1. The United Kingdom is experiencing historically high levels of employment. In 2007, the employment rate of 74.4% was one of the highest rates amongst comparable industrialised countries. Nevertheless, many people still suffer the social and economic costs of worklessness. In spring 2007, over 4.3 million people of working-age and 1.79 million children were living in workless households.[2] A workless household is a household that includes at least one person of working age, where no one in the household aged 16 or over is in employment. The National Audit Office estimates that workless households cost at least £12.7 billion a year in welfare benefits.[3]

2. The Government's aspiration is to raise the employment level to 80%. Since 1997, employment rates have increased for every disadvantaged group targeted through the Department's New Deal employment support programmes with the exception of the lowest skilled. The employment rate for lone parents, for example, increased from 45% in 1993 to 57% in 2006. Worklessness has not yet reached the point where it cannot be reduced further.[4]

3. There is evidence that New Deal programmes are becoming less successful at helping clients into work. Job entry rates for the New Deal for Lone Parents, New Deal 25 Plus and the New Deal for Young People have been declining or stable for some years. One possible factor is that the composition of the client group has been altered by both the initial success of the programmes and the high overall employment rate. As people with relatively few barriers to work move into employment, those remaining on benefits and within the New Deal client group face greater barriers and are therefore harder to help into work. The Department does not know how many of the 2.9 million people who had started a New Deal programme are still participating in it, and hence it is not possible to estimate accurately the size of the 'hardest-to-help' group.[5]

4. Reducing worklessness can be difficult if there is a perception that some parts of the country do not have an adequate demand for workers. There are jobs available in all parts of the country for people who want to work, with all Jobcentre Plus offices reporting some vacancies. Figure 1 shows vacancies notified to Jobcentre Plus in each Local Authority District. As at February 2007, Jobcentre Plus was advertising approximately half of the 620,000 vacancies that the Office for National Statistics estimated were available in the United Kingdom. The estimated number of vacancies equates to some 37% of the numbers of people who were unemployed.[6] The Department for Work and Pensions believed that the current influx of migrant workers was not hindering efforts to raise employment levels because unemployment has continued to fall and more people were continuing to be in work.[7]

Figure 1: Total vacancies notified to Jobcentre plus between October 2006 and September 2007 per 10,000 of the working age population by Local authority District[8]

5. Households where none of the adult members are looking for work (the economically inactive) now account for four out of five workless households. While employment levels have risen, there has been much less success in reducing the proportion of workless people who are economically inactive.[9] Economically inactive people may be unable to work because of a medical condition or caring responsibilities but many of these people would like to work given the right support and encouragement. Spending on employment programmes to date has focused on clients in receipt of Jobseeker's Allowance. Achieving the aspiration of 80% employment will require much greater focus on and outreach towards people who are economically inactive. The Department estimates that around one-fifth of the 7.97 million people who are currently economically inactive would need to move into work in order to reach the 80% employment level. The population of economically inactive people has diverse needs and associated costs. The Freud Review of Welfare to Work programmes[10] noted that the Department needs a better understanding of the full costs and benefits of moving different groups of individuals into work, so as to assess whether the current balance of spending on programmes and different client groups is optimal. The Department is continuing to implement the Freud Review recommendations.[11]

6. Only two of the New Deal programmes examined in the National Audit Office report — New Deal 50 Plus and New Deal for Disabled People—show a positive fiscal benefit per participant in the programme (Figure 2). A positive fiscal benefit arises where the cost of the programme is less than the direct benefits to the Exchequer over one year of the participant gaining employment. These benefits include increased tax receipts and reduced benefits payments, less any in-work payments such as Tax Credits. Net benefit calculations do not, however, reflect the different structure and client groups of each programme, nor the indirect benefits such as the impact of higher employment on health and crime. Some New Deal programmes represent better value for money than others, and the Department has commissioned an extensive range of evaluations to assist it in understanding the direct and indirect costs and benefits of many of the schemes.[12]

