions before the House are whether the programme for which the Minister is responsible is the best possible use of roughly £3.75 billion and whether it represents good value for money. They are the issues we should be focusing on. In answering those questions, I repeat that I agree with the Government about the benefit that can come from active labour market measures. I am prepared to be straight and say that they do involve some public expenditure. That was why the previous Government—[Interruption.] I see that economies are coming early. I am prepared to concede that a saving on electricity releases expenditure for something else. I am prepared to recognise and argue for the necessity for extra expenditure on active labour market measures.

The Minister rightly stressed the importance of the gateway element in his programme for the young unemployed. One of the questions asked by the Employment Sub-Committee, which is chaired by the right hon. Member for Bishop Auckland (Mr. Foster), to which I would be interested to hear the answer, is, if the gateway principle is right for the young unemployed—I agree that it is—why is there not a similar principle in the elements of the new deal focused on the over-25s, where the same arguments apply? With that caveat, I agree with what the Minister said about the gateway element.

I also recognise that there can be a role for employment subsidies in the promotion and enhancement of work opportunities. That is why we launched the workstart pilots. Provided that they are highly targeted, and provided that some of the distortion and displacement effects of wage subsidies are recognised and controlled, there can be a role for them. There certainly can be a role for what I understand are now, in the awful jargon, called the intermediate labour markets but might more revealingly be referred to as voluntary sector employment or the environmental task force. I have no difficulty in principle with those or with the training option.

The basic principles of the Government's scheme are not necessarily wrong, but we have to consider the detail behind them. What stakes will the Minister set in the ground to define the scheme's objectives and, therefore, its success or failure? When the Labour party first spoke of the scheme for the young unemployed, it talked about taking 250,000 young long-term unemployed people off the dole. It can no longer use that as the definition of success, given that there are now only 122,000 young long-term unemployed who qualify for the scheme. The original definition of the scheme has had to be changed.

It should at least be a warning that a scheme that was designed several years ago with one very definite objective is substantively unchanged, although the objective has changed radically because it was achieved by the previous Government by another means. Since the date on which the Labour party announced its scheme, the previous Government reduced the number of the young long-term unemployed by 250,000 by ensuring more flexible labour markets—

Mr. Ernie Ross (Dundee, West)

They were fiddled figures.

Mr. Dorrell

The hon. Gentleman should be a little careful about adopting that argument. One of the things that at least some new Labour Members have been learning over the past few weeks is that the unemployment figures that are published every month are now the responsibility of the Labour Government. I have not noticed that they have been coming forward with any great haste to change the basis of those figures in a way that reflects the argument deployed by the hon. Member for Dundee, West (Mr. Ross).

Mr. Andrew Smith

Will the right hon. Gentleman give way?

Mr. Dorrell

I shall be delighted to do so. Are we going to hear about a change to the basis of the unemployment figures?

Mr. Smith

Has the right hon. Gentleman abandoned what I had understood to be the previous Government's commitment to give more prominence to the labour force survey? We have made it very clear that we believe in giving it more prominence, as it is a more reliable and, indeed, internationally comparable measure of the levels of unemployment.

Mr. Dorrell

I agree with that proposition. As the right hon. Gentleman knows, the labour force survey does not paint a significantly different picture. I was seeking to deal with the outburst of the hon. Member for Dundee, West, who was using old Labourspeak. The House will remember that, whenever the unemployment figures were published—the labour force survey figures or the monthly ones produced by the previous Department of Employment—Labour Members used to leap to their feet and say that they were fiddled. The Government are now using exactly the same figures on the same basis.

Mr. Ernie Ross

I have been a member of the Select Committee that deals with employment issues for the past three Parliaments and I have to say that what the right hon. Gentleman is saying is a pile of arrant nonsense. The Committee never disagreed with the labour force survey figures. We disagreed with the way in which the previous Government dealt with the claimant count and their suggestion that that somehow reflected the real number of people looking for work.

Mr. Dorrell

I shall not dwell on that. The hon. Gentleman now appears to recognise that the important element in the argument is not the way the figures are constructed but the fact that over the past two years there has, according to the labour force survey and the claimant count, been a substantial reduction in the number of young unemployed people.

The original objective that the Labour party set itself when it published its welfare-to-work programme for the young unemployed, which was to take 250,000 young people off the unemployment register, was achieved by the previous Government. The new Government have had to redefine the objectives of what is still the same scheme. I was suggesting that that should be a cause for questioning by those of us who follow the matter.

Mr. Andrew Smith

rose—

Mr. Dorrell

I want to make a little more progress.

I want to cite what the Minister said when pressed on the subject by my hon. Friend the Member for Altrincham and Sale, West (Mr. Brady) in the Education and Employment Committee. My hon. Friend asked the Minister: Would it be a fair measure of success to say that we would have to see the current trend rate of decline of unemployment increase? The Minister started by not being very clear. He said: That does depend on assumptions about what is happening to the wider macroeconomy and, for that matter, the labour market … So that would be an oversimplification to put it like that. My hon. Friend then pressed him: So you might be happy that you were getting value for money if the current trend was maintained, or even if unemployment rose? The Minister responded: Only if something devastating, which was unforeseeable, happened to the economy. My hon. Friend then put it to the Minister: So, barring some devastating and unforeseeable action, you would expect the trend rate to be improved. The Minister said: I would, yes. The Minister's definition of success is an improvement in the declining trend rate. I should be grateful if he could confirm that that is his definition of success for his programme for the young unemployed. It is important to be clear about the Government's objectives for the scheme to which they are going to commit more than £3 billion of public money.

Mr. Smith

The measures of the programme's success will be: first, keeping our promise to get 250,000 young people off benefits and into jobs; secondly, significantly enhancing the employability of the young people who have undertaken work on the programme; thirdly, a higher level of youth employment and a lower level of youth unemployment than there otherwise would have been.

Mr. Dorrell

I am interested that the Minister does not appear to be confirming what he said to the Select Committee. When my hon. Friend said: barring some devastating and unforeseeable action, you would expect the trend rate to be improved", the Minister replied: I would, yes. Is the right hon. Gentleman changing that position?

Mr. Smith

If the right hon. Gentleman reads on in that Select Committee evidence, he will also see that I made it clear that, with the falling numbers in the client group, the proportion of those who are harder to help is increasing. We want the declining trend rate in youth unemployment to continue, but that becomes a bigger achievement as we get further towards those who are hardest to help. That has implications for the gateway and the wider support services involved in the new deal.

Mr. Dorrell

I must correct the right hon. Gentleman. I shall read on. The right hon. Member for Bishop Auckland then said: Minister, can we turn to the Employment Service and its preparation to deal with the New Deal". It is not true that the Minister went on to say what he has just claimed. The Chairman of the Committee changed the subject. That is not surprising. The Select Committee was more circumspect in its report than was the Minister in setting the objectives.

Mr. Smith

It is important that such matters should be correct for the record. In my subsequent answer, I specifically referred to the previous question. It was clear that that was the question that I was answering.

Mr. Dorrell

The Minister went on to make points that he had already made but were not reported. I am not sure whether the House will have followed that contortion.

The Select Committee was more circumspect than the Minister in defining the objectives of the programme. The Committee was clearly concerned that, if success was defined too closely by a decline in the trend rate, it might be a difficult test to pass. Given that we are probably close to the peak of the economic cycle, the Select Committee is likely to be right.

The Committee, importantly, broadened the focus on the definition of the scheme's objectives. The Chairman said: we have taken certain evidence which suggests that, because unemployment has been falling pretty rapidly, the target group, which most of the money has been spent on, is diminishing and it might be better to focus the scheme, or to rebalance the scheme, to take more into account the longer-term unemployed. The Chairman made it clear that he was reflecting evidence that the Committee had heard that the Government's programmes will spend the lion's share of the money from the windfall tax on the young unemployed.

The figures are revealing. The Chancellor announced that he would spend £3.15 billion on 18 to 24-year-olds during this Parliament. The Government have earmarked £350 million for over-25-year-olds who have been unemployed for more than two years. That is barely 10 per cent. of the money earmarked for the young unemployed. For lone parents, they have earmarked only £200 million. The focus of the welfare-to-work scheme remains heavily on the young unemployed, but the facts of the employment market have changed sharply.

Not only, as my hon. Friends have pointed out, has the number of long-term young unemployed people fallen sharply over the past couple of years, but the turnover rate of unemployed people—the number leaving the register to go back to employment—is significantly faster among young people than among the older age group. On the most recent figures, there are more than 400,000 people between the ages of 40 and 55 on the unemployment register. The rate at which they are leaving the register to go back to employment is approximately two thirds of the rate at which younger people are leaving the register.

That is why the Chairman was right to point out that the changes to the labour market since the Labour party committed itself to the shape of the new deal some years ago might require a shift in the balance of the programme to offer more assistance to the older unemployed. There are serious social problems associated with long-term unemployment in the older age group.

Mr. Derek Foster (Bishop Auckland)

Does the right hon. Gentleman accept that the Minister went on to concede that he would build sufficient flexibility into the programme to enable it to respond to the changing nature of the jobs market?

Mr. Dorrell

I was about to quote the Minister on that. I should like him to clarify what he meant when he said, in response to the Chairman: if the numbers of 18–24 year olds more than six months unemployed diminished significantly below that which in overall terms has been budgeted for, clearly that would release resources which could then be considered for reapplication elsewhere. That is clearly what the Minister's brief said. When my hon. Friend the Member for Altrincham and Sale, West asked the same question later—whether the shift in the balance of the labour market meant that the money allocated for the young unemployed could be shifted within the welfare-to-work programme to benefit the older unemployed—the Minister said: What I was saying was that, if as things develop you can see that you are well within the overall budget that had been provided, it follows logically that there could become resources available for reallocation. The Minister's brief clearly said that, if he was asked that question, he could say that the resources were available for reallocation. His words do not tell us whether the money would be available for reallocation within the welfare-to-work programme or for reallocation by the Chief Secretary to the Treasury on a wide range of other Government spending programmes. Is welfare to work a £3.7 billion programme with priorities that may shift between the young unemployed, the older unemployed and lone parents, or was the Minister telling the Select Committee that, if the money allocated to deal with the young unemployed was found to be more than necessary, it would be taken away from his Department and reallocated by the Treasury? That is an important question that his evidence did not answer.

The details of the rules of the Government's scheme also raise value for money issues. The most obvious unintended effect of the scheme is the deadweight cost associated with any wage subsidy programme. To what extent is it anticipated that the scheme will pay employers to do what they were going to do anyway?

When National Economic Research Associates looked at 17 schemes in 10 member countries of the Organisation for Economic Co-operation and Development with similar wage subsidy characteristics, it concluded that up to 50 per cent. of spending on wage subsidies could be deadweight. NERA also said that only 10 to 30 per cent. of the expenditure on those wage subsidy programmes would result in extra jobs. That led it to conclude that it was ultimately somewhat sceptical about the likely effectiveness of a permanent full-scale wage subsidy programme. When the Select Committee asked the Minister about that issue, he did not dissent from the proposition that deadweight costs could be between 25 and 50 per cent. of expenditure. Given that the Government are suggesting that a substantial sum of public money should be spent on the programme, we need to know in far greater detail what plans they have to control the level of deadweight, and what level of deadweight expenditure they would find acceptable. Presumably there is a level at which the Government would conclude that the deadweight expenditure was such that the money would be better spent in the interests of the people on whom it is targeted on a labour market programme or on another programme.

More insidious than the deadweight issue is the problem that the welfare-to-work programme may encourage people to do things that are slightly different from what they would have done otherwise. The changes brought about as a result of the scheme may be undesirable. Let us consider the young unemployed person who has been unemployed for five months. If that person finds someone who wants to employ him, is it not in the interests of both parties to delay the employment contract for a month, at which time the young person will qualify for the £60-a-week subsidy under the Government scheme? Nobody would regard that as a desirable result. What safeguards will there be to prevent such distortions?

There are worse possibilities. Let us consider the young person who is thinking of attending a further education course on terms that are available to the whole community. Is it not in that young person's interest, in some circumstances, to wait for six months on the unemployment register to qualify for the more generous terms that are available under welfare to work? Surely that would be a perverse effect of the Government's programme.

Let us consider the case of an employer who is considering recruiting a young person. We can take as the control case the 18-year-old who has just left employment or who is still in employment and considering changing his job. If a person between 18 and 24 has been unemployed for more than six months, he will be £60 cheaper to the employer. That is the five months argument with which I have already dealt.

Let us consider the case of an employer who is considering taking on a 16 or 17-year-old instead of the 18-year-old control case. One of the perverse effects about which the Government need to be careful is a result of the provision in the Teaching and Higher Education Bill which imposes on the employer of the 16 and 17-year-old the obligation to cover the cost of a day a week on a training course. The employer does not have the same cost obligations with an 18-year-old. We need to know that the Government have thought through the different cross-subsidies and the incentive effects of various programmes taken together.

Of course I do not believe that the Government's objectives are wrong; we share their objectives. We all want enhanced job opportunities, linked to training to improve the output potential of young people and of all people who are currently unemployed. That is a shared objective.

We are concerned about whether the details of the Government's programme have been sufficiently clearly thought through. In considering such programmes, we need to remember that they are being implemented against a background of low and falling unemployment, by historic standards and by the standards of most of our OECD competitors. We need to recognise that there is a danger that the structure of the Government's schemes will have a number of unintended and undesirable side effects.

The most important question is whether this programme represents the best possible use of £3.7 billion, given all the competing claims on expenditure. If it is claimed that this programme is part of a general programme of welfare reform which will release money from one part of the welfare budget so that it can be spent on another, that is a fraud.

When Labour Members go through the Lobby next year to vote for the Prime Minister's programme of welfare reform, they should remind themselves that the previous Government achieved Labour's target of a 250,000 reduction in the number of long-term young unemployed. They must ask themselves whether the £3.75 billion that the Government are committed to targeting on an objective that has already been achieved by the previous Government is being used in the best possible way, particularly against the background of cuts and other restraints that it is the inevitable lot of Government Back Benchers to have to support.

10.35 am

Mr. Derek Foster (Bishop Auckland)

I am pleased to follow the right hon. Member for Charnwood (Mr. Dorrell), who is doing his job as Opposition spokesperson. All the questions that he has raised are perfectly legitimate. It is important for our democratic process that we have a vigourous Opposition, and good government is made even better through proper probing by the Opposition and by Select Committees.

Some of my colleagues would have taken some of the right hon. Gentleman's remarks rather more seriously if the previous Government had shown a real intention to address the problem. Who put unemployment up in the first place over 18 years or so? The right hon. Gentleman has the audacity to claim that his Government achieved this Government's objective during the last few months of their time in office. He went a bit over the top at that point.

Mr. Brady

Will the right hon. Gentleman give way?

Mr. Foster

I am just beginning my speech, and I know that many of my hon. Friends want to contribute to the debate.

I would have been a little more kindly disposed towards the right hon. Member for Charnwood if I had heard him express the sentiment expressed by one of his predecessors, Lord St. John of Fawsley, whom I distinctly recall saying, when he was Leader of the House, that unemployment was a moral and social evil. Many of us came to this House to ensure that that moral and social evil was totally abolished, and I am proud that the Labour Government have addressed the problem with a tremendous amount of political will and with great ambition. I am proud that they are prepared to drive through this part of the programme with great flair and imagination.

I was rather critical of the idea that the Employment Service was the appropriate body to do the job, however, as the enforcement agent of a pretty harsh benefits regime seemed unlikely to be able to transform itself into an all-sharing, caring organisation which could assist young people in negotiating their way into employment, education and training. I will now repeat what I said yesterday to the chief executive of the Employment Service. I said that the culture change required within his organisation to make it fit to drive through the programme is seriously under way. The staff at my local jobcentre at Bishop Auckland are implementing the new programme with enthusiasm and a sense of liberation. We owe a debt of gratitude to Leigh Lewis and his staff.

I should also refer to the commendable flexibility that the Government insisted should be written into the design of the programme. It would have been excusable for a Government with such an ambitious programme to lay down the law pretty rigidly from the centre. That could have got the programme off to a good start, as everyone would have known exactly where they stood. However, the Government rightly foresaw that needs differ greatly from area to area. Enormous care and trouble has therefore gone into creating imaginative partnerships which will design programmes that are relevant to their areas.

That is highly commendable, but there is one slight difficulty: despite the flexibility that has been written into the design of the programme, some of the uncomfortable deadlines that have to be met—particularly in the pathfinder areas—are making it difficult for the most innovative and imaginative programmes to succeed. I should like my right hon. Friend to give that just a little attention. It would be regrettable if the deadlines that had to be achieved made it difficult for innovation and imagination to be shown within the programmes.

The Select Committee report referred to problems with private sector take-up. The global players have been extremely supportive of the programme—once again, the Government deserve congratulations for getting them signed up—but as we know from our own constituencies, the success of the programme will be determined by small and medium-sized enterprise take-up. Once again, much time and effort is now being given to that and there are signs that many opportunities are forthcoming. I know that the Government are already addressing the issue, which is crucial, as is the quality of training that is written into the private sector option.

Training must be relevant to the young person and to the job market. Not only must it provide benefit to the young people, as it did in the past, but it must be relevant to the employer. In the past, much of the training provided by the training system left the private sector dissatisfied, because the training was not directly relevant to the businesses concerned and did not result in any improvement in productivity. I know that my right hon. Friend is giving a great deal of attention to that, too.

There are also concerns about voluntary sector participation in the programme. I am a veteran of such programmes. I remember the report written by one Geoffrey Holland in 1977—an imaginative document, which set out some far-sighted ideas. The voluntary sector played a major part in earlier programmes, but it is finding it rather more difficult to respond this time. In my constituency there is some difficulty in finding the funds to create an overarching structure that would allow the voluntary sector to participate. That is absolutely essential, and I know that my right hon. Friend wants that part of the programme to succeed.

Finally, I should like to say something about the new deal for lone parents and disabled people. I have not heard one right hon. or hon. Member dissent from the view that it is absolutely essential to get more lone parents and disabled people back to work. That has to be right for lone parents, for disabled people, for the labour market and for society at large. There is no dissent from that among my right hon. and hon. Friends, and I suspect that there may be no dissent among the Opposition. The legitimate concerns are that it will be extremely difficult to facilitate lone parents and disabled people getting back to work. The barriers are pretty formidable.

For lone parents, of course, the problem is child care. We very much welcome what the Government are doing in the way of child care, but I suspect that much more will have to be done if we are to get large numbers of lone parents back to work. There are transport problems to be faced. Many employers are not exactly family-friendly, so the culture change that is required to get employers to welcome lone parents back to work may take rather a long time. I hope that my right hon. Friend will not underestimate that.

