Finance Committee

Meeting date: Wednesday, March 13, 2013

Official Report 687KB pdf

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Employability

Item 3 is to take evidence from the Cabinet Secretary for Finance, Employment and Sustainable Growth on the committee’s report on improving employability, which was published on 3 December last year. The cabinet secretary is accompanied by Julie Ann Bilotti and Martin McDermott from the Scottish Government’s employability and skills division. I welcome the cabinet secretary again, and his officials.

As a reminder, the remit of the inquiry on improving employability was:

“to explore the need to improve the employability of individuals experiencing high levels of multiple deprivation as a prerequisite to increasing sustainable economic growth.”

A plenary debate was held on the subject on 8 January this year. I invite the cabinet secretary to make an opening statement.

I have given the committee a response in the chamber and also a written response, so I am happy to answer questions based on those contributions.

The cabinet secretary wrote to me on 18 February, and colleagues will have copies of his detailed responses to the questions that were put to him. Of course, when someone responds to questions, that often generates further questions. I am sure that colleagues around the table will have plenty of those and I certainly have a few of my own. In the usual way, I will start with some questions before opening the session to colleagues around the table.

My first question relates to your response about the employment recruitment incentive. That consists of £1.5 million over three years to support 1,000 disadvantaged young people, including care leavers, carers and ex-offenders, by providing an incentive of £1,500 per individual to encourage employers to assist and support the transition of young people from those backgrounds into sustainable employment. Could you explain how that will work and provide some background? Will the payment be a one-off payment for four or six weeks of support, or will it provide on-going support?

We will work with employers to ensure that we put in place resources that enable them to sustain the recruitment, employment and training of individuals. I envisage that the payments will not be one-off but will be dependent on performance as we proceed through the deployment of the initiative. We must be sure that the initiative delivers the outcome that we seek, so the funding is conditional on performance, and Skills Development Scotland will work closely with individual companies to progress that.

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I note from the Scottish Government’s response that £3 million has been allocated to the

“Third Sector Challenge Fund to provide additional pre-employment support to 1,754 young people.”

Three million pounds is a fairly round sum of money, but 1,754 is a fairly precise number of young people. How did you arrive at that figure?

That figure will have been driven by a calculation of the expected per capita cost of support within the £3 million budget. The contract value is actually £3,200,276, so the figure is not quite as rounded as we have suggested in our response; it is slightly more. We will look at the cost of the programme and the number of individuals who can be assisted.

In preparing such programmes, do you look at how much money is available and fit the number of young people you can help into that, or do you look at the number of young people you want to help and see what resources are available? How does the process work?

It is driven by a policy desire to take a particular course of action—on this occasion, to ensure that we have in place support that is targeted at the social enterprise and third sector communities. A sum of money—in this case £3 million—is allocated at the strategic level, and we work out a reasonable cost for reimbursing organisations for taking on an individual under that particular initiative. Organisations will bid for the funds and, once we see those bids, we will make an assumption about whether the amount will be exactly £3 million on the button, or £3,200,276 as it is in this case. The figure is driven by the bids that we have received from organisations.

When you are seeking to put together such a fund, how do you assess potential demand? How do you know that there might be demand from 1,700 or 1,800 people, as your response indicates? There could be demand from 5,000 people. How do you address that aspect?

I concede that some of our judgments will be based on the resources that are available. When we allocate resources from the substantial numbers into individual programmes, and we end up with approximately £3 million for a fund of this type, I am afraid that the test of affordability must be the determinant, but we will try to maximise the effectiveness of that resource as far we can.

We formulate the relevant interventions that we can make by examining the current composition of the labour market and looking at particular challenges. In the latter part of 2011, the Government recognised that we had a significant youth unemployment problem that required specific action. We deployed a set of different interventions to address that through a specific policy approach, and we are now beginning to see a better position in that regard. Youth unemployment is still far too high, but it is not as high as it was in December 2011. We are beginning to see the fruits of some of that activity to try to reduce the level of youth unemployment.

In the evidence that the committee took, there was a lot of concern about where responsibilities lie between the UK Government, local government and the Scottish Government. I was pleased to read of your chairing the first meeting of the reconstituted Scottish employability forum on 31 January. The forum will have a rotating chair between the Convention of Scottish Local Authorities, the Secretary of State for Scotland and you. How do you envisage the forum working to deliver joined-up support for people who require employability support?

