14 May 2007

New Deal's Woeful Failure

New DealGordon Brown's flagship New Deal scheme to help young unemployed people is a "woeful" failure and not adapting to fit the needs of participants or the current labour market, according to former Labour welfare reform minister Frank Field in a report for the think tank Reform.

What he says is, of course, not new. Other reports, such as last month's by The Prince's Trust, have noted that twice as many 16 to 24-year-olds are classified as not in education, employment or training (NEET) as are unemployed.

What is new is that a former Labour minister, albeit one who has been a long-standing critic of the Chancellor, now accepts that this is the case. Noting that, despite £3.5bn in funding, there are now 70,000 more 18 to 24-year-olds out of work than when the New Deal scheme began in 1998, Mr Field says, "The results show that even if the money was available, which it isn't, more of the same won't work and will be a betrayal of young unemployed people."  Just last week the National Association of Head Teachers criticised the Government's obsession with targets and testing, saying that schools are producing an "army of the unemployable" with tens of thousands of teenagers quitting education without any qualifications.

Mr Field echoes criticism made by the Conservatives, who have long claimed that many of the young people helped into employment by the New Deal would have found jobs anyway. He also adopts the suggestion made by Conservatives that time limits should be set for recipients of benefits — a policy that has proved successful in encouraging people back into work in America. In 1994, a record 5.1 million families were on American welfare. However, as a result of the Personal Responsibility and Work Opportunity Reconciliation Act introduced by President Clinton in 1996, today just 1.9 million families get cash benefits—and in a third of those only the children qualify for aid. Overall, child poverty has been reduced by over 1.6 million, with unprecedented declines in poverty occurring among children of single mothers and the greatest decrease happening among black children. Whereas in Britain people on benefit frequently discover they will lose out financially if they seek employment, in America people who return to work are the ones who get help with child care, job training, and transportation.

The new American system has not been without its problems, but there is clearly a lot we could learn if we are to transform our own bloated state dependency and answer fundamental questions about how to guarantee the stability and security upon which the economy and well-being depend, such as:


Ed said...

5.1 million on welfare in the US?! If only we could get down to that figure !

John, The Difference said...

Ed, it does sound rather amazing, doesn't it! However, although these figures accurately reflect the millions who have been moved from welfare into work, they only represent the number of families receiving cash benefits. The total number receiving government services for the poor (such as Medicaid, food stamps and disability benefits) has in fact risen from 39 million in 1996 to 44 million (or one in six of the population), so many of the newly employed have presumably only been able to secure low-paying jobs. Nevertheless, even without allowing for the fact that they don't have the NHS, this is still significantly less than the one in three in Britain (including 69% of pensioners) who have become dependent on the state for at least half their income!

Ruth said...

But if people have been paying in to a state pension all their lives they're supposed to be able to depend on the state. Pensioners shouldn't be counted as part of these statistics.

John, The Difference said...

Ah, but Ruth, they shouldn't be made to grovel with cap in hand. The issue with pensioner poverty is that almost two in three are now caught by the welter of means-tested benefits that Gordon Brown has introduced so inexorably.

Worryingly, the proportion of pensioners entitled to but not claiming said benefits has also soared, with more than £3½ billion of income-related benefits going unclaimed each year. So, while pensioners have lost more than a third of the increase in their basic state pension since 1997 through disproportionate increases in council tax, 45% of those entitled to Council Tax Benefit are missing out. Of still greater concern is the fact that two thirds of the non-claiming pensioners eligible for the main means-tested benefits are among the poorest 20%.

Means-testing is demeaning, discourages saving, and leaves many of the most needy even worse off - which is why Conservatives have repeatedly talked about increasing the basic state pension to match the value of the means-tested benefit.

Ruth said...

So if the Conservatives raise the basic pension there will be more people getting at least half their income from the state than under the current Labour arrangements. You can't win both while misusing the statistics like that, which was my original point. Pensioners receiving income from the state isn't part of the problem.

MikeC said...

Hundreds of thousands used to save for their futures by way of contributing to their pension scheme, but, at a
stroke Gordon Brown wiped out their private pensions, forcing them
into unnecessary dependence on the state.

However, I'm also not trying to say that private pension funds are the only and best way to plan for one's future. A strong family network, (not simply the modern nuclear but more of an extended family), will likely provide a more relational, stable, and loving environment, than any by way of service provision in exchange for cold hard cash.