Disabled people also have a wide range of problems and must not be considered as a generality. We must address their individual problems in getting back to work. There is no question but that they want to work. Many people who work for Remploy do so through choice, even though they might be better off on benefit. Many disabled people would prefer to work, but physically cannot cope with a full day's work, so we have to be absolutely certain that it is made easy for disabled people to get back to work.

Let me issue a warning that appeared in the leader of the Financial Times yesterday: The lesson from both sides of the Atlantic is that real welfare reform is not a cheap option or an exercise in cost-cutting. In the United States, it was found to be rather expensive to get people back to work. If my right hon. Friends feel that there are huge savings to be gained by pursuing such a policy, they may be mistaken. I genuinely hope that they are not. We are all signed up to it and we want it to succeed. It is good for the nation, it is good for disabled people, it is good for lone parents, it is good for everyone—but it is has to be done sensitively, and I intend to play a full part in ensuring that it succeeds.

10.48 am

Mr. Edward Leigh (Gainsborough)

Many hon. Members wish to participate in the debate, so I shall confine my remarks to one subject—women with children and whether or not they should be forced into the market place.

Sometimes the United States sets the fashion in such matters. In some states—notably Wisconsin, which the Select Committee has studied—women on benefits with children as young as 12 weeks are forced back to work. If they refuse to work, their benefit is simply removed. I consider that a cruel practice. I believe that there is a possibility—perhaps a danger—that in our wish to get women into work, which is of course very desirable, we shall force or begin to force women with very young children into work. I will address that subject on the basis not of my own views and prejudices but on the basis of the massive social surveys of women with young children carried out in recent years.

Of all families with dependent children, 70 per cent. are headed by a married couple and 8 per cent. by a cohabiting couple. Of the rest, 20 per cent. are lone mothers and 2 per cent. lone fathers. There has been a dramatic growth in lone-parent households, from 8 per cent. of all households with children in 1971 to 16 per cent. in 1986 and 22 per cent. today. Some lone-parent households are created by bereavement, but the majority nowadays are the result of divorce or separation.

The Department of Social Security has conducted a great deal of research into the attitudes of lone parents. "Lone Parent, Work and Benefits", which was published this year, found that, of lone parents who had never lived with "a partner", 38 per cent. said that they had no intention of ever doing so, and 20 per cent. said that they were looking forward to having more children. When all lone parents were asked why they wanted to remain a lone parent during the "current spell", 48 per cent. said that they preferred to live independently and not as part of a couple. The report discovered a great deal, but one thing is clear: some lone parents simply prefer to remain lone parents—they make that choice.

No modern democracy can or should force people to get married, but that does not mean that lone parenthood is an entirely private matter. First, the taxpayer picks up the bill for welfare payments; secondly, the children grow up with one parent instead of two. In most cases, the missing parent is the father. There is ample evidence available to the House and the nation that such children tend to die earlier, have more illness, do less well at school, exist at a lower level of nutrition, comfort and conviviality, suffer more unemployment, be more prone to deviance and crime, and repeat the cycle of unstable parenting from which they suffered.

It is right that Governments should be concerned about spiralling welfare payments, and I understand why this is a major concern of the new Government. Clearly there is such a thing as welfare dependency, and it has grown dramatically in recent years. Every civilised nation finds it the greatest problem with which they are trying to grapple. The tax and benefit system can encourage people to behave more irresponsibly, and undoubtedly, in every nation in the western world, the tax-benefits system has done precisely that over the past 20 years. It can encourage people not to take responsibility for their own lives, and it can make it easier for people to get away with irresponsible and anti-social behaviour.

In the United States, the deadbeat dad phenomenon is well known. Many men father children, but are then for all practical purposes absent by choice from the home. I have no doubt that there are deadbeat mums, too, but in this country the main problem is families without fathers—and families need fathers. The Child Support Agency can make men pay, but there is a danger of politicians reducing the whole problem of lone parentage solely to one of money. Children need a mother and a father. The Government should be concerned to promote what is best for children—the two-parent family—and they can do that through the tax and benefit and education systems.

I agree with what Cardinal Hume said on Thursday last week when he asked the Government for a review of the tax and benefit system so as to promote marriage. The cardinal said that lone parents need to spend more time with their children, and that the long-term health of society depends on the health of the family, whether it be the family with a lone parent spending as much time as possible with the children, or the two-parent family.

It is of course right for the Government to discourage welfare dependency, but I should also say very strongly that young children, particularly in a lone-parent household, need a substantial time commitment from their parent. The Government should never use the benefit system to force mothers with pre-school children into work. That is unfair and cruel in a modern and compassionate society.

There has been much talk of high-quality child care, but the best child care is provided by the natural parent. Cardinal Hume suggested that the Government's initiative to get single parents back to work could be "false economy". It concerns me that children of a lone parent, having already been deprived of—usually—a father, will be further deprived through their remaining parent being forced into work.

I do not make that point about the child who is already at school. Perhaps we have been too lax in saying to single parents, "Well, so long as your child is under 16 you can stay at home." Perhaps we have gone to the other extreme from what has happened in Wisconsin. My remarks are directed at the plight of the child of pre-school age.

Why should my opinions matter? Most women, however, share such views.

Ms Gisela Stuart (Birmingham, Edgbaston)

Does the hon. Gentleman agree that mothers in Wisconsin asked to go back to work after 12 weeks not as a result of any social policy but because American working women from all classes go back to work very quickly? Therefore, the decision is made not on the grounds of social policy but simply because Americans refuse to treat welfare mothers any differently. They simply treat mothers very badly. We must therefore be careful what conclusions we draw from Wisconsin.

Mr. Leigh

I am pleased that my colleague on the Social Security Committee has made that point. In an American two-parent family, there is at least some element of choice. Many professional American ladies will want to go back to work very quickly, but at least they have some choice because there is a working father in the family. What concerns me about what is going on in Wisconsin, and what I do not want to be replicated in any way here, is that lone parents who have no choice are simply ordered back to work by the state. That is what happened in the Soviet Union, and it is not a civilised way of behaving.

According to the British social attitudes survey, most women—55 per cent.—believe that mothers with pre-school children should stay at home. Nearly a third of women-28 per cent.—say that part-time work is okay. Only 5 per cent. of women advocate full-time work for mothers with pre-school children. Women should choose; if they want to work part time, full time or not at all, let them. I have no opinion on that. All that I am trying to drive home is that they should not be forced to go out to work as a result of the benefit system.

According to some figures from the Office for National Statistics, 17 per cent. of mothers with pre-school children work full time and a further 31 per cent. part time. The majority of mums with pre-school children do not work at all. Of all mothers with children under 16 years old, only 22 per cent. work full time for an average of 41 hours a week, while 37 per cent. work part time for an average of 18 hours a week. We must recognise that children need time with their mothers.

The British social attitudes survey asked mothers who work part time whether they would change the hours that they worked if they could have the child care of their choice. Interestingly, just over two thirds—67 per cent.—said that they would work the same hours. Only 17 per cent. of those mothers said that they would work full time, and 7 per cent. said that they would like to work additional part-time hours. The survey also asked—this is the interesting point—what sort of child care women wanted. Most said that they would prefer it to be provided by relatives or husbands. The study concluded that the views of women on that point were so firm that no amount of child care subsidy will make a difference to them. The survey found that 62 per cent. of working mothers with children under 12 used relatives, including husbands or cohabiting partners, as child carers. Only 15 per cent. used child minders, and 6 per cent. used a nanny. It is worrying that 4 per cent. of mothers with children under 12 said that they did not need child care arrangements because the children "looked after themselves."

The norm in this country, and the evidence that I have quoted from studies, is that most mothers do not want full-time work. The overwhelming majority of mothers—78 per cent.—do not work full time. It is true that 37 per cent. work part time, but the majority of those mothers are at work only when the children are at school or cared for by a relative.

Caroline Flint (Don Valley)

The Joseph Rowntree study showed that the two major issues that lone parents said would help them get back into work were opportunities to improve their education and skills, and child care. I do not know what world the hon. Gentleman is living in, but certainly in my experience one of the reasons why so many women depend on friends and family to cobble together child care from one day to the next is that we do not have the same provision for child care as the rest of Europe. In Britain, we have places for only a third of children aged three and over: in France, there are places for 95 per cent. of those children, and in Germany and Spain there are places for 70 per cent. of pre-school children. Women have to cobble together child care because it does not exist in this country, but the Labour Government will address that problem.

Mr. Leigh

That is a fair intervention, and if we can improve child care, I shall be the first to welcome that. However, as the right hon. Member for Bishop Auckland (Mr. Foster) said, it will require massive increases in public spending, because no savings will be made. The American experience is that increasing child-care opportunities has increased public spending. If women want to put their children into child care and go out to work, I am happy with that, but most women do not want to be forced into full-time work against their will. That is my only point. I do not criticise the Government or their efforts to improve child care. Nor am I making a party political point. I am simply warning the House about the implications for this country of what is happening in the United States of America.

I am worried that, in solving one massive social problem—welfare dependency, about which we have all worried for years—we may exacerbate the cycle of deprivation experienced by children, who need and want at least one parent, but preferably both, involved with them all or most of the time. After all, children do not choose their parents, and they are not responsible for the actions of their parent or parents.

Melanie Phillips, a well-known left-of-centre journalist—[Interruption.] Well, she used to be.

Mr. Wicks

No more.

Mr. Leigh

She is no more, apparently. She has written: Of course, some mothers want to work and do work full time from when their children are very young. But to expect all lone mothers to do so is either effectively to deny the importance of the maternal caring role, or else to condemn women to a form of servitude in attempting to combine, alone and unsupported, separate roles in conflicting domains". The breakdown of the traditional family goes to the heart of the issue. Yes, welfare dependency is a bad thing, and why should others pick up the bill for irresponsible behaviour? However, in the midst of all that, we must consider the children. Forcing lone mothers to work full time could have serious effects on their children. Patching up one problem could lead to even worse problems, unless the central issue of the breakdown of the family is addressed.

What should the Government do? First, a strong distinction should be made between lone parents with pre-school children and those whose children are older. There should also be a cap on the number of hours that lone parents are compelled to work under the scheme even when their children are of school age. Secondly, the Government must address the issue of fatherless families. It is not enough to take money from fathers through the CSA and then leave them alone. Fathers should be expected to perform some of the duties of parents even when a couple have separated. Fathers should be strongly encouraged to take more of a role and the court welfare officers must uphold the need for fathers to have access to their children. Thirdly, and most importantly, the Government must support the traditional family. The divorce rate is far too high.

What should the Government do to support the traditional family? From a number of newspaper reports, it appears that some members of the Government believe that something should be done. A major article in the Financial Times on 5 December caught my attention. It claimed that Ministers are considering introducing tax incentives for marriage, making divorce more difficult, reforming the CSA to encourage fathers to keep in touch with their families, and educating children about their future responsibilities. If that article is true, I welcome it. When Treasury civil servants appeared before our Select Committee recently, they were unable to tell me anything about the source of that story, but as it appeared in the Financial Times it must have come from a well placed ministerial source.

I hope that the Government are, indeed, considering such radical and substantial steps to support the family. I hope that they are fully seized of the vital importance of encouraging both mother and father to take an active interest in their child. I hope also that the Government will reject the cruel practice of forcing women with pre-school children into work against their will.

11.5 am

Mr. Ernie Ross (Dundee, West)

Most of my hon. Friends and I listened in amazement to the hon. Member for Gainsborough (Mr. Leigh) as he tried to redraw the past 18 years of the Tory Government's performance and the past 10 or 11 years of his own performance. If some of the evidence that he offered today had been offered by him and his colleagues instead of the rhetoric that we heard from the Tory party conference and the actions that we saw from the previous Government, we might not be in the current situation. Others will have the chance to reflect on what the hon. Gentleman said and the way in which he used his vote when his party was in government.

I wish to echo my right hon. Friend the Member for Bishop Auckland (Mr. Foster), because those of us who have experienced 18 years of opposition need to remind Conservative Members—especially new ones, and also our new hon. Friends—of the history of the previous Tory Government. We saw a succession of make-work schemes, few if any of which were completed according to the programme set out by whoever happened to be the Secretary of State for Employment at the time. In my time in the House, we got through a number of Secretaries of State for Employment. Their attitudes were usually driven by the previous Tory conference and the rhetoric heard there against the unemployed and single parents.

During the previous Government's time in office, those of us on what was then the Select Committee on Employment learned from bitter experience of those schemes—and from trips with various Secretaries of State to the United States of America, to assess whether so-called successes in that country could be introduced here—that getting the long-term unemployed back to work is costly. There is no escaping that principle, and empirical evidence for it is contained in all the Committee's reports, which are available in the Library. That is why I am pleased that, early on, the Labour Government identified the means by which we would meet that cost. We said exactly where the money would come from.

Those of us who followed various Secretaries of State round the world looking at experience elsewhere, discovered that, if we were to deal with the long-term unemployed and single parents, child care, after-school care, and in some cases before-school facilities, were essential. That is why I welcome what my right hon. Friend the Minister of State and his fellow Ministers have said about ensuring that child care, after-school clubs, and even before-school clubs, will be available to support our new deal policy. All the empirical evidence on the record shows us that there is no easy option for anyone.

I apologise to you, Mr. Deputy Speaker, to the Minister and to other hon. Members, because I shall have to leave shortly after speaking. I have a constituency matter to attend to in Dundee, which is rather a long way away, so I must leave the House.

Tayside is one of the pathfinder areas for the new deal, so I shall give my right hon. Friend the Minister the benefit of some of our experience there. I join all the other hon. Members who have spoken of the enthusiasm that has been engendered in the Employment Service. It is amazing to see people who started their careers—in some cases long before I became a Member of Parliament—hoping to help people back into work. They then spent 18 years massaging the unemployment figures—or rather, the claimant count figures—to meet the terms of the latest Government scheme with which they had to try to work.

Now we see those people doing the job that they entered the Employment Service to do—getting people into jobs. They have opened their arms and welcomed with enthusiasm the new deal and the possibilities that it offers. I want to place on record my appreciation of the work of Bob Alexander, Alison Blake and the rest of the Tayside Employment Service team who are leading the pathfinder scheme.

Why was Tayside chosen? Why not Glasgow? Tayside is both an urban and a rural area, whereas Glasgow is the largest city in Scotland, containing most of the population. More importantly, before the Tories gerrymandered the boundaries to get rid of the regional councils, Strathclyde region used its spending power to set up structures that helped to offset the worst aspects of the Tory Government's policies. Those structures are still there, and it would not have given us an accurate reflection of what the new deal could achieve if the pathfinder area had been established in Glasgow. That is why we welcomed the pathfinder area in Tayside.

It has been a struggle. From the day and hour that the initiative was announced, we have had to work hard, and many people have had to learn many lessons. We have had to find ways of working together, and new initiatives that we can all support. It has been exciting. I have tried to play my part, along with my hon. Friend the Member for Dundee, East (Mr. McAllion), who unfortunately cannot be with us this morning. We have been heartened by the response, especially from employers.

More than 200 employers from all over Tayside have attended the various meetings, and more than 100 have committed themselves to working with the scheme. When my right hon. Friend the Minister visited Dundee recently, he met the representatives of several of the companies, so he will know for himself the enthusiasm with which they have greeted the new deal.

We now have targets to meet, and 36 personal advisers are ready to move in and work with the clients. We knew from the beginning that most of the clients would be disillusioned after 18 years of "revolving door" schemes, which they quickly learned how to operate. We wanted to stop the revolving door and have a one-door approach. People would come in and go out at the end better, more whole people, who we hoped would be able to move into real long-term employment.

Because of that disillusionment, we said early on, "Let's not keep the client forums and focus groups inside the Employment Service." The Employment Service has many connotations of people being pulled in and having their benefit cut, or told that they have to go into a programme that they do not agree with.

We went out and made contact with organisations throughout Tayside that helped people with problems such as drink, drugs, homelessness and debt. We built a structure of information points and organisations already funded for such provision, and we met the clients there. As a result of that, the gateway will be managed in the special needs group by a consortium led by the adult community training organisation, and in mainstream education and careers guidance by Tayside Careers Ltd.

The gateway is ready to start. Last week, all the contracts were handed out for the other areas. In education and training, the lead body will be Scottish Enterprise Tayside, and the chamber of commerce, local authorities and other training providers will also be involved, with local colleges and voluntary organisations.

The voluntary option will be led by the Scottish Council of Voluntary Organisations, with more than 90 organisations in the voluntary sector participating. We discovered early that if the environmental task force is to work, we must have regard to the way in which Tayside is structured. We have Angus, Perth and Dundee—communities that are significantly different from each other.

We therefore decided to place the environmental task force contracts with the three councils, Dundee city council, Angus council and Perth and Kinross council, to ensure that the differences within Tayside were reflected.

We have also had support from the private sector. I should especially like to place on record our thanks to Travel Dundee, a subsidiary of National Express, which offers free travel to new deal clients attending job interviews and half-price travel for six months for those who are successful in obtaining employment at the end of the programme.

Mrs. Jacqui Lait (Beckenham)

The hon. Gentleman said that about 100 employers on Tayside had expressed support for the new deal. Have those 100 employers actually offered jobs? Do they believe that the current level of employment will continue for the next year or so, or do they, like many other employers, expect a downturn in the economy, which will mean that they are unable to provide jobs?

Mr. Ross

None of the employers has said, "We've got five jobs," or, "We've got 10 jobs." They have given a commitment to work with the new deal scheme, and they are confident that, when the clients are ready, they will be able to take some on. They have not said, "Here are 10, 15 or 20 jobs." If they did that, I would expect the Employment Service to provide clients off the normal unemployment register to be taken now. The employers have given a commitment. They have signed the contract in the new deal employer agreement, which is much more important.

I do not want to delay the House too long, because I know that other hon. Members seek to catch your eye, Mr. Deputy Speaker. ScotRail has offered the same deal as Travel Dundee, and Stagecoach, which operates a service throughout the region, is also to offer subsidised travel for new deal clients. However, we have a problem in Angus, because we have not yet managed to convince the local bus operator there to offer the same facility, but we are working on it.

The programme is up and ready to go. We in the Tayside new deal programme set ourselves the deadline that everything had to be in place by 15 December. That has been achieved. On 16 December, my colleagues in Tayside invited all the organisations involved in the programme to attend a walk-through from the identification of the client to the end of the option. That was held in Angus college, and more than 70 people attended. It was a huge success.