The concern that the committee has expressed about the need for there to be consistency and complementarity between the different approaches of different spheres of government is at the heart of why we have the Scottish employability forum. The secretary of state, COSLA and I all accept that there is the potential for overlap, duplication and a lack of consistency, as the committee has suggested. The Scottish employability forum is designed to be a response to that.

At the first meeting of the forum, we heard a pretty challenging presentation from Professor Alan McGregor, with whom many of you will be familiar from the training and employment research unit at the University of Glasgow. On behalf of the employability forum, Professor McGregor leads a delivery group that is tackling that issue. Professor McGregor’s presentation was as robust as anyone who has heard him speak before would expect it to have been. As a consequence of that, we agreed that the delivery group that Professor McGregor leads would go off and tackle particular areas of potential overlap and lack of consistency and return to the employability forum with a strong mandate for us to tackle the issues and to make progress. From that discussion I got a very strong sense that, notwithstanding the different responsibilities that exist in different parts of government, there is a joint willingness to tackle that question.

We will try to keep focused, despite the volume of the responses from the young people in the crèche next door—I hope that they are not responses to our deliberations.

You have said, as previously noted, that the employability fund will be open to all unemployed people of working age who have not yet been mandated to the work programme. How many people are likely to be assisted by the fund and how will it work in practice?

In 2013-14, we expect the fund to deliver just over 17,000 individual training opportunities, which will be in addition to the commitment to 25,000 modern apprenticeships. The fund will focus significantly on young people, but we recognise the need to support adults who have been unemployed for up to 12 months. There will be a lot of joint working with the college sector, and the procurement process started back in December on behalf of Skills Development Scotland. We will pursue that in the course of the financial year to come.

Paul Wheelhouse and Elaine Murray, who were members of the committee when we did a lot of the work on this, took a particular interest in the rural aspect of employability. In the Government response, there is talk of a bus for jobs scheme. We are told that the scheme

“covered about 70% of all bus routes in Great Britain. We understand the scheme could be extended if there is good feedback.”

Can you tell us a wee bit more about that? Where are the 30 per cent of bus routes that were excluded? How is the scheme going to work to help employability?

I would have to get back to the committee on the question about the 30 per cent of bus routes—I do not think that I could answer that today. We touched on the wider question of rural support in the debate in January. It is important that we have in place an offering that is relevant to every part of the country.

When I was in Fort William recently for discussions with local players in the field of employment and employability, I was struck by what they said about the demographic profile of their area. There is a tendency for many young people to leave that locality to go to further and higher education opportunities outwith the immediate labour market, although the local West Highland College is trying to reverse that trend through work with the University of the Highlands and Islands. The demographic profile of the locality therefore suggests that more adults require support beyond what is being provided. Part of our approach on the employability fund is to recognise that we must deal with different demographic profiles in different parts of the country with regard to who requires support to gain access to employment. That aspect will be reflected in the roll-out of the employability fund.

Evaluation is an issue that came up in the report. In the Scottish Government’s response to the report, you give some detail on the strategic logic model, which

“will inform each evaluation of individual employment and skills initiatives”.

Your response gives some information on the model, but can you talk us through it a bit just for the record?

Essentially, the strategic logic model has been designed to take into account the guidance on the evaluation of programmes that HM Treasury produced. At the project and programme level, the model will explore the effectiveness of the range of different interventions that we provide to support individuals into employment. The model will focus on measuring progress towards the objectives that we set for Skills Development Scotland and will explore the extent to which our approach at policy level supports the achievement of outcomes in the national performance framework, in which the committee has taken a strong interest.

The approach will also aim to draw on a range of information sources that can test whether the model is delivering the results that we could have expected, and it will highlight any gaps in our knowledge and understanding of the marketplace as a consequence. It is therefore designed to look at the whole through-flow from the setting of the national performance framework and what we want to achieve as a country, to how that progresses into the design of the strategy for Skills Development Scotland and the whole area of employability, and how that translates into programmes; it will then work its way back through that to determine whether the programmes are fulfilling the Government’s strategic objectives.

In our evidence sessions, but particularly in the workshops that we held when we went to Dundee, Dumfries and Ardrossan, in my constituency, we heard a lot of concerns that local authorities and the national health service were not taking on their share of apprentices and young people in other areas. In the Government’s response to the report, you say:

“We have asked all Scottish Government public bodies to submit youth employment plans which set out exactly what they will do in this regard ... on 23 January the Chief Executive of NHS Scotland, Derek Feeley, wrote to each NHS Scotland Board asking them to report by 28 March on activity to improve employability during”

the current year and in 2013-14. Will you be able to provide the committee with details of that following 28 March and details of what local authorities are doing in the area as well?