Figure 2: Programme performance in 2005-06

Programme	Jobs		Costs (excluding administrative)		New benefit (cost) to Exchequer per participant1
	Job entry rate (%)2	Additional jobs3	Cost per job4	Cost per additional job5
New Deal for Lone Parents	43	15,684	£330	£1,960	(£40)
New Deal for Partners6	48	61	£470	£15,760	(£1,100)
New Deal 25 Plus	28	10,324	£2,850	£9,840	(£360)
New Deal for Young People	33	17,457	£2,170	£9,710	(£390)
New Deal 50 Plus	31	2,263	£100	£870	£50
New Deal for Disabled People	48	11,064	£2,230	£6,370	£1,260
Source: Department for Work and Pensions data
Notes: 1 Net Benefit/cost to the Exchequer is the difference between the cost per participant, and the benefits that will flow back to the Exchequer in benefits saved, and increased tax revenue, less the cost of increased Tax Credits payable to people who move into work. These are calculated based on the best evidence available on the average duration of jobs gained under programmes and average entry wages. Where this evidence is not reliable, duration of one year and minimum wage entry are assumed. 2 Job Entry Rate is the number of job entries divided by the total number of participants in the year. 3 Additional jobs is an estimate based on evaluations conducted of each programme. 4 Cost per job is the total cost of the programme for the full year, divided by the total number of job outcomes 5 Cost per additional job is the total cost of the programme for the full year divided by the estimated number of additional jobs. Programme Costs exclude administrative costs such as staff costs, office costs and computing. 6 Data for New Deal for Partners is based on relatively weak evidence on additional jobs and includes a relatively high proportion of administrative costs because of the low number of participants

Source: National Audit Office analysis of data from the Department for Work and Pensions

7. The New Deal for Partners shows the largest net cost to the Exchequer. This voluntary programme is aimed at the dependant partners of benefits claimants. Only 3% of the partners who were identified as candidates chose to participate in the programme (Figure 3), and evaluations suggest that only 61 of the jobs gained by programme participants were additional to those that would have been gained without the programme. The low net benefit to the Exchequer (Figure 2) results from the low participation rate and the assumption that if a partner found work, the primary benefits claimant remained on benefit, generating almost no saving to the Exchequer.

Figure 3: Only 3% of candidates identified go on the New Deal for Partners programme

Identified as candidates for work-focused interviews          Under half are booked for interview after contact is made          Around 1 in 3 attend interviews          1 in 5 refuse all assistance          Around 3 per cent go on the programme
	Percentage of those identifies as condidates

Source: National Audit Office analysis of Jobcentre Plus data

8. The Government is gradually extending both the support it offers to workless households and the number of clients whom it expects to seek work actively. For example, the Green Paper In work, better of' proposed a more flexible New Deal and a new social contract with lone parents which anticipated an eventual move into the labour market in return for the necessary personalised support.[13] As part of the agenda to increase rights and responsibilities, Jobcentre Plus has been increasing the number of lone parents who are invited for a work-focused interview. The Department does not know the proportion of workless people who choose not to work rather than being out of work because of personal circumstances.

3   C&AG's Report, para 1 Back

4   Qq 28, 32, 77; C&AG's Report, para 1.1 Back

5   Qq 1, 11, 22, 23, 26; C&AG's Report, para 5.10 Back

6   This estimate uses the International Labour Organisation definition of unemployment, where 'unemployed' is defined as someone who wants to work, is available to start work and is actively seeking employment Back

7   Qq. 31, 33-36, 41-42; Local labour market analysis supplement to C&AG's report on Sustainable Employment Back

8   Vacancies notified to JobCentre Plus represent only a proportion of the total number of vacancies in the economy. Back

9   Economically inactive people are not working, not looking for work and/or not available for work Back

10   Freud, D., Reducing dependency, increasing opportunity: A report to the Department for Work and Pensions, 2007 Back

11   Qq 3, 27, 91, 94; C&AG's Report, paras 1.9, 5.11-5.12 Back

12   Qq 2, 10, 12-14, 24, 37-38, 70-76, 82, 85; C&AG's Report, paras 5.2-5.4 Back

13   Green Paper, In Work, better off: next steps to full employment, 2007 Back