Now we are waiting for 15 January, when my right hon. Friend the Chancellor of the Exchequer will come to Dundee to launch the new deal there. We are up and ready to go. Roll on that day.

11.18 am

Mr. Paul Keetch (Hereford)

It is a pleasure to speak in the first debate on the new deal, as the newly appointed Liberal Democrat spokesman on employment and training. As the Government know, my party supports their efforts to get people off welfare and into work. We find it hard to believe that anybody could criticise those efforts.

However, we have a few concerns about the new deal that I should like to raise with the Minister and with the House. The first involves the voluntary sector. I enjoyed the speech by the right hon. Member for Bishop Auckland (Mr. Foster) in that respect. We also have concerns about the problems that will be faced by rural areas, and about the element of compulsion in the new deal. I shall touch on that later.

In response to a question from me on 28 November, the Under-Secretary of State for Education and Employment, the hon. Member for Newport, East (Mr. Howarth), who is responsible for welfare to work, pointed out that the new deal's objective is not to create more jobs; it is principally aimed at raising employability. We all know that some of the most basic and fundamental skills that people need to achieve employment are literacy and numeracy. We welcome the Government's moves so far on early years education and their announcement a few days ago on tackling under-achievement among 16 and 17 year-olds. We are confident that the education and training option under the new deal will also help 18 to 24-year-olds to improve their basic skills.

Our concerns lie with the fact that the final group of young people who will enter the options will be those who are most difficult to help. Recent research by the Royal Statistical Society shows that most young people do not stay unemployed for long. Even before the new deal, 90 per cent. of all young people signing on for jobseeker's allowance found a job after nine to 12 months. With the intensive job search help available within the gateway period, that figure will inevitably rise.

We support that, because it means that those young people will achieve what they want—a job. In that respect, we are confident that the gateway policy will work. However, the people who will go on from that need the most attention because they will be the least employable, the lowest skilled and the least motivated, and they will go on to the new deal options. That must be recognised.

Mr. Oliver Heald (North-East Hertfordshire)

Does the hon. Gentleman agree that, although young people are important, the group that needs most help consists of people who are over 40 years old, unskilled and long-term unemployed? Is it not odd to offer wage subsidies to young workers but not to older workers who most need the help? Does the hon. Gentleman agree that that exacerbates the problem for older workers, because they must then compete in the job market with younger people who have a wage subsidy? Does not that encourage all the worst trends in the employment market in terms of agism?

Mr. Keetch

I endorse some of what the hon. Gentleman says, but the Government's policy is to target the young unemployed, and this morning we are simply responding to that policy.

I was discussing the four options that the Government propose after the gateway period. The first is the basic skills option, which many young people will take up. The second is the job subsidy option, which the Employment Service expects some 40 per cent. of young people going through the new deal to take up. Those participants are most likely to get jobs, and the participants left to go on to the voluntary sector and the environmental task force sector will be the most difficult to place. We are worried that participants in the new deal will regard the last two options—in the voluntary and the environmental task force sectors—as less attractive.

We have few fears about the ability and will of the voluntary sector to deliver programmes that will produce high quality and value for individuals who take part. The voluntary sector does a real job, and we want the Minister to make sure that the help that the voluntary and the environmental task force sectors receive is designed to ensure that those are real options. Intensive support is needed in that area, and we hope that the Government will provide it.

Some people who take up those options will have genuine problems. Some will have difficulty getting up in the morning, not just because they are bone idle, but because they have little or no experience of the workplace. Some will be apathetic; some will be badly motivated; some will think that working in the voluntary sector is not a real job; and some, because of the compulsion element, will be pretty disruptive. We hope that the Government understand the voluntary sector's concerns and will deal with them.

Concerns have been raised with my colleagues and me about the problems likely to be experienced under the new deal in rural areas. Because of inaccessibility, participants in rural areas might not get as many options as unemployed people in urban areas. Rural areas will need particular attention. I come from Herefordshire, and I know the problems of accessibility and transport. We realise that the Government have set up deals with transport companies and that some partnership deliverers in the new deal have prepared excellent strategies. For example, the new deal partnership in Herefordshire recently received an A grade for its strategy, and I congratulate it on that. However, the Minister must give an assurance that unemployed people in isolated rural areas will have the same number of high-quality options as those who live in cities. Can he assure the House that participants from those areas will have the opportunity of high-quality training?

The aspect that most concerns Liberal Democrats about the new deal is the compulsion element, which should not be necessary. Recent studies conducted by, for example, the Children's Society show that, even given the poor number of quality schemes available under the previous Government, the vast majority of young people continued to participate in them. With a policy of compulsion, a small minority of those who will need to be forced on to a scheme will simply create a disruptive element, threatening the quality of training available to others. They will be apathetic and begrudging about the whole scheme.

On a broader point, we are concerned that young people will always have in the back of their minds the fact that the person assigned to help them will also have the power to remove their benefits. That will damage the relationship between the adviser and the participant, and limit the potential for trust.

Mr. Gibb

Does the hon. Gentleman believe that, if a young person does not make himself available for work, he should be allowed to continue languishing on income support?

Mr. Keetch

People do not want to languish on income support. As the hon. Gentleman should know, the vast majority of young people want to work. The experience under the previous Government showed that, when 16 and 17-year-olds had their benefit withdrawn, a significant number of those young people simply disappeared from the system. We are concerned that, if sanctions are imposed on 18 to 24-year-olds as well, it could have a similar impact, creating a status-zero group within society. That will do nothing for those individuals or for society as a whole. On a scheme such as the new deal, where individual attention is vital, the compulsion element could damage young people's perception of the programme. Young people will be encouraged to take up the programme if it offers quality, not compulsion.

The Children's Society and other voluntary organisations share our concern on that issue. We recognise that the Government have tried to ensure that young people are offered as many options as possible; if they are to have no choice about whether they participate, they should at least be given a choice about the option that they would like.

Many thousands of young people are on existing Government training schemes, but would rather be in full-time work. The Royal Statistical Society says that 70 per cent. of young people who leave the claimant count to enter existing Government training schemes will sign back on the dole within 12 months, because they cannot get work. That is where the broader aspect comes in.

The new deal is meant to improve employability, but it will not create more jobs. While there are undoubtedly sectors that require additional training, the new deal will not target those high-skill places. Essentially, we are worried about the "revolving door" syndrome, to which the hon. Member for Dundee, West (Mr. Ross) referred. Young people may enter the new deal and come out of it at the end with improved employability, but if no jobs are available, they must simply wait around for a new scheme to come along.

We are also concerned about the funding of the new deal. As Labour Members regularly remind us, we did not support the windfall tax. It is a one-off measure, and we are concerned about what will happen after this Parliament in terms of long-term training. Do the Government intend to privatise a few more industries in this Parliament, so that they can introduce more windfall tax in the next and have another new deal?

Before the general election, the Liberal Democrats put forward a series of fully costed proposals that would have dealt with education and training for the length of this Parliament and beyond. We would have invested in people from day one. We would have guaranteed early years education to all three and four-year-olds, which would have helped thousands of lone parents, as well as being an investment in our country's future. We would have shifted the tax burden from jobs to pollution. We would have introduced a new low-income benefit and a remissible training levy.

We have many other policies, for example, on how we would have introduced training, which I am more than happy to discuss at length if hon. Members want—[HON. MEMBERS: "Go on."]—but I do not want to detain the House. However, Liberal Democrat Members welcome the new deal as a valuable approach intended to deal with a problem that the previous Government neglected. We shall support it and encourage it as much as we can.

11.30 am

Mrs. Louise Ellman (Liverpool, Riverside)

First, I congratulate the hon. Member for Hereford (Mr. Keetch) on his first speech in his new post. Most of the hon. Gentleman's comments were perceptive, and in this debate and beyond he will see how the Government are dealing with his points. However, his final comments rather spoilt what had been a good speech.

I shall refer to a number of ways in which the Labour Government are already tackling continuing employment. I hope that, given those comments and others that will be made in the debate, the Liberal Democrats will give their genuine and full backing to the welfare-to-work programme, and resist the temptation to snipe at the inevitable practical difficulties.

I welcome the welfare-to-work programme. It has special importance to my constituency; Liverpool, Riverside has the second highest unemployment rate in the country—17.8 per cent.—and a male unemployment rate of 24.2 per cent. That is nearly 6,500 people—and nearly 2,000 of them are aged between 18 and 24. Welfare to work needs to have a special impact in Liverpool, Riverside, where unemployment is a deep-seated and long-term problem.

In that context, I thank my right hon. Friend the Minister for his decision to designate Liverpool as one of the country's five employment zones. He recognises the special position not merely of unemployed people in general in Liverpool, but of older unemployed people. I also thank my right hon. Friend for coming to Liverpool to announce the employment zone policy, and for the subsequent decision to designate the city in that way.

I support the welfare-to-work programme because it is a decisive and well thought out attempt to intervene in the cycle of unemployment at the individual and community level to give people individual attention, opportunities for work and the acquisition of skills to enable them to obtain and retain work and to ensure that people who missed out on basic educational qualifications get a second chance.

The very fact that the Government are prepared to do that and that they are working out in great detail the practical way in which to do it, to assist the individual and the community, is very important. Equally, it is important that that attempt to deal with individual needs—employability and the acquisition of skills and basic educational qualifications—is carried out in the context of a Government who are already changing priorities to ensure that public and private sector money is spent to generate employment in the economy in general and to create more opportunities.

The redistribution of more than £5 billion from the excess profits of the privatised utilities into employment-generating projects in health, education and training and directly into employment is a significant part of the Government's policy. Liverpool will benefit by £9 million from the programme to release capital receipts. That is £9 million of employment-generating activity that will also meet social need. From the additional £2.3 billion funding for schools, Liverpool already knows that it will benefit by around £11 million—£11 million of employment-generating, construction-based activity that will again assist social and educational needs, but will also provide employment.

More generally, the Government are about to put before the House a proposal to set up regional development agencies, which will bring together the public and private sectors, led by the business sector. That will lead to more employment and more regeneration of local economies, such as that of Liverpool and the north-west, and create and develop long-term employment.

I welcome the welfare-to-work programme, with its attention to detail and to individuals and its designation of individual employment opportunities, but I see its real value as leading from individual attention and opportunity to employment-generating activities in the economy as a whole and in the regional economy in particular. As we help individuals, we will be creating more opportunities for long-term employment.

The welfare-to-work programme is working across a broad range. It is working with private employers and with the voluntary and public sectors. In Liverpool, it is already working with locally based community organisations, which are already generating employment-training opportunities, such as the work being done in Vauxhall, the work of the Eldonians, the work being done in Dingle by Dingle Opportunities, the innovative Brunswick furniture resource centre and the Granby-Toxteth development trust. Those projects are already creating employment through socially beneficial work.

I am pleased to note that, in addition to working with private employers, the welfare-to-work programme will work with community organisations to extend opportunities for employment and contribute to the social well-being of local communities.

It is a long time since a Government took such a brave initiative. Any initiative that tackles long-term problems encounters snags. It is inevitable that, if expectations are raised, the problems will not merely be mentioned, but highlighted. However, the Government are determined to tackle unemployment.

The last Government to tackle unemployment in this way was the previous Labour Government and some of my first involvement in developing employment opportunities was through working with the Manpower Services Commission on the original job-creation programme under that Government. I saw some excellent work, some of which led to long-term employment and met social and community need as well as employing people and giving them skills.

Regrettably, soon after the Conservative Government won the 1979 general election, the Manpower Services Commission was dismantled, and all that excellent work was cut asunder and destroyed. I am sorry that 18 dark, long years followed, during which the unemployment figures that we thought unacceptable in the 1970s grew higher and higher and became simply a fact of life.

This Government do not accept that unemployment on that scale is a fact of life. That is why we are instituting the welfare-to-work programme. I am convinced that a programme that considers individual and local needs against a background of employment-generating initiatives, redistribution and the regeneration of the regional and national economies is the way forward.

I congratulate my right hon. Friend the Minister on his work on welfare to work. It will benefit this country and my constituents.

11.39 am

Mrs. Jacqui Lait (Beckenham)

I crave the indulgence of the House, because I know that I cannot make a maiden speech twice, but I hope that I may follow the usual courtesies and thank my predecessors for all the work that they have done. I come from a tradition of Members of Parliament who are very involved in the constituency of Beckenham: Sir Philip Goodhart was its Member of Parliament for 35 years and he and Piers Merchant, whom I succeed, had a strong reputation for supporting their constituents. I plan to continue that tradition.

Crystal Palace park is in Beckenham, although it is on the borders of many other London areas. Those who have visited the park will know that it is most beautiful, but sadly in need of regeneration. An application is being prepared under the new deal for intermediate labour market work to restore the park to its former glory. I look forward to the benefits from that.

Under the previous Government's single regeneration budget, Crystal Palace, Penge and Anerley have some very imaginative proposals, one of which is to create new construction jobs through training. That is producing precisely the same effect that any new deal proposal would. I agree with my right hon. Friend the Member for Charnwood (Mr. Dorrell) that there are many effective ways of ensuring that the young and long-term unemployed get back into the labour market.

We must ensure, as the money is available, that it is used. The Crystal Palace project is working along those lines. I should like to make my next point to the hon. Member for Dundee, West (Mr. Ross), who has probably left to go to his constituency; as a very new Member of Parliament, I will also have to go to my constituency, so I hope that I have the leave of the House to go soon after I have spoken.

Mr. Keetch

It is not far.

Mrs. Lait

That is right: as it is not far, I can carry out more engagements than, perhaps, the hon. Member for Dundee, West, who may take some time to get up to Tayside.

It is important to concentrate on ensuring that the young and the long-term unemployed get into the labour market, but we must also ensure that the economy can expand to accommodate those jobs and those people. It is of some concern to me that, although unemployment is decreasing, thanks to the policies of the previous Conservative Government, we are facing circumstances in which there could be a downturn in the economy.

In my view, the pound will remain strong, and that has a disincentive effect on some export industries; we are beginning to see the effects of higher interest rates; and the effect of windfall income on domestic spending is coming to an end. Those three factors, taken together, are being taken account of by the retail sector, which is already preparing for a downturn that it foresees happening next summer.

After the Christmas spending rush, we will probably find that spending is down for this year: there is already anecdotal evidence that less is being spent on leisure and in shops because people's incomes are being restrained. That will have a knock-on effect on businesses, which in the long run or—dare I say it?—even in the shorter run may not expand and take on people who want to join the labour market.

The Government would be better advised to consider the areas in which employment is weak. The speed with which many young people get back into employment has already been mentioned. We should consider those geographical areas in which people find it especially difficult to get back into employment because there is a weak local economy.

The hon. Member for Liverpool, Riverside (Mrs. Ellman) mentioned the problems in Liverpool, with its extremely weak local economy; other areas, despite an effective regional development policy in previous years, remain weak. Coastal areas tend to have higher unemployment than inland areas, largely because communications and infrastructure are poor there. The Government might consider recasting their regional development policy to ensure that the weaker elements in the United Kingdom are encouraged and brought up to the level of employment opportunities throughout the rest of the country.

Although the Minister refers to the enthusiasm with which separate companies—many of them blue chip companies—have greeted the new deal, it appears from the briefing of the Institute of Directors and the Confederation of British Industry, which have surveyed their membership, that, while employers are happy to take the subsidies on offer, the broad membership of those organisations has no enthusiasm for the new deal and indeed has some concerns about it.

Some of those concerns were outlined by the hon. Member for Hereford (Mr. Keetch): problems of market distortion, with companies making the wrong decisions merely because subsidies are available; deadweight; disruption; and—I am afraid that the hon. Gentleman did not mention this—red tape. There is an enormous fear that a huge amount of bureaucracy may be created. We also need to ensure that the recruits are willing to work and have an aptitude for the employment on offer.

The new deal criteria require an employer to keep on a trainee who displays the necessary aptitude. Is it the employer who decides what the necessary aptitude is?

Mr. Andrew Smith

Of course.

Mrs. Lait

I am most grateful for that intervention. How is aptitude defined? Is it the ability to do a job, or is it the necessary discipline on the part of the employee? Will an employer make the same decision as if the trainee had come in through a direct application and not through the programme? Will an employer be able to employ someone on the criteria that they would normally expect to apply? People have expressed concern about that. I take it from the Minister's nodding that he agrees that those are the criteria. I thank him for that.

How will the minimum wage affect the longer-term unemployed over 25? As I understand it, employees must receive in wages at least as much as the employer's subsidy. If so, how does that interact with whatever level the minimum wage is set at? Will an employer have to pay the minimum wage to people he takes on under the new deal, despite the subsidy? It would be useful to have an assurance on that.

Like many others, I want the long-term unemployed and young people who are unemployed to be in work, but I have considerable doubts about whether this new deal will, in the long run, keep the labour market free of distortion and allow companies to make their decisions free from the influence of subsidy. We must never revert to what happened in 1979. It was not beneficial to the British economy to have companies with over-employment, retaining workers for all the wrong reasons. We need companies with productive workers who can help to keep those companies in business.

11.50 am

Mr. Malcolm Wicks (Croydon, North)

It is a pleasure to follow the hon. Member for Beckenham (Mrs. Lait), who was making, if not a maiden speech, then a kind of comeback speech. I congratulate her on it. I spent some days in Beckenham before the by-election trying to persuade her electors to give the hon. Lady a rather different route from welfare to work—we nearly succeeded—but she has ended up here, and my congratulations are genuine.

The hon. Lady's constituency boasts the original site of the crystal palace—the dome of its day. My constituency—here comes the link—boasts one of the finest football clubs in the world, Crystal Palace football club.

We are here some 50 years after the post-war compact devised by Keynes and Beveridge. The latter was a great Liberal, although not great enough to make 1p on income tax stretch as far as today's Liberals can make it stretch—perhaps because he knew some arithmetic. Beveridge, Keynes and the post-war Labour Government tried to refashion the relationship between the economic and the social in a welfare state of considerable sophistication but always based on the assumption of full employment. We, in the years and months to come, need to look again at the relationship between the worlds of work and of social policy, in different and rather more difficult circumstances than those facing the post-war reformers.

Our inheritance is one of unemployment and economic recession. Many hon. Members have today rightly focused on the young and on the long-term unemployed, who are often men in their late forties and fifties. We need to focus rather more on that group than we sometimes have done.

Owing to family insecurities, more and more children are being brought up in one-parent families. Typically, the head of the household is a lone mother who is not in employment. This new challenge raises difficulties to do with values. We are attempting to grapple with such problems and with disability issues and with the problems facing people with severe learning difficulties who are seeking access to the labour market.