I will be delighted to provide information to the committee on what is undertaken directly on the Government’s behalf and by public bodies at the Government’s behest. That message has been strongly communicated by the Minister for Youth Employment, the permanent secretary and me, and the Government reported to the committee on that.

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I would prefer it if the committee sought information on what local authorities are doing on the issue from local government directly, because I think that that would be a more appropriate channel. Clearly, we discuss the priorities with local government, but I try to avoid requiring local government to report to me on them. However, I think that it is entirely legitimate for the committee to ask that question of local government.

I have a final question before opening it out to colleagues. In relation to “Working for Growth: A refresh of The Employability Framework for Scotland”, you state in your response to our report:

“Employers are ... helping to inform the shape of the new Employer Recruitment Incentive”.

I asked you initially about the statement in your response to our report that the Government will provide £1.5 million over three years

“to support 1,000 disadvantaged young people”.

Do you have any further information on the recruitment incentive that you can convey to us?

The employer recruitment incentive will support the creation of up to 10,000 job opportunities for young people in small and medium-sized enterprises. We will contribute £15 million of funding to that and £10 million will come from the European social fund. The incentive will provide a 50 per cent wage subsidy over a six-month period. The incentive is primarily aimed at helping young people between 16 and 24 who have been unemployed for up to six months. It will try to help the SME sector directly to contribute towards economic recovery as a consequence of businesses expanding their staff teams.

The work on the incentive is far advanced. I imagine that funding decisions on particular commitments will be taken in the early part of the financial year, so the incentive is well on the way to being deployed.

Thank you. I open it up to questions from members, and the first to ask one is Gavin Brown.

Just to follow up on your final question, convener, the Government’s response paper says that the employment recruitment incentive

“will go live in April.”

Is that still the timescale?

Yes.

I am going on memory here, but I think that in your initial budget speech back in September you said that there would be money from the Scottish Government that would be match funded by European money and what I think you described as business investment or contributions—I forget the exact wording.

It is what I just expressed to the committee, which is that there will be £15 million from the Scottish Government and £10 million from the European social fund, which is not quite a matching amount. That funding will offer a 50 per cent wage subsidy for a six-month period. Clearly, the other 50 per cent would have to come from the businesses. In essence, therefore, the public purse will meet 50 per cent of the costs of an individual’s wages for six months.

Another issue that we looked at is the funding of the third sector. We discussed that in quite a bit of detail during the debate on that subject. As other committee members will have done, I certainly saw a lot of evidence from the third sector that stated that providers are not getting three-year funding as the norm and that, in many cases, they were still getting single-year funding, which is an issue that various political parties and Governments, including your own, have tried to do something about. The committee made a suggestion, which is not necessarily correct, on what we could do about that, but you have not indicated that you will take that forward. However, is the Government minded to do something additional to try to help with that?

As I have indicated to Mr Brown in correspondence, I am happy to take forward a discussion about how we can create the conditions in which there is a greater propensity to deploy three-year funding for third sector projects. The Government’s commitment on the question has been clearly expressed. There is a joint agreement, which Mr Brown has cited in debate and which I will cite again. The joint statement on the relationship at local level between government and the third sector states:

“As a general rule funders will aim to take a 3-year approach to both grant and contract funding.”

There will be certain circumstances in which that is just not possible, but I do not think that members are arguing that it should be possible in absolutely every case. However, I recognise that members are arguing that it should be more prevalent than it is. I am certainly happy to explore with members how best we can deploy that. We could do that in a range of different ways, up to and including making funding conditional on three-year deals being in place. That is at the draconian end of the spectrum. However, we need to make a number of interventions to go beyond exhortation and into implementation.

There was quite a lot of publicity around the case of a young graduate on one of the work programmes in England who was asked to work for nothing in a store. Has that topic been discussed with the Secretary of State for Scotland in the employability forum? Is working for nothing for a couple of weeks part of any of the employability programmes that we are developing?

That subject has not been discussed with the secretary of state, nor was it discussed at the Scottish employability forum. I think that the forum probably met before the court case to which you refer crystallised, if memory serves me right—I am pretty sure that it did.

