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Pre-budget statement

By Paul Convery

Working Brief 110, December 1999/January 2000

In his Pre-budget report on November 9th, the Chancellor announced a wide range of enhancements to the New Deals and to education and training expenditure. The financial statements show that the windfall levy funds are being spent at lower levels than originally planned providing Ministers with considerable scope for developing and expanding aspects of these programme.

New Deal for over-25s

As the Chancellor had hinted in his Party Conference speech four weeks earlier, the New Deals will be extended. The type of programme first introduced for the under-25s will now reach out to all those over-25 in every part of the country. Backed up by advice, counselling and mentoring, the New Deal will offer job subsidies, work-focused training, help with setting up in self-employment or college-based learning. The programme - which will run from April 2001 - will introduce an "improved, more flexible package"of help for long-term unemployed people "tailored to their individual needs". Participation will be mandatory although the Government has not yet decided whether the trigger point for participation should start at 6, 12 or 18 months. This "New Deal 25-plus", for long term unemployed adults, will be funded by 100 million of windfall levy money.

A further 10 million from the windfall levy is being added to the Innovation Fund to improve the effectiveness of the New Deal and to test more locally-developed proposals. Over 3 years, 5 million of this funding will be used to encourage Pilot projects in 11 urban areas (the 10 cities that have New Deal employer coalitions plus Glasgow). These will help develop new "intermediary" services that simultaneously understand the needs of both employers and jobseekers and, drawing on the recent New Deal Task Force report (see Working Brief 108), the DfEE says this will "build on both the work underway in the UK and the lessons for best practice from the US." In addition, the main New Deal Innovation Fund will be used to "explore the role that sector based intermediaries can play in supporting employers particularly small businesses", starting with the financial and IT sectors.

A further 20 million - resulting from previous underspends in the ES budget - has been reallocated to the ES in 2000-01 to increase the intensity of fortnightly jobsearch reviews for people who have been unemployed for six months or more. This will allow job centre staff time to match job seekers with vacancies and to ensure that job seekers are applying for employment - including Call Centres used to contact jobseekers with information about suitable vacancies. These measures are described as "helping to modernise and intensify" the Employment Service itself (further details of IT measures are on page 3 of this issue).

The existing New Deal 25-plus pilots will also be extended to run until April 2001. These pilots in 28 areas of Great Britain are testing new ways of helping long-term unemployed people into work and play a necessary role developing the detail of the provision for a more full scale "re-engineering" after April 2001.

Self employment

For the over-50s, there will be self employment support which can last for up to 12 months. This is a variation on the 50-plus programme currently being piloted in 9 areas. Instead of a 60 per week tax credit, payable to an employee starting work, the Chancellor said that funding equivalent to 3,000 will be available for a business start-up.

New Deal spending

Much of the Chancellor's new initiatives are being funded by re-balancing the "windfall tax" revenues. Underspends, programme slippage and fortuitous savings mean that New Deal spending on both the New Deals for Young People and for 25 plus have been scaled back for the current year, and outturn figures for 1998-99 reveal a significant reduction from those announced at the time of the Budget in March this year.

For the New Deal for 25 and over, spending in 1998-99 was only 20 million, against an initial budget set in March 1998 of 120 million. he initial response, seen at the time of the budget in March this year, was to roll forward most of the underspend into this year, 1999-2000, producing a planned increase in spending from 180 million to 260 million. This has now been scaled back to 170 million.

New Deal for over 25s

 

Plan announcement dates

 

Mar 98

Nov 98

Mar 99

Nov 99

1998-99

120m

130m

30m

20m

1999-00

160m

180m

260m

170m

2000-01

90m

90m

110m

210m

2001-02

80m

80m

120m

90m

Totals

450m

480m

520m

490m

Some of this underspend has been rolled forward a further year, to 2001-02. This will reflect the continuation of the existing pilots for earlier duration groups for a further year, to April 2001, and the plans for re-engineering the New Deal for 25 plus.

New Deal for 18-24 year olds

 

Plan announcement dates

 

Mar 98

Nov 98

Mar 99

Nov 99

1997-98

100

50

50

50

1998-99

580

580

300

210

1999-00

650

660

820

710

2000-01

640

650

690

630

2001-02

640

650

690

640

Totals

2,620

2,590

2,550

2,240

The New Deal for Young people does not show the same degree of roll forward into 2000-01 despite continuing to falling short of plans - the estimate for 1999-00 has been scaled back by 110 million during the course of the expenditure year.

Lone parents

The New Deal for Lone Parents will be extended by funding college-based childcare places for 10,000 more children - bringing the total so far financed to 37,000. Although the main programme's target group is parents with school age children, all lone parents with children above the age of 3 will now receive notice of the programme. An Innovation Fund will be established to find ways of improving the programme. In pathfinder areas, a new support service, including outreach, will be tested for lone parents whose youngest children are aged 14 and 15 to help prepare them for the end of Income Support eligibility.

Partnerships

The Chancellor also announced an initiative to help MPs " irrespective of political party" and in "every constituency" to participate in partnerships that "bring the unemployed and potential employers together".

Fraud

The Chancellor concentrated on measures to reduce the "informal or hidden economy that is now draining billions of pounds in fraudulent benefit claims and unpaid taxes". Lord Grabiner QC, will chair a task force bringing together the Treasury, Inland Revenue, Customs and Excise, DSS and Employment Service. It will "investigate the scale of the problem and the cost to the taxpayer", recommend a plan of action and set a timetable to reduce the size of the hidden economy. The enquiry will examine ways to move economic activity from illegitimate to legitimate businesses and consider increased fines for deliberate and crimanally motivated fraud. The Treasury says that individuals "working at the margins of the economy" will be encouraged into legitimate work by stressing the advantages of social protection, in-work benefits and the available help to start up in self employment.

There will be new requirements for claimants suspected of being engaged in illicit employment to sign on for benefit on a daily basis - using existing legal powers that have become relatively dormant.

Education and training

Spending plans outlined by the Chancellor mean that DfEE expenditure will be re-prioritised to improve the quality and accessibility of education particularly for those who are disadvantaged:

The money for childcare places and to support Enterprise in Education comes from underspends in DfEE budgets in 1999-2000.