Not surprisingly, we are not alone in having to tackle these problems. Australia, New Zealand, the United States and many other western welfare democracies are grappling with them too. The Labour Government in Australia produced a welfare-to-work strategy in the document "Working Nation" some years ago. I have seen it in operation in New Zealand as well, and more recently—with parliamentary colleagues—in Wisconsin.

The changes are called for because of changes in the economic, social and demographic fabric of society. We are having to think through the future of our welfare states. It may be relatively easy to apply the strategy to some groups among the young unemployed, although many of them have known too many schemes and have become disillusioned, but there is a minority on the margins of crime and drug misuse to whom it will be much more difficult to apply it. The Australian experience shows that it is sometimes necessary to adopt a one-to-one case work approach to get some of these people back into work. It is neither easy nor cheap; but it is worth doing for social as well as economic reasons.

The number of one-parent families has been increasing steadily in societies such as ours—these trends are international. As many as 60 per cent. of this group find themselves part of it because of separation or divorce, but the most rapidly growing group are the families headed by what demographers describe as single never married mothers—they constitute one third of the group.

Such families tend to be the most insecure; the father is less likely to be a player than in some other one-parent families. Between 70 and 85 per cent. of them depend on income support for all or most of their income. It is quite right that the Government should focus on this group, among others, when drawing up their welfare-to-work strategy. There must be a change of culture in social security and employment offices. It is no longer good enough to say that until the youngest child is 16 the mother's need will be assessed; meanwhile she is simply handed a giro and not required to work or even to be seen again. We need a more positive approach to enable this group to find work and child care and to build up the confidence necessary to do so. That is why I believe the Government's overall strategy to be right.

No decent strategy of welfare to work, however, must be based on blind dogma of the sort that suggests that every lone mother, whatever the needs or age of her child, has to be in employment, and that, if she is not, she is somehow a failure. We need to blend into the strategy a family perspective which focuses increasingly on the most important group of all: the children.

We must not dodge these issues. At the moment, we say that, until the youngest child in. a one-parent family is 16, there is no requirement to work. That is patently absurd. I have not checked the history books, but I guess that the notion dates back to the 1940s, when most mothers stayed at home looking after their children. Those days, thank God, have gone, for all sorts of reasons. Women now work outside the home just as men do, to pay the mortgage, the rent and so on. For the sake of equity, we need to re-examine the respective positions of one and two-parent families.

If anything, we need to talk more about two-parent families in some of these debates. At some stage, we should grasp the nettle and abandon the rule that says that a lone mother must stay at home until her youngest child is 16. That is daft, and, gives the wrong signals. I have seen the desperate effects on lone mothers who, when their youngest child does reach 16, suddenly find, 25 years after they were last in the labour market, that they are required to work, which terrifies them—and I can understand why. It is a silly rule. At some stage—I am not urging the Government to do it immediately; let us try the voluntary strategy—we should grasp the nettle.

Similarly—this is the quid pro quo in terms of the social politics; I agree with the hon. Member for Gainsborough (Mr. Leigh) on this one—we must not be over-harsh. The judgment about how to care for a young child up to the age of five, say—I am not sure whether it is five, six, seven or eight, but it is certainly the judgment about how to care for a baby—is best left to the family. Mother does know best, and it is not right for any Government to say otherwise.

We saw the horror story in Wisconsin. Some good things are being done there in terms of child care, but saying to a mother, "When your child is 12 weeks old you will be required to work, and your benefit can be cut if you do not," has more to do with child cruelty than child policy. I see a Conservative Member shaking his head.

Mr. Leigh

I am nodding. It is all right.

Mr. Wicks

No, another one—the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb). The splits remain, even on this issue.

There is a serious point here. The income support regime for lone mothers should be liberal and generous for those with children under the age of five. The benefits should be as generous as possible. I am saying not that mothers with children under five should not be in employment—many are—but that the mother, not Parliament or Government, should make the choice. That has to be the basis of sound social policy.

My right hon. Friend the Member for Bishop Auckland (Mr. Foster) mentioned disability issues. I want to talk more about people with learning difficulties. In my home borough of Croydon yesterday, a charity called Status Employment showed me its work with young people with severe learning difficulties—people whom the social security system categorises as not capable of working; and it has the benefit structure to match. I met one young woman, now 32, who has Down's syndrome. After she finished school, she spent nine years of her life going to a day centre—the cost of which, incidentally, was about £54,000. She wanted a job; she knew that others had jobs.

Status Employment, an excellent agency—I hope that my right hon. Friend the Minister might be able to visit it sometime—said that it would help the young woman to find a job. Its strategy is to go into the place of employment—in her case, a hotel—and, for a week or so, do the job itself. Afterwards, the young woman went in and, for a week or two, did the job with the hotel management until she had been properly trained.

The young woman has been doing that job for about four years now. She is one of the hotel's most valued employees, and has had an award from it for her service. The only problem is the social security regime: the regulations—I understand the complexities here and am sympathetic to the problems—say that she cannot work for more than 16 hours. If she does, she comes off income support and some other benefits. Given that she lives in a residential home that costs £400 a week, hon. Members will realise the difficulties.

I urge the Minister to say something in his winding-up speech about the needs of people with disabilities or, in that young woman's case, learning difficulties. There is good practice out there and we need to work away at the social security traps so that more people such as that woman can find the work that they want and deserve to have. I know that the Minister is sympathetic to the issue, but I urge him to say something about it.

The welfare-to-work strategy is the right strategy. We must not confuse it with a work ethic triumphalism that says that the only decent work is in the waged economy, as opposed to caring for very young children at home. We need to blend the strategy with a perspective about family policy. As I have said, as well as the obvious groups to be concerned about, we should also be concerned about those with physical disabilities and learning difficulties, many of whom are out of the job market and, as my experience showed yesterday, dearly want what we all have—a job.

12.3 pm

Mr. Shaun Woodward (Witney)

This is undoubtedly an important debate. I am sorry to see so few hon. Members on both sides the House, but particularly perhaps on the Government Benches, as this is clearly a centrepiece of their programme.

Mr. Kirkwood

How many Friday attendances has the hon. Gentleman seen?

Mr. Woodward

This is a centrepiece of the new Government's programme. To see barely 20 hon. Members on the Government Benches to discuss a centrepiece programme is relevant.

Mr. Wicks

It is the secret seven on the other side.

Mr. Woodward

We are also the effective seven.

When I was in America a few years ago, I was incredibly impressed by the teaching of Professor Galbraith. I share with the hon. Member for Croydon, North (Mr. Wicks) and others the view that unemployment is an evil in our society.

Unemployment is a terrible thing. It has happened in my family; my brothers have both recently experienced long periods of unemployment, and I know the devastating effect that it can have on individuals and their families. Nobody on either side of the House would question for one moment the importance of measures that need to be taken to alleviate the effects of unemployment. The questions are what those measures should be and whether they are relevant.

The hon. Member for Croydon, North rightly raised the question of the very different world in which we operate today from that of William Beveridge—and indeed, thinking about the idea of the new deal and welfare to work, the world of Roosevelt back in the 1930s. Listening to some hon. Members, including the hon. Member for Liverpool, Riverside (Mrs. Ellman), one might think that that has not been recognised. Unemployment in this country undoubtedly rose in the earlier part of the 1990s, but the hon. Lady seems to have failed to notice that it also rose in a number of other countries as well.

The only difference seems to be that, unlike the situation in other major European nations, unemployment has fallen considerably in the United Kingdom in the past few years under the Conservative Government. It has not fallen in the same way in France or Germany. It may be worth Labour Members showing a little humility and recognising that there was a Government before the one elected on 1 May, and that that previous Government presided over a dramatic fall in unemployment.

There is no disagreement over the fundamental objective of the new deal, which is to do something about taking people off the unemployment register and getting them into jobs. The question is whether the measures are appropriate. There is a danger that, in the rhetorical flurry of the new Government, some realistic measures of objectivity may be lost. Since the new deal was dreamed up by the Labour party, more than half the members of its specific target group are now in employment. That did not require a new deal or a welfare to work programme; it simply required real jobs.

One need not necessarily pay credit to a Conservative Government or an incoming Labour Government, but one should pay credit to the companies that have created the jobs that the young people now have. We spend a great deal of time criticising each other on both sides of the House and flattering each other as colleagues about what we are doing, what we intend to do and what we did not do, but the truth is that the jobs have been created by British firms for young, and older, British people. Those firms deserve the credit. When Labour Members heavily criticise the Conservative Government—I obviously disagree with their comments—they must bear it in mind that they are effectively criticising the firms that created the jobs. Those firms should be praised for that. They are the firms with whom the Government are seeking a partnership in the prosecution of their new deal.

There are two crucial questions to be asked. First, what will the measures of the new deal do for the specific target group of 18 to 24-year-olds? The current number is 122,000—by the time that the national scheme is up and running, it will probably be fewer than 100,000. What will the new deal do to get those people into jobs that will be sustained when the period of subsidy ends? The second critical question is what the new deal will do for the other people who occupy the registers of the long-term unemployed. What will it do to enhance their employment prospects?

The new deal is not so new. The only thing that is really new about it is the new tax that it raised this summer—the £3.5 billion to £5 billion of funds to be used to pay for it. Like many others, at school I was taught to cite my sources. The new deal stems principally from the work being done in Australia and America. I suspect that Robert Reich deserves a little more credit in Government documents than he currently receives.

America has had an extraordinary period of economic prosperity, with 12 million new jobs created since 1993. In their period of welfare to work and in their new deal, however, the poor in America have barely benefited from the tremendous economic benefits.

California is often cited as a model for welfare to work programmes, and I am sure that hon. Members have learnt from many of the mistakes that have been made there. Nevertheless, it is important to prick the bubble and to remind ourselves of the reality—that California's welfare-to-work scheme has not been a great success. Recent evaluations by California's Public Policy Institute show that, in the next five years, measured poverty in California will rise from 27 per cent. to 42 per cent. Recent surveys examining the GAIN—the greater awareness to independence—programme show that, after three years, only one in four of those who participated in the programme are still in employment.

California's programme has not been a huge success and has had huge problems. I very much hope that the Minister, as part of his consultation, will want to take on board what went wrong there. Undoubtedly the programme's aims were right, but it has not worked. We have to understand a little more about why it has not worked.

Ms Stuart

Does the hon. Gentleman accept that the United States is an extremely large country, that it is generally accepted that both California and New York are quite exceptional in their conditions, and that to draw general conclusions would therefore be somewhat disingenuous?

Mr. Woodward

The hon. Lady is right. The danger is always that, in examining models around the world, everyone will get caught up in the flurries of excitement about a model somewhere that is thought to work. Many people wanted to study the California model. I am saying that we should examine also how that scheme has evolved, and beware of extracting its first half without examining its second half.

The worry is that current studies evaluating the California programme are revealing that it is not the success that it was originally thought to be, and that, after originally taking many people off welfare, it is creating a situation in which many people need welfare but in which the programmes have been removed. The programmes are not there when people need them.

There is undoubtedly a need to match the new deal welfare to work programme with the Government's welfare reform programme. All hon. Members should heed the type of comments made by the chairman of the parliamentary Labour party—who I hope will not be shown any yellow cards, called into Downing street, or even removed, like Oasis and other bands, from Downing street party lists. He made a valid point: serious welfare reform is crucial.

To answer the hon. Member for Birmingham, Edgbaston (Ms Stuart), the lesson from California must be that we should beware an early flurry of excitement which allows us to dismantle measures that may protect people. Lone parents, the disabled and others whom the Government may wish to have off unemployment registers will need welfare support if those programmes go wrong, but by that time the support may not be there.

We have been so carried away by the rhetorical flush of everything being new—the new economy, the new deal, the new responsibilities and the new everything else: Labour Members have learnt the rhetoric well—that real debate and analysis has been stopped. Education and training, for example, are now always said in the same breath. But they are different issues. There is, unquestionably, a public responsibility for education, because the state can and should provide good education. But is the state the best provider of training?

I heard the Minister talk about partnership. Of course there should be partnership, but a great deal of the evidence to date suggests that public sector training does not endure. It perhaps offers a short-term panacea to get people off the unemployment register, but at the end of the day one has to ask whether the training that the public sector provides is the best kind of training.

The report produced by the Select Committee on Education and Employment is tremendously interesting. That is especially so of the evidence that it contains. Having read the comments of Peter Davis at the beginning, I found it worrying that there have been fewer representations from business than the Minister might have liked. I am sure that he will do all he can to change that. As hon. Members have said, it is worrying that there have not been enough representations from the small and medium-sized enterprises which will be absolutely vital if the Government's objectives are to be met.

Is this programme the right measure at this time? David Webster, the chief housing officer of Glasgow city council, has produced an excellent study. He went behind the rhetoric and examined many of the assumptions made about the link between unemployment and the long-term unemployed. For the benefit of the House, I shall refer to one or two of his conclusions. He points out that there is a very interesting pattern and a close correlation between rising levels of unemployment and increasing numbers of long-term unemployed. As unemployment falls, so does the number of long-term unemployed, although the fall in the latter lags behind a little.

The survey covers the period from 1948 until the present day. It includes research that shows that, while there are regional variations, the situation is pretty much identical across the country. It also shows that, if the long-term unemployed are to be helped, unemployment itself has to be tackled and real jobs have to be created.

There is no question but that welfare to work is a good objective, but is it the right use of £3.5 billion of public money? Is there a danger that it is a short-term measure to deal with a long-term problem? Of course we need to tackle joblessness, but perhaps there is a case for more specific targeting of the money in areas such as Manchester, Glasgow and Liverpool which have particular problems that have resulted from a changing job market. That changing job market has stemmed not from the policies of a Conservative Government but from changes in the global environment and the demand for work. Are the measures of the new deal the correct ones to tackle such problems?

Will the new deal promote greater equality, one of the other objectives mentioned by the Government in the Select Committee's excellent report? There is undoubtedly a huge discrepancy between those who are well off and those who are not in employment, but will the new deal redress that? I think probably not.

In his evidence to the Select Committee, Peter Robinson said: I think the equity case for wanting to rebalance priorities within the overall New Deal is quite strong in that clearly the older very long-term unemployed have more difficulties in getting back into regular employment when compared with the youth group, particularly the group unemployed for between six and 12 months or six and 18 months. So, yes, I think we should be thinking about that rebalancing. It also perhaps offers an opportunity to rebalance the objectives towards other groups who are not registered unemployed: the disabled, lone parents. That is a feature of the New Deal but perhaps it is a feature that ought to be elevated to greater prominence. That is a very important point. Labour Members are genuinely concerned about the plight of lone parents and the disabled, because they are worried that many of the pledges that they made and endorsed behind their leader are subject to considerable questions. It is clear from The Daily Telegraph this morning that yesterday's meeting with the Secretary of State for Social Security was not a happy one. The disabled lobby could not get satisfactory answers. Only last week, there was a rebellion over lone parent benefits. Though that was a one-night wonder, it raised important questions. I find it startling for a Labour Government in their first six months in office to be seen to be deaf to the demands of lone parents and the disabled.

Will the new deal save money? The unemployment costs on the benefit register are a fraction of the amount spent on the disabled—7 per cent. against 20 per cent. It is argued that the measures will go on to help in health and education, but I suspect that no money will be saved. The subsidies for the young people will eventually end and they will be unemployed again. They will then be back on the register and requiring welfare.

The debate is not about kindness—hon. Members on both sides want people to be in work—but about whether the new deal measures will do more harm than good. My fear is that we are embarking on an exercise in great rhetorical flurry that will not do much for the long-term prospects of the unemployed or improve the situation in the job market.

12.21 pm

Mr. John Healey (Wentworth)

I welcome this debate and the Government's strong commitment to the new deal. It holds out hope in Rotherham and the Dearne of new benefits for young and long-term unemployed people, benefits for local firms and benefits for the local economy.

We are used to thinking about the new deal as an employment programme, but we should also think of it as part of a wider economic development programme. If we get it right, it should increase the capacity and activity in local firms, increase the pool of local employable labour and boost regeneration efforts in Rotherham and the Dearne.

The new deal programme could have been written with Rotherham in mind. We have more than 2,000 adults who have been unemployed for more than two years and 1,081 18 to 24-year-olds who have been unemployed for more than six months. Of the young people eligible for the new deal, nearly half have never worked. Some 47 per cent. have no educational qualifications and a further one in four have only basic qualifications up to GCSE or NVQ level 1. We have an employment problem and an employability problem—the twin targets of the new deal programme.

I am glad to see the right hon. Member for Charnwood (Mr. Dorrell) back in his place. He has been absent for most of the debate. People in South Yorkshire do not think as highly as he does of the previous Government's employment record. In a decade, we lost 50,000 coal and steel jobs in the county. The people of South Yorkshire would not recognise his self-congratulatory description of the previous Government's record on jobs.

I am proud to say that Rotherham was picked as one of the Government's 12 national pathfinder areas for the new deal. We are well placed to pull together the partnerships and programmes required to deliver it. Agencies in Rotherham have a long track record of working in partnership. Indeed, we have a long track record of delivering something very close to the new deal. I am referring to the direct recruitment programme which was started in 1993; the Select Committee took both written and oral evidence on this. The programme was developed under the current manager, Jane Wheelhouse, and it is run under the wing of Rotherham Chamber of Commerce, Training and Enterprise, with the active collaboration of the Employment Service, Rotherham council and voluntary agencies in the area.

Direct recruitment offers help with advertising vacancies, CV sifting and shortlisting of potential interviewees, a training period of up to 16 weeks, negotiable funding for off-the-job training during the 16-week period, a training grant for continuing development after that period and, from last year, a wage subsidy for six months after that training period.

I dwell on this example because the results of the programme point to the potential of the new deal. The hon. Member for Witney (Mr. Woodward) urged us to get behind the rhetoric and to offer objective measures. The large majority who have gone through the Rotherham direct recruitment programme have been long-term unemployed. Since the programme started, 1,500 people have been placed in work; that is 75 per cent. of the total in contact with the service.

In the 12 months of the wage subsidy element, 289 people have been put into work. Of that total, 86 per cent. were still in those jobs at the end of the six-month subsidy period and, crucially, 69 per cent. were still in the same jobs six months after the subsidy finished.

Mr. Dorrell

That was under a Tory policy.

Mr. Healey

The programme was a local initiative and was locally developed with great imagination and innovation. It was not helped by the constraints people were working under at that time.