An interesting point arises from Jean Urquhart’s question as to whether we think that all interventions are as effective as they could be. I do not say that to have a go at anybody else. Other people might think that some of our interventions are not particularly good. It will be interesting to see how the employability forum progresses in discussing what works and is of benefit to individuals in helping them to make the journey from unemployment into employment and stable support. We should be prepared to have that discussion. We need to challenge some interventions to determine whether they are of any value. I am referring not just to the example that Jean Urquhart cited but to schemes and initiatives that we may preside over.

A lot of employers across Scotland take secondary school pupils for work experience, which is quite a different thing.

In my capacity as convener of another parliamentary committee, I hear regularly—and quite rightly—concerns being expressed across the board about the new welfare reforms and the drive by the Department for Work and Pensions to do things online. Those who are the most disadvantaged and are the least likely to be able to use online mechanisms are the people who need support and assistance the most. However, when we look at the issue of career development and skills, we hear the similar argument from some teachers and users, and even some people in SDS, that the people who are in most need of support and the least likely to be able to cope with online technology as a means of gaining that support will have to use the my world of work website.

Will you explain why, although the Scottish Government—among others—thinks that those who are most disadvantaged should not be forced to use online technology as a result of welfare reform, it is confident about those who are most deprived and disadvantaged relying on that technology for my world of work?

That accusation would be fair if the only way in which people could access information about employment was through visiting the my world of work website, but that is not the case. I have seen the my world of work system, which is absolutely magnificent. It is there to give young people—most of whom are technologically capable and very interested in technology and in interacting through the technology that is available—the opportunity to find information that suits them about the choices that they will make about their future careers. However, that is not the only show in town.

Part of the purpose of my world of work is to rebalance the way in which advice is available. Those who find the system difficult, who cannot access it and who need a bit more support to determine the best way to secure their interests in the long term can have face-to-face contact with careers advisers. That remains an essential part of the careers advice system that is in place.

People are encouraged to use my world of work as a technology interaction. That system is excellent, but the capability remains for people to engage in face-to-face discussion with careers advisers to obtain the necessary support. That is entirely appropriate.

The committee made recommendations in relation to one-to-one support and the development of more work support and work coaching. What timescales do you envisage for expanding that direct contact?

We have emphasised the idea of work coaching, which Mr McMahon highlights. The young people who left school in December 2011 and May 2012 and who require face-to-face contact have been given the offer to pair up with work coaches—that was done by January 2013—to ensure that such support is available to those who require it.

I was expecting you to give us more information. Do you want to take the opportunity to add anything?

I have given the detail that I have to share with the committee now.

Okay—thanks.

I was not on the committee when it did the inquiry, so I am not as well informed as my colleagues are. I was struck and impressed by the report, because it is focused. It highlights the needs of those who are most disadvantaged and furthest from the labour market. During the debate on the report, I observed that your framework document addressed that issue, just as the previous document did seven years ago. However, the evidence—such as we have—is that there has not really been a step change in the support available for those who are most disadvantaged in the labour market. To what extent did you have to change the policy focus in the recent document? Has there really been a shift in the Government’s focus or will there be continuity and business as usual, although we know that the policies have not really been successful?

In an ideal world, I would take the view that the focus on providing assistance for those who are furthest removed from the labour market had a beneficial effect. We saw that translated into the labour market statistics in the period from around 2006 to 2008, when there was a marked improvement in the labour market position. There was then a financial crash, which created economic dislocation. It would be nice if such things did not happen to interrupt the good, sustained work that we do to tackle these problems but, unfortunately, they do happen and they create economic dislocation of that type.

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The committee highlighted in some of its discussions on this question that that creates another factor with which we have to wrestle within the labour market. There is economic shock and rising unemployment, and some of those who have found it most difficult to get into employment or who have found it most difficult to access the labour market will probably have those challenges reinforced as a consequence of economic dislocation.

That means that we must be extremely focused in the services that we provide to those individuals. In the parliamentary debate, I was not trying to suggest for a moment that our system and approach are perfect. We are on a journey to make our employability approach much more cohesive and much more targeted on those who require the most support. That remains at the centre of the Government’s perspective on the issue.

It is good to hear that. It is tempting to focus on those people whom it is easier to get into work, as that helps to meet targets, costs less and so on. What are the two most significant shifts that you have made to refocus your approach more on the most disadvantaged people? What two or three things will really make the difference that we have not yet seen to any great extent?