We have seven working days, including Christmas eve, until we launch the pathfinder area on 5 January. I pay tribute to the part that Rotherham borough council, the Rotherham Employment Service, the Rotherham Chamber of Commerce, Training and Enterprise, voluntary agencies and local employers have played in sinking their organisational self-interests in the common interest of making the new deal programme a success.

With regard to our plans for the local area, four innovative features of what we shall deliver in Rotherham and part of the Dearne area on 5 January are worth noting. First, we are setting up a new deal company which will contract for the overall provision, independently of the new deal programme suppliers. Secondly, we are creating independent, stand-alone, shop-front user access to the new deal company. Thirdly, we have appointed independent consultants to give an authoritative external view of every tender submitted for the new deal programme. They are assessing a quality threshold that all potential contractors will have to meet.

Fourthly, we shall deliver employment status and a wage to all those on the voluntary sector option and the environmental task force in our area which are either directly ruin or sponsored by Rotherham borough council. Everyone in Rotherham is pleased that we are to be a pilot for the programme. I am certain that other areas will be able to learn from what we do, and that they will also learn from our mistakes.

In relation to the national level, I will focus first on the inquiry by the Select Committee on Education and Employment into the new deal. It was our first inquiry, and we looked in particular at the new deal for young people. This is the most fully developed and heavily funded part of the new deal programme. We examined it particularly in the light of falling rates of unemployment among that target group and because there was common criticism that perhaps the Government should concentrate on other client groups instead. However, the Committee backed the need to tackle first and foremost unemployment among young people because it is such a waste.

When a generation looks forward to a life on welfare, it is a waste of human potential and taxpayers' money. If we can intervene early to establish new work options, skills and habits, we should do so. Otherwise, we shall end up with a generation of young people who do not do jobs, but do cars, their neighbours' houses and drugs instead. There are strong labour-market arguments for targeting that group first, but there are equally strong social reasons for doing so.

The hallmarks of the design phase of the new deal have been genuine openness and flexibility. I congratulate my right hon. Friend the Minister on that. However, I caution him that openness and flexibility must also be the hallmarks of the delivery phase. If the new deal is fixed and inflexible and is not open to continuous improvement, and if the Ministers and agencies involved are unable to review and rework the programme as it proceeds, this will become just another scheme whose great potential is strangled. I am committed absolutely to making the programme work in my area and across the country.

Finally, let me set out five aspects of the programme with potential for early review. First, let us extend the modest funds for voluntary sector capacity building beyond the end of March next year. When the voluntary sector sets out to develop something new, it does so slowly and scrupulously. If, in the next financial year, no funds are provided to help the voluntary sector in that respect, it will be a great waste of potential.

Secondly, let us ensure that the chance to tender for the gateway, the voluntary sector option and the environmental task force is more than a one-off opportunity. If we do not, we risk losing innovation and the ability to respond to new needs as they emerge.

Thirdly, let us review the per capita price for provision in the gateway. The costs and the budget were calculated at an earlier stage in the economic cycle, when the planned flow through the gateway was significantly greater. As a greater proportion of those entering the gateway are likely to require support for the full 16 weeks, the costs and complexity of needs are likely to be greater.

Fourthly, let us make a management fee available for other agencies than the Employment Service to help deliver the job option of the new deal. Other agencies, such as training and enterprise councils, chambers of commerce and local employers associations already have established contacts and membership among local employers. At present, they are being asked to get involved in this part of the new deal on the basis of good will and new deal managers have no freedom to fund the contribution that they can make.

Fifthly, let us consider in the short term introducing a gateway element for the new deal for the older, long-term unemployed, and in the long term let us also consider establishing a continuing careers service to advise and support people throughout their working lives. Hundreds of thousands of unemployed and economically inactive people—mainly men—have a wealth of workplace experience and work habits behind them. Re-skilling may be the issue for many, but for some it is more a matter of personal adjustment and considering new options. Pamela Meadows, director of the Policy Studies Institute, appeared before the Select Committee earlier in the week. She put the case as one of needing to help a former steel worker see a future as a traffic warden rather than one on welfare payments.

Everyone involved in the new deal has been working flat out with 5 January or 1 April in mind. I am confident that we will get off to a good start on those dates. Under the immediate pressures of delivery, however, we must not lose the vision of what the new deal programme could become. It is an opportunity that we and the long-term unemployed will not have again.

Mr. Andrew Dismore (Hendon)

On a point of order, Mr. Deputy Speaker. It arises from early-day motion 128, which called for a public inquiry into Westminster city council. It was tabled in the names of myself, my hon. Friends the Members for Regent's Park and Kensington, North (Ms Buck) and for The Wrekin (Mr. Bradley)—all three of us are former Westminster city councillors—and a number of other Members on 17 June. On 27 June, by which time the motion had been signed by 108 hon. Members, it was suspended on sub judice grounds, pending the outcome of the appeal by Dame Shirley Porter and others against the finding of the district auditor that she been guilty of wilful misconduct.

The early-day motion asked the House unreservedly to condemn the Conservative party under Dame Shirley Porter and her leadership in relation to the sale of the cemeteries for 15p, the placing of homeless families in asbestos-ridden towerblocks, and the 'homes for votes' gerrymandering of local elections and to condemn the failure of successive Conservative governments to take action against Westminster Council or condemn its wrongdoings". I have just returned this minute from the High Court, where the case was determined. For that reason, the rules of sub judice can no longer apply. I therefore ask that the early-day motion be reinstated at the earliest possible opportunity. So far, not one Conservative Member has appended their name to it.

The High Court found that Dame Shirley Porter and Councillor Weeks lied to the court and to the district auditor and that their ulterior purpose was to alter the electorate in Westminster to affect the outcome of the 1990 city elections by gerrymandering through the sale of council homes. The appeal by Dame Shirley Porter and Councillor Weeks was dismissed and the High Court is today issuing a certificate against Dame Shirley Porter and Councillor Weeks which states that their wilful misconduct jointly and severally caused a loss to the council of £27,023,376. A certificate is today being issued to Westminster council to recover that money—

Mr. Deputy Speaker (Mr. Michael Lord)

Order. I have got the general drift of the hon. Member's point of order, and I must tell him that it is not a matter for the Chair.

Ms Karen Buck (Regent's Park and Kensington, North)

Further to that point of order, Mr. Deputy Speaker. Is it appropriate to ask for a Government statement today on the verdict in the High Court that we have just heard, which confirms the massive wrongdoing by two former leaders of Westminster city council who were engaged in gerrymandering in Westminster throughout the late 1980s?

Will such a statement address the fact that Westminster council tax payers are £27 million worse off as a consequence and that the absolute priority must be the recovery of that £27 million for the well-being of the citizens of Westminster? One of those found guilty by the court today is still a councillor. The Conservative party has never condemned the behaviour of Westminster city councillors and must now do so on the grounds—

Mr. Deputy Speaker

Order. I do not think that the hon. Member has added a great deal to the original point of order. I have no knowledge of the events that have been raised, but I am sure that the Table Office and other appropriate offices in the House of Commons will ensure that the court's findings are examined and, if need be, set the usual wheels in motion.

12.38 pm

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

Before those two points of order, which raised important and controversial issues, I was about to say that the debate had been proceeding in a positive, non-partisan and ecumenical fashion. We have had an interesting and valuable debate on a subject of extreme importance to all our constituents and to the Government as a matter of public policy.

Friday debates are usually better than those that we have during the rest of the week, because hon. Members actually listen to one another on a Friday and the debates are the better for it. I listened with interest to the speeches by the hon. Members for Wentworth (Mr. Healey) and for Dundee, West (Mr. Ross). The House benefited from their direct experience of living in pathfinder areas, and they made valuable and important contributions.

As a Member who is interested in the subject and as Chairman of the Select Committee on Social Security, I am happy to respond to the Minister's earlier challenge to Opposition Members to be fully supportive of the Government's endeavours. I shall certainly ally myself and—I venture to suggest, because I think that I know my colleagues well enough—the Social Security Committee with that request and say that we shall all work positively to try to achieve the Government's objectives. The right hon. Member for Charnwood (Mr. Dorrell) said much the same, although, as he got a wee bit excited, he started shouting, which detracted a little from the bipartisan nature of the debate.

Debates such as this are important. I teased—from a sedentary position, which I know is not allowed—the hon. Member for Witney (Mr. Woodward) when he complained that not enough hon. Members were present. I do not know how many Friday sittings he has attended, but we have a good turnout today and also a high-quality one. The hon. Gentleman made an important contribution to the debate, and I shall refer to his comments about David Webster's study shortly.

It has always puzzled me that the House still has, in this day and age, annual and fixed debates about the individual armed forces and the defence public expenditure papers. We have set-piece debates on all sorts of traditional matters, which are historical baggage from the time when the House had a direct and important interest in them, at the expense and to the detriment of some new areas of concern that deserve regular consideration by the House. I suggest that we make today's debate an annual one. Perhaps the Minister could speak to the business managers and see whether, once a year, we could spend a day monitoring the progress of the Government's policy.

I hope that the Government's policy will evolve—we have heard much evidence about the need for it to do so—and the hon. Member for Wentworth was right when he said that, to succeed, the policy would need to be flexible and also be implemented locally. All hon. Members will want to share their experiences of the working of the scheme in practice.

The Government may have rushed the introduction of the scheme. I do not blame them for that, because the expectations of the incoming Government were very high. I do not wish to carp, but it is asking a lot to take the whole country into the scheme after a 10-week pilot project from 1 January to the beginning of April. The work of Bob Alexander in north Tayside has been exemplary, and the culture in the Department for Education and Employment has changed signally for the better—I pay tribute to the work that has been done. However, it is asking a lot of everyone to change so dramatically in such a relatively short time. The timetable for the scheme may be too precipitate.

The House is deplorably bad at learning lessons and monitoring schemes. The previous Government implemented several schemes, such as the workstart project, which did not appear to be properly evaluated. I do not know whether the present Government evaluated the previous schemes before they introduced their proposals, but those schemes did some valuable work from which lessons could have been learnt. The new scheme should last 10 or 15 years, not three or four, and it should be based on a consensus that is capable of surviving a change of Government. That is very important.

As an Opposition spokesman rather than a member of the Labour party, I believe that the Labour Government are now in a crucial position. Expectations are high, and the state of the economy gives them valuable flexibility. They must seize the moment.

The Labour Government are in a better position to introduce radical welfare reform and welfare-to-work schemes than the Conservatives were, because some of the decisions and some of the implementation of the schemes will be very hard to bring off. I do not seek to make a party political point, but it is true that people were highly suspicious that all that the Conservatives wanted was to save money—nothing more, nothing less.

Social security, as a policy subject, became boring during the 18 years of Conservative government because there was no philosophy—except that perhaps the right hon. Member for Hitchin and Harpenden (Mr. Lilley), who is now the shadow Chancellor, tried at the end to get some cohesion and philosophy into the debate with his Mais lecture, which contained some interesting ideas.

The Conservatives approached social security reform with a salami-slicing technique, taking out £100 million here and £500 million there each year for 18 years. That did nothing. It did not address the problem, or even begin to. I am pleased that the Government have grasped the nettle and seized the opportunity. I am pleased that they are doing what they are doing. In so far as I can help, I am willing to help.

I should like to recommend a book that I took on holiday—and incidentally, I could take this opportunity to ask the hon. Member for Croydon, North (Mr. Wicks) for my copy back. I have responded to the Minister's challenge, and I shall give him one in return. Over Christmas, will he read Nick Danziger's book, "A Journey to the Edge"? It is in the tradition of Jack London and George Orwell, and the desperate thing about it is that in some areas the problems now are the same as if not worse than when they wrote.

I come from a rural area and do not have the experience of other hon. Members whose areas have much more difficult inner-city problems. I listened with great interest to the speech by the hon. Member for Liverpool, Riverside (Mrs. Ellman), and I take my hat off to her. It must be a difficult job to act as a constituency Member in such an area, and perhaps we do not do enough to help.

Nick Danziger's book is unbearable because it is about powerlessness and hopelessness. The Minister should read it, and so should everyone else in the House. It certainly persuaded me that something of a completely different nature needs to be tried. The Government deserve credit for introducing the policy. I think that the planets are in harmonic conjunction, and if the Minister does not grab the opportunity, it may not come again for 10 or 15 years, so it is important that we get it right.

Expectations are high. There have been programmes in the past, but the hon. Member for Croydon, North was right to say that they failed, and that people are now cynical about them. We must get the policy right this time.

Having said all that, I now want to endorse some of the points made by the hon. Member for Witney. I, too, have read the David Webster study. He gave written evidence to the Social Security Committee's tax and benefits study, which appears in our report. David Webster conducted an interesting study in Glasgow, a place that I know because it is my native city. He asks some legitimate questions about the "withering flowers" theory propounded by Alan Budd and Richard Layard.

According to that theory, if we leave people languishing in unemployment for long enough, they become unemployable. David Webster also expressed some doubts on the theory of replacement ratios and the idea that the benefits system was encouraging people to remain jobless. The Minister and his officials should read that work carefully.

Long-term unemployment, although it is a lagging indicator, tracks total unemployment almost exactly. That being so, perhaps we should not concentrate exclusively on supply side questions—although I realise that we have to start there. I also understand the point of starting with the 18 to 25-year-olds. It is important to get them early and try to do something.

None the less, we must tackle some of the other factors, too. Webster has some valuable suggestions to make in that direction. If we are to be flexible and have a system that evolves, why do we not do more pilots? Why do we not pick and mix, and try different things?

I have travel-to-work areas in my constituency with bad problems. The town of Hawick has just seen 200 lay-offs in a declining knitwear industry. The people who have been made redundant are struggling and do not know what to do next, because 80 per cent. of the manufacturing sector employment in that town derives directly from knitwear. Moreover, the town is geographically remote and receives no regional development assistance.

As well as the 10 or 12 pathfinder projects, we should encourage community-based local initiatives on a travel-to-work area basis throughout the country. We should be much more adventurous in how we invite people to tackle joblessness and employability issues in their areas. I agree with the right hon. Member for Charnwood that taking £3 billion and applying it to 122,000 18 to 25-year-olds is questionable. Although it is important to deal with young unemployable people, I, too, wonder whether that balance is right.

The Government should also consider immobility in the labour market. I am worried about the impact of housing benefit, which can freeze people permanently into difficult labour market situations.

I want the Government to consider other ways of approaching the problem. I am pleased that a start has been made and I hope that the gateway approach will develop and that we shall learn lessons from it. When we deal with the residual hard-to-employ group to which the hon. Member for Wentworth referred, it is essential to do so on a one-to-one basis, so that the scheme works. We should perhaps try giving employees, rather than employers, a top-up. There is an argument for giving prospective workers an incentive to find long-term work.

The Social Security Committee went to America and met people who are actively engaged in some of those matters, although the context was different, because America has a tight labour market and now has more people in work than it has had for the past 25 years. We do not, alas, enjoy such a context. I was struck by the fact that companies receive tax breaks for contributing to charities and community activities. Perhaps we should consider giving those blue chip companies, whose participation in welfare-to-work schemes is essential and welcome, a tax break if they put money into them. We could also encourage individuals by offering them tax breaks if they invest in welfare-to-work schemes.

My hon. Friend the Member for Hereford (Mr. Keetch) and the hon. Member for Dundee, West mentioned transport. In rural areas, transport is an essential part of the package, without which it will not begin to work. Some areas have no public transport, and people have no cars because they cannot afford them. The same problem arises with child care, but that was dealt with adequately earlier in the debate. Transport needs to be looked at extremely carefully if areas such as south-east Scotland are to have any meaningful chance of access to the Government's proposals.

My hon. Friend the Member for Hereford mentioned sanctions. I was formerly very uneasy about sanctions, but I am beginning to change my mind. When the Social Security Committee went to Wisconsin, we were told that there must be an element of sanction in order to "call out the cheats", in American jargon. We must face the fact that people abuse the system. It is not a nice thing to say, because it is our constituents who do it. The percentage of the population involved is not huge, but people work on the black economy and it is condoned. We must try to change that culture. Therefore, sanctions may have a role to play, as long as they are not rigidly applied.

The waiver scheme used in some of the states and counties in the United States can be used in conjunction with sanctions in a way that calls out the cheats, without causing personal catastrophe to those who are acting in good faith, but who can get caught in the rough justice to which rigidly applied sanctions will almost certainly lead. The Government have to be careful and to monitor how that works.

Some of the Minister's colleagues in the Department for Education and Employment have been studying the United States' experience and there are lessons to be learned, although we must be careful how we translate experience there into the conditions in this country.

This is an important debate, and I congratulate the Government on putting this policy at the heart of their political agenda. I shall do everything I can to assist the process. In return, I hope that the Minister will acknowledge that it is an evolving policy, which must be flexibly applied. If there are lessons to be learned, I hope that next year, or whenever we next debate the matter, the right hon. Gentleman will say that he has learnt those lessons from hon. Members on both sides of the House. A consensus on both sides of the House is essential if the scheme is to work.

12.55 pm

Ms Gisela Stuart (Birmingham, Edgbaston)

Thank you for giving me the opportunity to take part in this debate, Mr. Deputy Speaker. I am particularly delighted to follow the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). We spent a week in Wisconsin as part of the Select Committee on Social Security, and I want to use this forum to thank him for his tremendous work as Chairman and to congratulate him on that role. When we were there, we also found that we have a lot to learn when it comes to soundbites. I heard many pithy little snippets, such as "Jobs or gaol", which I remember avidly, and also "Pay or paint"—I hope that we learned not to do that.

During the election campaign, which seems a long time ago, I knocked on doors in housing estates where we have about 90 per cent. unemployment, asking people to vote for a Labour Government. At times, the response was that politicians are all irrelevant—"What difference will it make to us whoever is in power?" I very much hope that the welfare-to-work programme will be the most glaring example of the difference that politicians can make and of the fact that a Labour Government can make a difference.

My constituency is a little like a cake slice of Birmingham, as it takes in part of the inner city and part of the very deprived outer city—the deprivation is worse in the outer city. A quarter of the unemployed people in my constituency are under 25, and 40 per cent. of them have been unemployed for more than six months. I take issue with the argument that the young are the unemployed group whose numbers will quickly be reduced. That is certainly not the case in my constituency. Three quarters of the unemployed have been out of work for more than two years, and the vacancy to claimant ratio is 1:1.9, so every job is being chased by two people. The pattern is stuck solid and there is little change.

What is welfare to work all about? The right hon. Member for Charnwood (Mr. Dorrell) suggested that it is all about releasing money from one sector to another, and Opposition Members seem to agree. If that is what they really think, they still have not got it. They have not understood that it is part of a much wider package to deal with social exclusion. This is the start. This is a Government who look at the long term. If Opposition Members still cannot see that wider picture, let them keep travelling along this journey with us. I hope that they will learn.

A number of hon. Members, including the hon. Member for Witney (Mr. Woodward), asked how we would judge the success of the welfare-to-work programme and whether we merely look at the monthly unemployment count. There could be an increase in well-being if more people are working and fewer are unemployed, but one could argue that some people in low-paid jobs are simply choosing to take part-time jobs, so their sense of well-being is better. Those figures tell us little. The evidence that we found in America was that whole sections of the population simply withdraw from the official market and disappear from the statistics. That is one of the lessons that I hope we learned from Wisconsin: whole groups of people can fall off the edge, without it being clear what happened to them. A drop in the monthly count of those registering as unemployed may make us feel good, but it may mean that huge sections of the population have disappeared.

Let us consider a different measure: the annual benefit count. Which benefits and which groups are we to concentrate on? Should the fact that huge sections of the population do not claim the benefits to which they are entitled be considered a success? I suggest not. That is not an especially good indicator.

Another measure that has been used in the past is of households below average income, but if we have fast economic growth, the top rate of income may increase and push up the average, so there would appear to be a huge disparity, but it gives us no indication about real poverty.

All those measures are snapshots that do not tell us what happens to people's lives. We should remind ourselves that we are dealing with real people and with huge changes in patterns of life. If we want to assess what is happening to those people, we must consider factors such as lifetime income, the way in which they drift in and out of work, and whether we have realistic career patterns.

In Washington, we had an interesting encounter with a Mr. Rector at the National Heritage Institute. Those of us who met him will never forget him. He claimed to be one of the architects of the Wisconsin model; it is interesting how success has many fathers. When asked what his criteria were for judging the success of welfare to work, he referred to a reduction in case load, and a reduction in the number of out-of-wedlock births; if all children were born in wedlock, all society's problems could be solved. It would be wonderful if that were so, but it is an extremely narrow interpretation, and even the hon. Member for Gainsborough (Mr. Leigh), whose concern for the family is well known, found it somewhat simplistic.

We must be careful not to end up creating a working poor. Welfare to work is laudable, and we all want to work towards it, but in the United States we found that huge sections of the population worked full time and still could not meet their most basic costs. Simply to replace the non-working poor with the working poor is not progress. That is why I warmly welcome the introduction of the minimum wage as a base level to help us forward.

Mr. Gibb

Does the hon. Lady have any estimates of how many jobs would be lost as a result of the minimum wage? Could she cite the Confederation of British Industry, for example, or any other authorities on that question?

Ms Stuart

I suggest that the hon. Gentleman waits for the Low Pay Commission to report with its suggested minimum wage figure, and we can take the debate from there.

Opposition Members criticised the Government for concentrating on the young at this stage, but we must remember, as part of the aim of the welfare-to-work programme is the reduction of poverty, that young workers and part-time workers are most at risk from poverty in work. An Australian study on welfare to work said that having a job was necessary to escape poverty in the 1990s, but that now it was no longer sufficient to ensure that escape. Young and part-time workers went back to work, but their incomes were too low to address the basic problems.

How should we measure the success of the welfare-to-work programme if the static measures are not sufficient? If we consider it as part of the whole social exclusion programme, we can come up with some realistic measures. If people return to work and take part as stakeholders in society, we can measure a whole range of factors that will give us a much better indicator of well-being.

Welfare to work addresses poverty and social exclusion and provides opportunities. We should consider factors such as class mortality rates. Birmingham has very low life expectancy rates. In some wards, male life expectancy is 54 years. The causes are great poverty and high unemployment. Birth weights also give us a good indication, as do suicide rates among young men. Hon. Members who represent rural constituencies will know that suicide rates among young farm workers are rising dramatically. Those are all signs of a lack of well-being.

What about the numeracy and literacy to equip the next generation to take part in work? At a primary school in my constituency, about 60 per cent. of the children in a given age group will have moved on after one year. There is no stability; the school sees its role as providing a safe environment. It has become a pastime of many parents in the area, because they have no jobs, to seek rehousing continually. This is why we need to keep an eye on numeracy and literacy rates for the future.

As for the long-term unemployed, I was taken aback by the hon. Member for North-East Hertfordshire (Mr. Heald), who suddenly expressed tremendous concern for people over 40 who have not worked for many years. Who put them in that position, if not the previous Administration? If they were so concerned about them, why did they do nothing—

Mr. Heald

Does the hon. Lady agree that we should be concerned about people over 40 who are unskilled and who have been unemployed for long periods? Does it really make sense to concentrate the new deal wage subsidies on the young unemployed, who are already finding it easier to get work than the other group, thereby disadvantaging the latter even more?

Ms Stuart

The hon. Gentleman will not be surprised to hear that I disagree with him. I am of course extremely worried about that group, but we have inherited a huge problem and we have to start somewhere. I suggest starting with the generation that has not yet been wasted. We must start by giving those people opportunities, and then move on—it is an evolving programme.

There are no easy or cheap solutions. One universal lesson has been that this is not about saving money in the short term: it is about saving money in the long term if we can crack the problem of social exclusion. The Labour Government have a unique opportunity to bring about a change in the culture of benefits dependency. One of our most powerful tools will be the welfare-to-work programme. The pilot projects offer a tremendous opportunity from which to learn and on which to build, and I congratulate Ministers on the schemes already in place.

Meanwhile, I plead with the Opposition to cease their petty-minded attacks. Previous measures have not worked; now we have some positive models in place from which to learn. Given time, I am confident that they will tackle social exclusion. Let us give welfare to work a chance to develop; let us learn from it.

1.7 pm

Mr. Graham Brady (Altrincham and Sale, West)

I shall try not to engage in petty attacks. We have had quite a constructive debate this morning, and I hope to continue in that vein.

I believe that the new deal in the welfare-to-work programme illustrates a fundamental philosophical difference between us—which is hardly surprising. Some Labour Members may find it reassuring to see measures that reflect old-fashioned socialism, whereas some of the talk emanating from Ministers about flexibility in labour markets may not be quite so welcome to them. They prefer talk about job subsidies, and so on.

It is important to debate the subject not just from a philosophical point of view but on the basis of evidence about the way in which labour markets work and about which practices appear to be effective and which do not. By way of a preface to my remarks, I want to recall that we have had considerably greater success than many of our European partners in areas such as tackling youth unemployment. It would be very worrying if we set off towards a more regulated, structured and dirigiste labour market of the kind that would only emulate the failures that some of our continental partners have experienced.

We have all welcomed the goals of welfare to work. We would all like more people to work and fewer people to depend on benefits. Conservative Members have been happy to endorse specific elements of the policy. My right hon. Friend the Member for Charnwood (Mr. Dorrell) picked out the active labour market policies as welcome in some respects; however, remarks such as those from the hon. Member for Wentworth (Mr. Healey) about the experience in Rotherham, one of the pathfinder regions, highlight one of the new deal's flaws, which is that it takes the lessons of local experiences, some of which I agree have been good, and tries immediately—and without any great evidence that they will be positive or constructive nationally—to spread them throughout the country. That will be dangerous, because it will lead to a massive distortion of the labour market. We have not had any opportunity to test the effect of such a policy.

The evidence that the Select Committee on Education and Employment took from the Policy Studies Institute showed that workstart had been effective with a very small subsidy concentrated over a short period. I am not sure that it is wise to extrapolate from that that a permanent subsidy at a much higher level will have correspondingly greater effects. In fact, the evidence suggested that such a long-standing subsidy at such a high level might be a waste of resources, and that it might be better to focus on the shorter term with a smaller amount.

We have heard much about the focus on the 18-to-24 age group and whether that is appropriate—a matter that the Select Committee considered in some detail. The figures provide compelling evidence that the emphasis in the new deal is wrong. The reduction in the number of people in that group from 250,000 people when the Labour party made its pledge to 122,000 surely suggests that there should be a change of emphasis. It is important that the Government take that on board. Indeed, as I always seek to be helpful, I tried my best in the Select Committee to emphasise that we wanted to help the Government to get over their reticence about not adhering strictly to the target that Labour set two years ago. The success of our labour market and economic policies has largely obviated the need to fulfil that pledge. The focus on 18 to 24-year-olds may be wrong.

The Government's response to the movements in the labour market has been somewhat worrying. The principal change of emphasis has not been from the young to the older unemployed. It seems that the Government are now talking about the flow of unemployed rather than about stock. The stock simply is not there any more so they have to consider the figures for flow. If one is looking at flow, there is never any need to reallocate because, over time, one will always find sufficient people to satisfy whatever criteria one sets. It troubles me that we may never reach the point of reallocation.

I have been pursuing the question of the new deal's objectives for some time because I do not believe that they were as well set out by the Government as they should have been. That tended to be borne out by the evidence that we took from Peter Davis, the man from the Pru. I know that work is on-going. I am somewhat troubled that, rather than resulting in a more precisely defined objective, the shift away from any objective involving a figure or a measurable acceleration in the trend rate of declining unemployment will result in a more nebulous concept of employability.

If are trying to measure whether we are getting value for the £3.5 billion of public money that is being spent. I am concerned that it is not possible to measure employability in any meaningful sense. All the evidence that the Select Committee has taken from many well-informed sources on the subject has tended to point to that conclusion. Evidence that we took about the position in Australia also bore out the suggestion that, after the long running of a similar scheme there, there was no generally agreed measure of success or failure. The only real measure has been that Australian business has become rather disaffected with the programme, and it has therefore been discontinued.

Such a policy, particularly the job subsidy element, will result in displacement, substitution, changed practices, as my hon. Friend the Member for Beckenham (Mrs. Lait) said, and changes in the way in which employers make their decisions. Paragraph 8 of the Select Committee report accepts that the policy would displace not only some people who are currently short-term unemployed and who would otherwise have found work fairly quickly but some people who are currently in work. That is a serious possibility on which we should reflect at length. If we are talking about the introduction of a Government policy which, whatever its arguable merits in global terms or its long-term benefits to the labour market as a whole, will put some people who are currently in low-skilled jobs out of work, depriving them and their families of their livelihoods—as we found in the Select Committee report—that is a matter of considerable concern.

The new deal is focused principally on the marginal elements of the labour market, on those groups who have the greatest difficulty in finding employment, such as lone parents and the disabled. Increasingly, as the number of young, long-term unemployed declines, a greater emphasis is being placed on the idea that there is a mass, of whatever size, which nobody has tried to define, of the unemployable young or dysfunctional young—people who find it difficult to contemplate entry into the employment market.

Given that some of those people have significant difficulties in entering work, one has to consider the Government's contention that there is no fifth option in the new deal and the possible effects of that. Will inability to continue claiming benefits encourage people to discover that they are not as dysfunctional as they thought, and decide that they may be able to enter the labour market? Or will it drive them on to the black economy and off benefits into uncategorised groups such as those to which the hon. Member for Birmingham, Edgbaston (Ms Stuart) referred? If so, I cannot help wondering whether the Government will find a new fondness for the claimant count as a way of measuring unemployment because we may find that a large number of people suddenly disappear from the employment totals. We shall watch that with interest.

The Government are optimistic about their programme and like to claim that the business community is too. I have had a number of conversations not just with the small business sector, but with large businesses, which are concerned about the programme and do not regard it so optimistically. Understandably, they are not inclined to make a public song and dance about that. The Government must learn that people sometimes talk to Ministers differently from the way in which they talk to Opposition Members; Ministers should not be fooled by the slightly sycophantic approach of some business men when talking to them, rather than about Government policies.

The simple, inescapable logic when it comes to the job subsidy element of the new deal has been discussed before but is central to the case: if reducing costs for employers increases employment, increasing costs will lead to unemployment. The Government have not answered that point, and I do not believe they can, as it is logically inescapable. The hon. Member for Edgbaston was right to link the policy to the minimum wage—the two are inextricably linked.

The minimum wage is not about poverty, but is another facet of the welfare-to-work programme. But in this instance it is not about the transfer of unemployed people to work but about the transfer of £4 billion to £5 billion of benefit costs from the state to employers. It is an inescapable conclusion—I see that the hon. Member for Edgbaston is shaking her head. The minimum wage will reduce in-work benefits as income from people's employment rises, and there will be a significant claw-back for the Treasury. There will therefore be a big Government saving from the minimum wage, but that saving will be picked up by employers—there is a cost to employers.

Ms Stuart

Surely even the simplest economics tells us that, if people in work claim family benefits, the taxpayer will pick up the bill. Is there not something very wrong in the taxpayer picking up the bill for employers who pay such poverty level wages that employees must claim benefit?

Mr. Brady

It depends on one's policy. If the Government's policy is to reduce unemployment, they will have to accept that the costs of doing so will have to be met from somewhere. In transferring that £4 billion cost to business, the Government will make unemployment levels rise, and make it less likely that people will be in employment and more likely that they will be on benefit.

All hon. Members would prefer it if the taxpayer did not foot the bill for benefit payments, but we cannot simply magic away that cost. In imposing a minimum wage, one is not removing the need for payments but transferring the bill to employers. I argue—I do not think that any serious commentator has disagreed with this view—that loading those costs on to business will make businesses able to employ fewer people.

Mr. Dorrell

Would my hon. Friend like to make an observation on the irony of the intervention by the hon. Member for Birmingham, Edgbaston (Ms Stuart), who seemed to suggest that it was wrong for the taxpayer to support employment on relatively low wages through family credit? I do not understand how that is reconcilable with her support for the £60-a-week subsidy that is a key part of the welfare-to-work package.

Mr. Brady

It is also at least arguable that the job subsidy will—because of the competitive effect—depress wage costs in the overall economy. Whereas transferring benefit costs to business may cost it £4 billion or £5 billion, the Government's subsidy programme will cost the taxpayer £3 billion to £4 billion. It may be no coincidence that the figures are not that different. The new deal is necessary partly to mitigate the most deleterious effects of the introduction of a minimum wage. That is why the Government have chosen to focus on marginal groups in the labour market—the long-term and young unemployed, the disabled and lone parents, all of whom will be hardest hit by the minimum wage.

As I said, distortion of the labour market is not only an academic concern: it is central to people's lives. We talk about distorting a labour market, and it sounds distant. However, if we are distorting a labour market so that it takes away someone's job or creates a situation in which someone is less likely to get back into work—and has not yet been unemployed for as much as six months, when they can qualify for the subsidy—we are possibly having a very real and damaging effect on the living and livelihood of individuals and their families.

The policy is old-fashioned socialist intervention in the labour market, and I do not believe that that works. From the rhetoric with which the Labour party fought the general election and some of Ministers' statements since, I had hoped that they had learnt something about how business works and how markets operate and that a flexible labour market generates more employment and higher living standards. In its current form, the policy indicates precisely the opposite: they have not learnt anything.

1.22 pm

Mr. Andrew Love (Edmonton)

I congratulate my right hon. Friend the Minister on his determination in holding to an ambitious timetable. It is no mean achievement to go, in less than a year, from scratch to the national launch of the main programme for the young unemployed. I also pay tribute to the unique design features of the new deal, which incorporates two strengths: first, local determination of the delivery vehicle, responding to local circumstances and the strengths of local providers and agencies; secondly—as hon. Members have already mentioned—flexibility. Ministers have left considerable scope for change and adaptation of the programme. Indeed, this Minister has shown considerable flexibility in many aspects of the programme, but the one that I would mention especially involves allowing participants the opportunity to sample the different options available before making their choice.

vasanth I have one caveat in respect of those two strengths: flexibility and local determination must not be achieved at the expense of quality, either of the programme itself or of the jobs and training that it delivers.

I shall deal now with the three aspects of the programme. The first is the gateway—the advice, guidance, counselling and support service. This is unique to the new deal, and its effectiveness will be vital to its success. It must be a high-quality service that provides a comprehensive range of other specialist services covering homelessness through to drug dependency. The gateway element will indeed be a major determinant of the success or failure of welfare to work.

The Employment Service will co-ordinate and lead the new deal programme and has responsibility for the gateway. It is widely recognised, certainly in London, that the Employment Service has an image problem—not, it must be said, all of its own making—because it is associated in the minds of many clients with its policing role in regard to the jobseeker's allowance. That perception may jeopardise its ability to deliver the gateway service. That is widely recognised, not least by the Employment Service itself, and steps have been taken to bring in outside agencies to help deliver the service. However, more needs to be done to strengthen its role in the gateway.

Employment Service staff have little experience in delivering the intensive advice and guidance required of the gateway. A comprehensive training programme for personal advisers to help them assess the needs of the client group properly would go a long way to address that weakness. In addition, many of the services provided by gateway could and should be sub-contracted and, where sensible—as has recently happened with a number of private sector organisations—the gateway itself should be subcontracted.

The second option is the employment option. This is likely to be the most popular, as it provides a job with an employer. We need to guard against its turning into the preferred option for all clients to the extent that other options are seen as second best. That can be assured only if the other options deliver real jobs as alternatives to the employment option.

An impressive list of national employers is lining up to provide places on welfare to work, to join the regional assessment panels and the other bodies and, indeed, to second staff to assist. I wholeheartedly welcome this, but experience in other countries shows that, to be successful, such programmes require the support and participation of small and medium enterprises. They are critical to the programme's success. We must target small enterprises in particular with our publicity and draw them into the programme. The new deal needs their support and good will, but it must ensure their compliance with the terms of the employment agreement. That will be a difficult balancing act, but we must try to prevent abuse.

Many small enterprises are too small to fulfil the terms of the employment agreement for the client group. That is especially true for the training element, and every effort should be made to contract this type of service on behalf of small enterprises through local consortiums.

In recent years, there has been an enormous growth in the services for small businesses provided through business links. Presenting the new deal in this way would be a much more positive approach and would link it to the development of the individual small business.

Finally, I shall deal with evaluation and adaptation. There has been a great deal of research into job subsidy. Indeed, the debate rages—we have hear something of it this morning—around the impact of deadweight, substitution and displacement. The existence of those effects is not in doubt, but their extent is. Numerous studies have been talked about this morning. There was no unanimity in the academic opinion canvassed by the Select Committee, but the studies tend to show that deadweight is substantial. The right hon. Member for Charnwood (Mr. Dorrell) mentioned additionality, which the studies show can be up to 30 per cent. However, those studies covered previous job subsidy programmes. The new deal is different because of the intensive support, advice and guidance offered, and the quality of the training to NVQ standard provided as part of each option.