Before I answer that question, I will address the suggestion that concentrating policy on those who are closest to the labour market costs less. I do not take that view at all. In the long run, if we concentrate on the people who are close to the labour market and ignore or do not do enough for those who are most disadvantaged and hardest to get into the labour market, the cost of that to the public purse will be horrific. We will get into an entrenched spiral of social problems arising from that economic inactivity and, as a society, we cannot afford to allow that to happen.

I will try to identify some of the actions that we have taken that have focused things the most. The first of those has been the suite of youth employment initiatives that we have taken. I go back to my earlier answer to the convener. We had an acute problem of youth unemployment, which resulted in the decision to appoint Angela Constance as the Minister for Youth Employment and to focus more sharply on avoiding another generation being lost to employment. The labour market statistics show that that is beginning to deliver a very strong impact on the utilisation of young people in economic activity. That is one area in which we have made an impact.

Secondly, the move to the employability fund and the emphasis on the role of the third sector are designed to reach some of the hardest-to-reach individuals. I have made no secret of my view that the third sector is often capable of reaching some of the most disadvantaged individuals in our society much more effectively than the public sector can through the approaches that we take. I am keen to ensure that we sustain the third sector’s involvement. That goes to the nub of Gavin Brown’s point about the sustainability of funding in those channels.

I certainly agree about the role of the third sector. In the debate, I mentioned Barnardo’s works, which is in my constituency. Perhaps I should know this, but what additional funding is available for third sector employability projects?

That is reflected in a range of opportunities through the employability fund. Increasingly, the wider third sector interventions that the Government is making, for example, in the strengthening of social enterprises through the enterprise growth fund and the just enterprise fund, are designed to do exactly that. All those measures are focused on strengthening the third sector to make a greater contribution.

A number of third sector organisations are involved in the delivery of the UK Government’s work programme. I think that it would have been beneficial if those organisations had been more directly involved in the programme than they are in acting on behalf of the providers, because that would have resulted in a more efficient and joined-up approach.

We also have community jobs Scotland, a Scottish Government programme that has helped the third sector in that respect.

I accept what you say about the cost in the long run of not doing the work that we are talking about. To go back to the Barnardo’s works programme, I made some points in the debate about how that keeps people on board for a longer time and offers more intensive support. In the short run, it is probably costing more than some other programmes. The other point is that the programme takes quite a lot of people who are in their 20s. The committee accepts the importance of the late teens age group, but the increasing focus on that group is another concern that was raised in the report—there is a worry that many people in their 20s are also in that kind of situation.

I would not want my comments to be misinterpreted. I quite accept that finding solutions for those who are furthest from the labour market will be more expensive but, if we do not tackle that in the short term, addressing the entrenched social problems that will arise as a consequence will be even more expensive.

Since the latter part of 2011, the Government has had a relentless focus on the youth employment position and we are now beginning to achieve significant progress. As a consequence, the approach that we have taken on the employability fund has started to reflect a response to the committee’s concern about support for people in an older age group, which I acknowledge is a significant factor.

I will return to careers advice, which was debated some months ago in the Parliament. The idea that people had to rely on the my world of work website was posited at that time. You have clearly and fairly stated that there is a range of interventions available, but is there not scope for you to go further? Is it not fair to say that the system that the Government has put in place now, far from leaving people to rely on that website, actually identifies those who are in greatest danger of struggling to access the guidance, and prioritises those people so that they get the most significant intervention to provide them with that guidance?

That is a fair reflection of the shift to the idea of work coaches, who provide some of the practical support that individuals require. By making the my world of work website available in the careers advice system, many individuals can readily access that to satisfy their requirements and have no need to use people resources to source advice, which makes such resources and advice available to those who need it most.

My experience of observing the utilisation and effectiveness of the my world of work website gives me confidence that the website and its interactivity meets the needs of those who can be satisfied by it, but also frees up resources for those who require more detailed intervention.

It would also be instructive to refer back to the debate, in which I think the Minister for Youth Employment made the point that anyone who wants to access careers advice through an appointment with a careers adviser can do so.

Yes, of course. That is absolutely right.

Thank you very much to colleagues, the cabinet secretary and his officials. That appears to be the end of this morning’s question session. We have now been in session for 100 minutes, so we will have a five-minute recess.

11:09 Meeting suspended.

11:16 On resuming—