Those features address some of the shortcomings of previous schemes, but it is important to adapt the programme to ensure that the subsidy is targeted and achieves the maximum benefit. That requires evaluation, but effective evaluation can be achieved only against clear objectives. Although the design document is a little vague, the Select Committee report outlines two main objectives for the programme—employability of young people and a sustainable reduction in the levels of long-term unemployment. If the programme is to be successful, we must try to measure the effects of subsidies on employability and adapt it accordingly.

Can that be achieved? The new deal will clearly have an impact on employability. First, it will keep participants in touch with the world of work. Secondly, it should improve the clients' motivation to find and retain employment. Thirdly—and perhaps most important—the relative skill levels of the participants will be improved. The new deal task force has addressed those issues and continues to do so. There is widespread recognition that to be successful the programme must clarify its objectives and monitor its delivery. That must include an evaluation of subsequent employment patterns to measure that improved employability so that we can improve the design and targeting of the job subsidy element of the programme.

We are only five or six days from the launch of the pathfinder and three months from the rollout of the national new deal programme. I look forward to fulfilling our manifesto objective of providing 250,000 jobs for young people and giving them new skills, enhanced motivation and, most important, hope for the future.

1.32 pm

Mr. Nick Gibb (Bognor Regis and Littlehampton)

Last week's vote on the abolition of lone parent premiums was more significant than we realised. More important than the Conservatives voting with the Labour Government against old Labour socialists was the size of the rebellion, with 47 Labour Members voting against the Government and at least 25 others abstaining, not to mention the many Labour Members who voted with the Government with a heavy heart and may not do so on another, similar occasion.

The Government can no longer claim to be a radical, welfare reforming Government. They realise that they have no chance of getting through any welfare reform measures worthy of the name. We shall have no more than some tinkering with the existing system. Of course, it will be dressed up in the usual Alastair Campbell hype, but very little significant welfare reform will emanate from the Government.

We have many reviews: the child benefit review; the welfare-to-work task force; the tax and benefits task force; the social exclusion unit; the family policy committee; the pensions review; the long-term welfare review; the disability benefit review; the industrial injuries compensation review; the royal commission on long-term care; and, of course, the comprehensive spending review. Very little will come out of those reviews, apart from a large amount of hype, a press conference and perhaps, if the mood takes the Government, a statement to the House. Little, however, will happen in terms of policy.

We are talking about more than just a crisis at the Department of Social Security or the Department for Education and Employment: we are talking about a crisis across the whole of this new Government. Their welfare reforms were meant to form the basis of their economic policy. The initial injection of capital from the windfall tax was meant to give rise, in due course, to savings in the welfare budget, to spending falls and, ultimately, to higher tax revenues as more people got into work, giving the Government billions of pounds to spend on education and health. None of that will happen because the welfare reforms will amount to so little.

We can already see the problem with the tax and benefits task force. When it was established in May, the event was reported in all the newspapers. They used similar phrases, so we could see the hand of Charlie Whelan. One newspaper wrote that the panel of experts headed by the Barclays bank chief would recommend radical reform, including full scale merger of the tax and benefit system. Another newspaper used a similar phrase, referring to integration of the tax and benefit system. The reality, which we began to see in evidence from Department of Social Security officials to the Social Security Committee, in the green Budget and in the publication of the first report from the Taylor review, is that the change amounts merely to streamlining and modernisation of the tax and benefits systems. The only four issues being discussed are a working family tax credit, some tinkering with the level of national insurance contributions at the lower end of the income scale, a 10p rate of income tax as the lowest rate and a tinkering with benefit withdrawal tapers. That does not sound like the full-scale integration of tax and benefits.

Let us consider the working family tax credit. It is nothing more than family credit, which was highly successful and was introduced by the previous Government. The only difference is that it will be paid to the income earner rather than to the spouse who looks after the family.

Some of us on the Social Security Committee suspect that the change is likely to result in an accounting benefit for the Government. Family credit is clearly public expenditure, but the working family tax credit, to the extent that it results in the income earner being relieved of tax instead of having the relief paid to the family, will result in the benefit being accounted for as tax forgone rather than as public expenditure. Approximately two thirds of all recipients of family credit pay income tax. With family credit costing about £2 billion a year, there could be a significant shift in the way in which public expenditure is accounted for. In other words, the policy is pure window dressing and no substance.

The essence of welfare-to-work programmes is to get people into work. In those terms, the previous Conservative Government had the most successful welfare-to-work programme ever. For at least four consecutive years, unemployment fell month in, month out. Unemployment is now at 5.2 per cent., which is lower than the rate in our major competitor countries in Europe. In Germany and France, the figure is 12 per cent. and in Spain, youth unemployment is a staggering 40 per cent.

This Government have inherited a golden legacy, with steady growth, low inflation and falling unemployment. If the new Labour Government had continued with the same economic policies, the golden legacy would have continued undamaged. That is what the public believed would happen when they voted for Labour on 1 May.

Mr. Keetch

Does the hon. Gentleman agree that some Liberal Democrat Members have criticised the Government for maintaining the economic performance of the previous Administration and for keeping within their financial limits? In many ways, this Government are continuing with the policies followed by the previous Government.

Mr. Gibb

I am grateful to the hon. Gentleman for that intervention. In some ways, he is right. The Government have stuck to the spending plans of the previous Government, but they have also undone many of their economic policies. Since 1 May, there have been five interest rate rises and an emergency Budget raising £5 billion a year from the nation's pension fund. That will have to be paid for by higher contributions that, for the average person, will amount to about £20 a month. That Budget also raised £5.2 billion from the windfall tax and in November a further £2 billion was extracted from the corporate sector as a result of the abolition of advance corporation tax and the introduction of quarterly corporation tax payments.

As a result of that and the high level of sterling, it is clear that the economy will slow down next year to such an extent that unemployment is likely to rise. Indeed, in his pre-Budget reports the Chancellor has acknowledged that there will be a slowdown in the economy. It really is a scandal. If only the Government had continued with the same economic policies, unemployment would have continued to fall and welfare to work really would have been the order of the day.

It is in some ways ironic, if it were not so tragic, that the windfall tax, which will raise £5.2 billion—the first instalment having been paid at the beginning of this month—will eventually be spent on welfare-to-work projects. The very act of raising the money by imposing the new tax will contribute to the contraction in the economy instigated by the Government, and that contraction will lead to higher unemployment. The policy designed to reduce unemployment will actually contribute to it.

One of the most successful welfare reform measures introduced by the previous Conservative Government was the jobseeker' s allowance. In addition to a successfully managed economy, the jobseeker's allowance contributed significantly to falling unemployment throughout the country month in, month out, for the past four years.

The jobseeker's allowance—which was opposed at every step by Labour in opposition, but is not now to be scrapped by Labour in government—involves contracts between the Employment Service and those claiming the benefit to ensure that effective steps are taken to obtain a job. It works because, as well as providing advice and help in finding a job, at the end of the day there is an element of compulsion.

With the Government's new welfare-to-work programme, it is difficult to ascertain precisely what sanctions will be applied to those who, in the Prime Minister's words, decide to go for the fifth option.

In respect of the new deal, there is a clear division in the Department of Social Security ministerial team about how much compulsion should be applied. The Secretary of State said on the BBC's "Question Time" on 2 October this year that compulsion was absolutely not the issue, but the Minister for Welfare Reform, in an article entitled "Reinventing Welfare: a Response to Lawrence Mead's paper 'From Welfare to Work: Lessons from America— said: Mead criticises voluntary approaches for assuming the poor are all primed to work and only need a better chance. The Minister agreed with that, saying: Here he is surely right. Policy makers need to recognise that the unemployed are not dashing around all the time in a frantic search for a job. The Secretary of State does not want compulsion, whereas the Minister for Welfare Reform does. Who is right? Perhaps the Minister could intervene in the dispute between his colleagues at the Department.

A further paradox in the Government's welfare-to-work policy is the introduction of the minimum wage. Professor Baine has been quoted in The Times as saying, in what I consider a very callous phrase: I would be surprised if there were not some job losses but the question is whether those jobs would be better lost anyway. Perhaps his tone would be different if the job in question were his own.

The Department of Trade and Industry has calculated that a minimum wage of £4.15 an hour, with an assumption of a 50 per cent. restoration of wage differentials, would destroy more than 1 million jobs. The Confederation of British Industry, which I was hoping the hon. Member for Birmingham, Edgbaston (Ms Stuart) would mention, has said that a minimum wage of £3.20 an hour would lead to significant job losses.

The question whether the minimum wage will be applied to the groups of people who are the subject of the welfare-to-work programme also arises. Will it apply to lone parents who are seeking a job for the first time, to young long-term unemployed people and to disabled people? If so, who will pay those wages? The £60 a week subsidy is a drop in the ocean compared with the weekly wage bill of someone who earns £4 an hour. The insanity of a minimum wage policy, combined with the damage that will be caused by signing the social chapter and all the economic problems that measures taken by the Government since 1 May have caused, means that, far from there being a welfare-to-work policy, the Government have created a work-to-welfare policy.

Even aside from all those issues, there is no evidence that welfare-to-work schemes work. The Economist said in March: Labour isn't thinking …Labour is underestimating the difficulties. Its plan to fund the job creation scheme with a one off windfall tax on the privatised utilities, even though the costs of any such scheme will be recurring, not one off … Most of those helped by workfare will be given low paid jobs; these will have to be supported by in-work benefits, a continuing cost to the taxpayer. Welfare to work is not a cheap idea and it will not necessarily reduce the overall employment count. Welfare to work will certainly not result in savings of billions of pounds—as the Government claim and which they have earmarked for spending on health and education.

Indeed, research conducted by National Research Associates in 1995 on 17 wage subsidy schemes from 10 countries in the Organisation for Economic Co-operation and Development showed that at least half the subsidy went on people who would have found a job anyway. The most likely effect of such schemes is an incentive to employers not to take on the school leavers they would normally have taken on and instead to take on a young employed person with a £60 a week subsidy.

The Employment Policy Institute paper, "Employment Subsidies and the Intermediate Labour Market" poured scorn on the proposals. It said: If take-up of the recruitment subsidy element of the New Deal does proves to be low"— which it may be in places such as those represented by the hon. Member for Liverpool, Riverside (Mrs. Ellman)— relatively more emphasis will have to be placed on environmental and voluntary sector programme options", particularly in "depressed localities". This possibility raises concern about the overall effectiveness of the New Deal given that community jobs programmes, whatever their broader merits, do little to improve the long-run unemployability of participants. The European Commission …concludes that studies indicate that community jobs schemes may have undesirable consequences for the future career prospects of participants. Such schemes risk diverting participants on to 'side tracks' which sometimes turn out to be dead-ends, and make it difficult for them to return to regular employment.

Mr. Barry Gardiner (Brent, North)

The hon. Gentleman has raised two points which I could not let pass. One was about the overall costs of the scheme. Does he know of the pilot of all pilots that is being conducted by Nortel in north London? It has embarked on the scheme, ahead of anything, by investing £200,000 to train young men and women between the ages of 18 and 24 and provide for day release. If they are successful, they are then put on the company's modern apprenticeship schemes. One of our strongest leading companies in the country thinks that it worth spending almost a quarter of a million pounds on such a scheme. If that is not recognising the value of investment, I do not know what is.

The other point is—

Mr. Deputy Speaker

Order. Interventions must be brief. What the hon. Member said will be sufficient for the time being.

Mr. Gibb

That £200,000 is not the billions of pounds that we were promised before and during the election campaign would arise from the great panacea of the welfare-to-work scheme. We were told that that money would be pumped into education. That was the basis of the Government's economic policy and election strategy.

The level of unemployment in an economy is directly linked to the level of activity in the economy. The jobseeker's allowance sought to ensure that people available for work were genuinely looking for work. When that was coupled with a successful economic policy, unemployment rolls tumbled. Indeed, David Webster's report, which has been mentioned several times today, showed a direct correlation between the number of long-term unemployed and the overall unemployment level. If he is right—many hon. Members have implied that he is—subsidising the long-term unemployed is an ineffective policy.

There we have it: the whole basis of the Government's economic policy—of their claim that they could pump billions of pounds of extra money into education and health without raising extra taxes—is found to be flawed. The basis of Labour's policy is We will reduce spending on the costs of unemployment and increase it on education. None of the measures so far proposed under the title of welfare to work will result in the saving of one penny of taxpayers' money.

Instead, when we take into account the ludicrous policies for a minimum wage and the adoption of the social chapter, the five interest rate rises, the £10 billion of tax rises in the contractionary Budget in July and the £2 billion extra corporation tax a year announced in November, we see that the economy will slow down and unemployment will soon follow.

On top of that slowing down, it became clear after last Wednesday's vote that the Government will no longer be able to get any of their radical welfare reform measures through their party. That vote signalled the beginning of the end of the current Secretary of State for Social Security, but it also signalled the end of any measure that the Minister for Welfare Reform might propose. It signalled the end of thinking the unthinkable; it signalled the end of tough sanctions; it signalled the end of being able to save billions of pounds from the social security budget to pump into education and health; it signalled a huge dent in the Government's public spending strategy; and it signalled the complete chaos in the Government on welfare reform.

That vote also exposed the fundamental flaw in all the rhetoric of Labour in opposition about shifting resources from the welfare budget to education and health. The policy is beginning to unravel, including the clever-clever tax on pension funds that the Government thought nobody would notice—but which people have noticed—and the disastrous policy on savings that the Government thought people would swallow, but have not. We have seen the nanny state bossiness over beef on the bone and now we see that new Labour cannot deliver on the most fundamental aspect of its social and economic policy.

1.51 pm

Mr. Roger Casale (Wimbledon)

I am grateful for the opportunity to report to the House on the excellent progress that has been made in preparing to implement the new deal for the young unemployed in south-west London. I also wish to share with the House some of the insights that I have gained from directly participating in and assisting with those preparations in my constituency of Wimbledon in the London borough of Merton. I feel that I have been able to act as an ambassador for the new deal.

The three major parties are represented in the constituencies covered by the local Employment Service district, and all the local Members of Parliament, from whichever party, have played a role in helping with the new deal. Indeed, the Employment Service district report stated: Local MPs …have agreed to use their existing employer networks to spread the word about New Deal through organisations such as the Merton and Kingston Chambers of Commerce and the Sutton Business Federation. I welcome and applaud the involvement of all my parliamentary colleagues in the area in advocating and promoting the new deal.

I also wish to draw attention, as other hon. Members have done, to the central importance of the new deal in the context of welfare reform. The new deal is the most exciting of all the new projects introduced by the new Government and is the touchstone by which all our achievements in this Parliament will be judged and the foundation on which the rest of our proposals will stand or fail. That is because the Government are committed to reducing the benefit bill, but as a Labour Government they recognise that that can be done only by helping those who can work, and want to work, off welfare and into work.

I said that I would report on the progress of the new deal in south-west London. On 14 November the delivery plan for our new deal was presented by Colin Purtill, the director of the local Employment Service, to the regional panel. I am delighted to say that it was one of the few to receive category A approval—a rating that testifies to the desire of all concerned to make the plan work, and to the fact that the Employment Service can design local provision of real quality based on a flexible planning partnership approach tailored flexibly to local needs.

The key elements of the local delivery plan in south-west London include the following. First, there is a flexible approach to the design of the gateway, based on five focal points in Mitcham, Wimbledon, Sutton, Kingston and Epsom, with the use of independent advisers as well as Employment Service staff.

The Employment Service recognises, as I do and as the Government do, that young people out of work have a multiplicity of needs. They are often without a home, and may also lack skills. That is why we need to draw on the expertise and advice of many outside the Employment Service in the design of the gateway. That is the approach that we are taking in south-west London.

Secondly, we are establishing a management consortium that includes, among others, the local training and enterprise council AZTEC, SOLOTEC—a local voluntary sector consortium—and the local authorities. The fact that it also includes employer representatives and other partners not intending to act as providers has been a key element in getting us category A approval. Such a consortium is seen as the best way of capturing local expertise and making sure that the voluntary sector in particular and the social economy in general plays a leading role in making the new deal work locally.

The final aspect of our delivery plan that I shall highlight is the clear commitment to quality assurance, to the monitoring of progress and evaluation, and in particular to equal opportunities. That means that the new deal in south-west London will not simply cream off the best among the young unemployed; underlying it will be the principles of fairness, of equal opportunity, and of opening up access to all.

Commenting on the local delivery plan, Ian Parkes, the managing director of AZTEC, said: Getting ready for the New Deal in South West London has gone very well—we are well prepared—only perhaps a little frustrated that we have to wait till April to get started". Colin Purtill of the local Employment Service told me that many employers had responded enthusiastically to the new deal, and would even take on young people without subsidies. He asked me to raise with the Minister during the debate the idea of getting this message across more strongly so that more employers might take on young people under the new deal without subsidies. That would allow resources to be directed at those with really difficult needs.

I take this opportunity to congratulate publicly all who have contributed to the successful design of our local delivery plan. More than 100 organisations, with their expertise and enthusiasm, made the consultation process so successful, and I know that they are as committed as I am to making the implementation of our delivery plan an equal success.

The Minister knows of our commitment in south-west London to making the new deal work for our community. Indeed, he recently visited a small business in my constituency to emphasise, with the parliamentary spokesperson for the Federation of Small Businesses, the importance and value of employment in small businesses to the overall success of the new deal strategy.

The Minister will be aware of the view voiced strongly in south-west London during the consultation process that, if the new deal is to work anywhere, it must work there. London has 15 per cent. of the total number of young unemployed people; 50 per cent. of those are black or from other ethnic communities, and 50 per cent. have no qualification higher than NVQ level 1.

The commitment and self-confidence that I have found in south-west London to helping the Government implement the new deal was driven home to me forcibly during the consultation process. I had the privilege of chairing one of the key meetings during the consultation phase, which took place at the YMCA and drew on that organisation's considerable experience of foyer projects in Wimbledon.

That meeting brought together more than 40 organisations, including representatives of statutory and voluntary bodies, housing associations, further education colleges, local employers, trade unions and local churches. They all said with one voice that the new deal was an opportunity to focus the local community's considerable resources and energy on a common purpose, and an opportunity to build on existing local partnerships such as the Wandle valley partnership for the benefit of the community as a whole.

The director of the Merton Voluntary Services Council, Ms Chris Frost, said that the consultation process had been excellent, building on well-established local networks and long experience of good co-operation between statutory and voluntary bodies. The industrial chaplain in Merton, Andrew Wakefield, said: Despite the tight time constraints, a genuine process of consultation took place, for the first time in a long time. In his closing remarks, the chief executive of the YMCA, Stuart Page, said: Look around at the resources represented by those present at this seminar today. There are more than enough means to solve the problems suffered by the young unemployed in this district. As my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) said, if we look around this Chamber we see that each of us has a role to play and a responsibility to make the new deal work.

The new deal is not a half-hearted stab at paying lip service to the Government's duty to ensure that the young have life opportunities; it is a thorough strategy for social regeneration and national renewal, which puts young people's needs to the fore.

Mr. Heald

Some 250,000 people over the age of 25 are registered as long-term unemployed—out of work for more than two years—but only some 100,000 people under the age of 25 are unemployed. Can it be right to spend £3.1 billion on the 100,000 and £350 million—a tenth of that—on the 250,000? The emphasis in the new deal structure is wrong.

Mr. Casale

Had the hon. Gentleman been here earlier in the debate he would know that that point has been raised a number of times and has been adequately dealt with.

The Government's pledge to create 250,000 jobs for the young unemployed is at the core of our project for national and social renewal. If the new deal is successful, it will be the greatest living monument to the new Government, and we shall share the credit with hon. Members on both sides of the House who contribute to its success in their local communities.

In reconnecting young people with work, we shall reconnect them with a society from which they have become disaffected because it seemed not to care. The dynamic gains to be made from the new deal can and must be reinvested to tackle unemployment among other groups, particularly the long-term unemployed and people with learning difficulties and physical disabilities, as my hon. Friend the Member for Croydon, North (Mr. Wicks) said. We must put those resources at the heart of the on-going process of social regeneration and our commitment to national renewal.

I am delighted to have had an opportunity to report on the progress that has been made in south-west London, and I commend the report to the House.

2.2 pm

Mr. John Randall (Uxbridge)

Welfare to work has been highlighted as a central part of the Government's programme. It builds on the series of employment and training programmes introduced over the past 25 years to ameliorate some of the effects of unemployment. The main goal of the Government's proposal is to take 250,000 people defined as long-term unemployed off the dole queue. That job has been made much easier as a result of the continuing fall in unemployment which the Government inherited from their predecessor.

The Conservative party shares the ambition of reducing unemployment. The continuing growth in new jobs reminds us that the main source of job creation is a successful economy. That will always be the case, but it does not mean that there are not specific problems associated with long-term unemployment which must be dealt with by other means.

As for the details of the Government scheme, no matter how important the objective it does not free us from critically analysing what is proposed. We share the desire to reduce unemployment, but as the Opposition it is our responsibility to highlight potential difficulties, while acknowledging the strengths of the scheme.

Unemployment is bad for the people who experience it and bad for the economy. It demoralises the individual and places strain on their families. It leads to de-skilling and a lowering of personal motivation. The longer people are unemployed, the more their skills deteriorate. They become increasingly ineffective in their search for new work, and employers become more unlikely to take them on to the payroll.

The exclusion of the long-term unemployed from the economy is not only a waste of human talent; it is economically damaging. If a large number of potential workers are excluded from participation in the labour market, it can lead to increasing skills shortages. There is a risk of generating a vicious circle of rising inflation and rising unemployment, which leads to reduced Government revenue and pushes up social security spending.

That unemployment is a bad thing and successful job creation a good thing is self-evident. The question is how best the latter can be done and how effective schemes such as the one proposed by the Government will be in reducing long-term unemployment.

There has been something of a sea change in that area in recent years, not least on the Labour Benches. There has been a steady but gradual shift in the welfare-to-work debate. It is now widely recognised that the Government are under an obligation to the taxpayer as well as to the unemployed. It is no longer acceptable or desirable from any perspective or point of view to allow the unemployed simply to accept financial support from the state without taking on reciprocal responsibilities in return. It is in the interests of both the unemployed and those in work to minimise unemployment.

When the Beveridge system was first designed, it was assumed that after a certain period payments would be conditional on the recipient accepting work or training. That original aspiration was never put into practice. The debate has rightly returned to that point of reference. In employment terms, the world has changed beyond recognition from the days of Beveridge. Global economic and technological change has resulted in unemployment levels that were not envisaged at the time of his report. Now, people may have to change jobs several times in a lifetime. That changing pattern of employment poses new challenges and creates new problems.

One of the problems of having high levels of unemployment, particularly of the long-term sort, is the strain that it places on other finances. The average cost of an unemployed person claiming benefit works out at roughly £3,900 per annum, which amounts to a total of £7.16 billion or 10 per cent. of the social security budget. In addition, the Government lose on average £6,000 in unpaid taxes and national insurance, so the total cost to the Exchequer is in excess of £9,000 per unemployed individual—10 per cent. of the social security budget, as I said.

Therefore, the Exchequer impact of high unemployment is considerable, although an accurate assessment of the respective costs and savings is dependent on the unemployed group that are returned to work. The average payment to the under-25s is around 70 per cent. of the average for all unemployed claimants. That means that savings for that group would be nearer £750 million, compared with the £1 billion for the over-25s.

The problems associated with the job subsidy element of the proposed welfare-to-work scheme are not unique to this scheme. They are difficulties that have been identified by a host of countries that have adopted similar initiatives. Wage subsidies form a key part of the new deal for 18 to 24-year-olds and for those who are unemployed for more than two years. The rationale behind the subsidy is that it is financed by transferring part of the benefit cost to a prospective employer. That way the new employee earns more than the dole, while the employer cuts his or her costs. Meanwhile, the Exchequer is no worse off, because it would have paid out that money anyway.

As we witness the continuing fall in unemployment, the problem of those who would find jobs regardless of such schemes is clearly illustrated. That makes it difficult to measure the true value of such initiatives. A proportion of those who benefit from the subsidy would have returned to employment in any case.

An evaluation of 17 wage subsidy schemes in 10 Organisation for Economic Co-operation and Development countries estimated that that applied to 50 per cent. of the jobs covered by the schemes. That must be put into perspective. The report was produced at the same time that the British workstart scheme was piloted by the previous Government. Workstart offered employers subsidies of £60 a week for six months to take on people who had been unemployed for more than two years. A report on the scheme by the Institute of Employment Studies found that it met its main aim of influencing employers' selection decisions in favour of the long-term unemployed.

I know that the Government carefully considered many of the flaws in the schemes when they prepared the new deal. The commitment to one day a week's training, combined with employer contracts, may deter the more cynical, who are simply interested in attracting a subsidy. That, alongside the co-operation of training and enterprise councils in tailoring the training to the specific needs of the local labour market, is vital. I know from speaking to people at my local TEC that that is important if they are to deliver their side of the bargain.

The OECD report suggests that the targeting of subsidies can make them more effective in combination with training, as proposed in the new deal. The longer-term effect of such schemes is felt in putting the unemployed back in touch with the world of work. It may well be that, even if the subsidised element is not strictly efficient in creating longer-term opportunities, it will help to re-motivate the unemployed.

Another problem is of people being substituted through schemes. I know that the Government are committed to monitoring the position. Employers do not sack people to replace them with those from the scheme, but the problem comes from the employer who would have replaced an employee in the normal way, who then recruits someone from the scheme. That will be difficult to assess in practice.

There are many international examples of workfare programmes. The overall value of the scheme will be established only in practice. I wish it well, and hope that any deficiencies that may materialise can be ironed out, for the benefit of those most in need. Only time will tell whether this large sum is being well spent.

2.11 pm

Yvette Cooper (Pontefract and.Castleford)

We have had an extremely good debate on the Government's welfare-to-work proposals. Hon. Members of all parties have been constructive and positive, with the exception of the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb); I am amazed that he could keep a straight face, because the weirdest economic logic was involved in arguing that we do not need a welfare-to-work programme and a new deal because the previous Government's macro-economic strategy would have solved all the problems and brought unemployment down. That is complete nonsense. I pick up on it because it takes to extremes an argument based on a misconception shared by many Conservative Members.

The argument is that unemployment is falling because of the previous Government's macro-economic strategy, and that, if we carried on cutting interest rates, it would fall further and we would not have a problem. The hon. Member for Bognor Regis and Littlehampton said that we should continue the policy from before the general election, when the right hon. and learned Member for Rushcliffe (Mr. Clarke), the former Chancellor, did not put up interest rates, despite the fact that the economy was growing.

Mr. Gibb

My right hon. and learned Friend may not have put them up at that time, but he had put them up; he did not cut interest rates for the whole period. To say that our economic policy was based solely on cutting interest rates is a travesty of the truth. The previous Government conducted a sensible economic, monetary and fiscal policy. Since 1 May, we have had an over-zealous monetary policy and huge tax rises.

Yvette Cooper

That so-called sensible macro-economic, monetary and fiscal policy caused the two deepest recessions since the war and put millions of people into unemployment—more than at any other time. The claim that Conservative macro-economic management is good for jobs will seem a bit rich to people in Pontefract and Castleford who were pushed out of work in the 1990s recession and had very little help from the previous Government to get back into work.

The problems of unemployment are not just to do with macro-economic management, bad though the previous Government's management was. The people struggling to find jobs in my constituency are clear evidence of the huge need for a new deal, especially for the young unemployed—despite the decline in youth unemployment. In Wakefield district, we did a survey of 18 to 25-year-olds who have been out of work for more than six months—the people who will be targeted by the new deal—and found that 48 per cent. of them had no educational or vocational qualifications at all. That is shocking; it is much worse than the national average, which is about 25 per cent. It points up the problem with our skills base. Long-term unemployment is concentrated among the unskilled, right across the country. That cannot be solved purely by macro-economic management. We need to examine the particular needs and problems of the people who are out of work.

The demand for high skills has risen in recent years, but this country's skills supply has not kept up with it. In countries where the supply of skilled labour has kept up, the relative position of the unskilled has not deteriorated; whereas in Britain, because the former Government failed to encourage the growth of skills in line with demand for them, skills shortages developed and the wages of those with qualifications kept rising, while the living standards, pay and chances of finding a job of those denied qualifications continued to fall. Hence the need for a new deal.

The problem continues from one generation to another. Twenty per cent. of the sons of the unemployed are unemployed themselves and 67 per cent. of the daughters of women with degrees will take degrees themselves, but only 8 per cent. of the daughters of women with no qualifications will go on to get degrees. From one generation to another, the same disadvantages are being passed down. We must put a stop to that. It explains why we are starting with young people and the young unemployed.

I take the serious point of the hon. Member for North-East Hertfordshire (Mr. Heald) about the problems of unemployment among the over-40s and over-50s. The people of Pontefract and Castleford, however, would find his party's concern slightly more plausible if, during the heavy industrial transition of the 1980s, more had been done to help older workers into new jobs when their former jobs in mining and the heavy industries were destroyed. We need to tackle generational injustice, in other words, not just the lack of employment opportunities.

Mr. Brady

Does the hon. Lady accept that there will come a point when youth unemployment has fallen to a certain level, whereupon the programme should be refocused? If so, what would that level be?

Yvette Cooper

As we bring down youth unemployment, it will be right to help other groups if the resources are then available. Other groups will need different kinds of help, so a new deal for the over-50s would be differently shaped. We must not, however, be complacent or suppose that, because we have got youth unemployment down, we have solved the problem. The group of people who will be left among the unemployed young will be the most difficult to help. The fact that so many people in my area are entirely without qualifications is very worrying.

We talked to those people in focus groups about what they wanted, and they said that they just wanted jobs—they did not want education and training. That shows the need to change attitudes, to help those people to see that education and training will help their long-term prospects, not just their immediate chances of earning.

Conservative Members asked whether supporting a job subsidy was incompatible with arguing that the reason for introducing a minimum wage is to get rid of unfocused employment subsidies through family credit. There is a big difference between top-up benefits and the minimum wage. With top-up payments, in effect, we subsidise the worst employers, allowing them to keep on cutting wages to £3, £2.50, £2 and £1.50 an hour; they know that the state will just top it up. That subsidy could go on indefinitely. It is unfocused and it does not target the people we want to help.

If we have a minimum wage, we stop subsidising bad employers and such exploitation, and we positively subsidise the group of people whom we want to help. Conservative Members mentioned that effective subsidies are those that are targeted. We target the subsidy. We know exactly how much it costs and we focus it on the people whom we want to help to get jobs, who we know would not get them otherwise.

This has been a positive debate. I welcome other hon. Members' contributions on the new deal in their constituencies. In my constituency, too, a strong partnership has developed. People there believe strongly in opportunities for young people, for lone parents and for the long-term unemployed. I hope that we shall be able to focus in particular on the education and training element in the new deal, because that is the most powerful way in which to tackle long-term inequality, long-term unfairness and long-term unemployment.

I congratulate the many members of my local Employment Service who have been putting together the positive new deal. A commentator said two days ago that there was a danger that the Government would make welfare to work the cornerstone of their programme for the next five years. Frankly, I hope that it is the cornerstone, because the programme is the most important thing that we could introduce.

2.21 pm

Mr. Andrew Smith

With the leave of the House, I should like to reply to the debate, which has been interesting and well informed. In the nine minutes remaining, I shall do my best to do justice to the high calibre of the contributions.

I think that everyone has recognised that, when we address welfare to work, we confront an enormous challenge of tremendous significance for the future of our whole society. Our welfare-to-work policy tackles social exclusion and aims to ensure that we bring employment, training and benefits to people in the right way, so that they have the standard and quality of life that we want in a civilised society, and so that they can contribute as full members of that society, which is obviously good both for them and for the character of the whole community.

I should like to pick up on a point raised by several hon. Members, including my right hon. Friend the Member for Bishop Auckland (Mr. Foster), my hon. Friends the Members for Wentworth (Mr. Healey) and for Edmonton (Mr. Love), and the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). They called for flexibility and asked the Government to learn from the experience of the programme as it develops. I pledge that the Government will do just that. We shall listen to hon. Members on both sides of the House, just as we shall listen to people from all parts of the community, because it is important that we get this right. We need to draw on the wealth of experience, innovation and ideas, to change the way in which welfare works for good, and to change it for the better.

An important feature of the new deal is the decentralisation that we have introduced, drawing in ideas from local partnerships. The hon. Member for Altrincham and Sale, West (Mr. Brady) could not be more wrong in claiming that we were somehow picking examples from here and there and banging them down indiscriminately throughout the country. I appreciated his contorted effort to portray the new deal as centralist and as showing the dead hand of old-style socialism. I could not recognise the description and, judging by the faces of his hon. Friends, I do not think that they could, either. The welfare-to-work programme is innovative and flexible. It draws on the strengths of each local community in responding to the particular needs of each local community.

I shall address as many as I can of the issues and questions that have been raised, including those raised by the right hon. Member for Charnwood (Mr. Dorrell). The priority that has been given to the young unemployed has been questioned. Like so many of my hon. Friends—my hon. Friends the Members for Liverpool, Riverside (Mrs. Ellman) and for Pontefract and Castleford (Yvette Cooper) and others—I make no apology for the priority that we are giving to the needs of the young unemployed.

Anyone who knows the situation in the inner cities, on the estates and in pockets of deprivation in suburban and rural areas, knows that record youth unemployment under the previous Government blighted the lives of millions, inflicted incalculable damage on the fabric of society and saw an explosion of drug abuse and crime. Anyone who knows those areas is aware that something has to be done to ensure that nothing like it happens again.

As for there being "only" 120,000 young unemployed people now, that means that 120,000 young people face drifting on, month after month, towards long-term unemployment.

Mr. Dorrell

Will the right hon. Gentleman give way?

Mr. Smith

I am sorry, but I have so much to cover in a short time that I cannot give way.

For each one of those young people, his or her unemployment is 100 per cent. For every month that goes by, there are another 15,000 people passing the threshold of six months' unemployment. Surely it is right that we take every action we can to enhance their employability, to provide them with work experience and to equip them with skills so that they can get, and stay in, jobs.

Mr. Dorrell

I am very grateful to the Minister for giving way.

The right hon. Gentleman has just said that the long-term young unemployed face a lifetime of unemployment. I agree that dealing with the problem is an important priority, but we must deal with facts, not illusions. Does he accept that, in his evidence to the Select Committee, Jon Stern said: The probability that someone aged under 25 and unemployed over 6 months in April 1996 would have left unemployment by April 1997 was 82 per cent."? It is simply not true to say that, once past the six-month barrier, those people face a lifetime of unemployment. Within one year, they have an 82 per cent. chance of employment. Let us deal with facts—that is not to belittle the problem.

Mr. Smith

I want to deal with facts: what about the other 18 per cent? That is precisely the group on which we need to focus to ensure that those people get jobs. The right hon. Gentleman's argument is like claiming that just because 95 per cent. of people are not damaged in road accidents, it is not a priority to deal with the remaining 5 per cent. We must focus attention on those who most need it, and the new deal is designed to do precisely that. That is one reason why an early priority for gateway will be to get those who are close to job readiness immediately into unsubsidised employment. That also answers the point about deadweight that the right hon. Gentleman and a number of other Conservative Members raised.

The right hon. Gentleman asked about the danger of a subsidy giving a perverse incentive to recruit the young unemployed. The subsidy provides a more level playing field for a group that has historically fared badly in the labour market. It is an incentive for employers to consider what those young people have to offer when they have had the benefit of basic skills training, help to become motivated and assistance to get them to the right position to be able to take on a job—that is what the gateway and the new deal will provide.

It has been claimed that the previous Government cut youth unemployment and somehow delivered Labour's promise in advance. Which Government increased youth unemployment by 400,000? None of the Conservative Members acknowledged that, still less apologised for it, as they should.

I echo the praise of many of my hon. Friends for what has been accomplished by the Employment Service. I place on record my appreciation of the work that is being done to prepare personal advisers for their role in the new deal, which will be particularly important. We can all see how critical that first interview will be for young people early in January, when they will realise that this programme is on their side and that it offers them the opportunity of gaining the skills and chances that have so far passed them by. We wish those personal advisers every good fortune in the important work that they will undertake.

I shall answer the important point made by my hon. Friend the Member for Croydon, North (Mr. Wicks) when he drew attention to the particular need for employment opportunities for disabled people and those with learning difficulties. He recounted the moving experience of his constituent with Down's syndrome. I, too, have seen the remarkable transformation that can be accomplished by such support and job coaching—by, with and on behalf of people who have often been written out of the script of employment. The £195 million that the Chancellor allocated in the Budget for the new deal for disabled people and those suffering long-term sickness will bring about more projects to pilot innovative work on access, dedicated training and job coaching, to help many more such people into work.

The hon. Member for Beckenham (Mrs. Lait) asked whether normal terms and conditions would operate for those employed under the programme. That is one of our precise objectives for people taken on under the employment option. Yes, there will be the subsidy and the £750 training grant, but those people will also be taken on as ordinary employees. The expectation is that they will be taken on at the normal rate for the job.

It being half-past Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.