Speech by the Rt Hon Iain Duncan Smith, Secretary of State for Work and Pensions.
It’s a great pleasure to be here in Scotland to speak to you today.
It won’t be news to anybody here that we are currently nursing a fragile economy.
We went into the recession with the largest structural deficit in the G7, and have now racked up a budgeting shortfall larger than any seen in UK post-war history.
The decisions we’ve taken on the deficit have put the economy back on an even keel, but we are now working hard to put in place the conditions for growth which will drive recovery in the labour market.
As a new set of employment figures were released yesterday I thought I would re-cap on them briefly.
In the latest statistics we saw that across the UK there are 118,000 more people in work than three months ago.
Encouragingly, the number of unemployed young people has fallen by 30,000 over the same period.
This follows recent trends where we’ve seen unemployment falling by 55,000 over the course of the last year, driven by a rise of over 400,000 in private sector employment.
But we shouldn’t get carried away by these figures - there are still too many without work who are desperate for a job.
And the overall position in Scotland is similar to the UK.
Scotland entered the recession with an unemployment rate below the UK average, and though it has seen a sharp rise since then, its current rate remains the same as the UK average of 7.7%.
To put this in context, Wales saw a larger increase in its unemployment rate than Scotland during the recession and still has a lower proportion of people in work.
But, as ever, headline figures hide the reality that there are pockets of prosperity and deprivation wherever you look - for example, Aberdeen has fared better during the recession than many other parts of the UK, whereas areas like North Ayrshire have clearly suffered more.
This is also true of the youth unemployment figures - whilst Scotland has seen its youth unemployment rate rise faster than the UK as a whole, Wales continues to have a lower proportion in employment and a higher rate of unemployment than Scotland.
Indeed, in many senses this has been a tale of two recessions. While they have taken a hit, employment rates for older people have remained surprisingly resilient.
Take the fact that the number of over 65s in work has actually increased by more than 100,000 in the last year - and this picture appears to be broadly similar in Scotland.
But the outlook for young people has been much tougher.
And one area where Scotland has suffered particularly badly is in the unemployment rates for 16-17 year olds.
This is a crucial area and one I want to explore in more detail today.
Neglected 16-17 year olds
16-17 year olds are a critical group, because if we lose young people early we risk losing them for good.
In the jargon, they develop a ‘wage scar’ which means they struggle to make up the lost ground later on in life.
In the last decade or so we’ve seen their employment prospects diminish as the support provided through the Jobcentre has been downgraded.
And we are now reaping what was sown, with the figures laying bare the scale of the problem.
Although many more young people are staying on in education, employment rates for 16-17 year olds who’ve left school or college have deteriorated substantially in the last decade or so.
Back in 2000 around 6 in every 10 were in work.
That figure is now down to just over 3 in ten.
A similar trend holds true in Scotland, where around 7 in 10 were working in 2000, a rate which has fallen to around 4 in 10 now.
And this is by no means just a product of the recession - in fact, by 2008 the level had already fallen to 5 in 10, so it has been on a steady downward trend over the course of the last ten years.
And we can contrast this to the figures for 18-24 year olds, whose employment rate was at about the same level in 2008 as it had been ten years earlier.
To understand how we got to this situation it’s worth reminding ourselves of the history of support for this group.
While there has been a strong focus on encouraging young people to stay in education in recent years, for those 16-17 year olds who do not stay on at school or college the system of employment support has changed significantly.
Some 23 years ago this group were taken out of the benefits system - except in cases of severe hardship - and put on a guaranteed Youth Training programme.
Under this system the Government promised that if individuals had not found education, employment or training within a short period of time it would provide them with a Youth Training place.
However, from around 1997 onwards this system changed as there was a gradual shift away from the Youth Training offer, until the early 2000s when it essentially ceased to exist.
As support from the Jobcentre leaked away so we saw 16-17 year olds struggling to maintain a foothold in the labour market, and it is no coincidence that over this period the employment rate for this age group deteriorated substantially.
When you look at the figures, it’s pretty clear that they start trending down steeply from around 2000.
Worse still, you find that employers are much more reluctant to employ 16 year old school leavers, believing them to be significantly less likely to be well prepared for work than their slightly older counterparts.
And we know that almost 200,000 young people left school between 2002 and 2006 and have still never held regular work since.
This is the lost generation.
Yes, the majority of young school or college leavers take the opportunities provided through the education system and manage to get on in the workplace.
And of course our Coalition commitment is to raising the participation age, and we have announced measures to ensure that as many young people as possible stay in some form of education or training.
But some children do drop out, and we must ensure they are not left behind and have proactive support to access training and work experience.
This support hasn’t been available from the Jobcentre, and instead Government has been forced to deal with the consequences, paying out potentially billions of pounds in benefits which could have been better invested in proactive support early on.
Of course, not every young person needs help from the Jobcentre to make the move into work.
Many can rely on the support structures provided by their family, drawing on positive family role models, as they make their own way into the labour market and start to build a career.
But there are young people all over the UK who have no such role models at all.
There are swathes of young people who have seen their whole family - and many in their wider community - go for generations without sustaining anybody in work.
Almost 1 in 4 households in Scotland don’t contain a single family member who works, compared to 1 in 5 in the UK as a whole.
Many find themselves trapped by a crippling welfare dependency, unable to see the point of working when they are better off on benefits.
The welfare system currently sees people lose up to 96 pence in every pound earned as they increased their hours in work.
Worse still, the system was so complicated and moving on and off benefits so fraught with difficulty that few people were willing to take the risk of moving into work.
Even where they want to work, many have found that they don’t have the skills or experience to compete in an increasingly globalised labour market.
A tangled mess of employment schemes failed to give people the real, individualised support they needed to build up the skills and experience to move back to work.
Universal Credit and Work Programme
Our programme of welfare reform is about trying to break this dependency and help people back into the workplace.
The Universal Credit will fundamentally simplify the system and make sure that work always pays, eradicating some of the obscene withdrawal rates we’ve seen in the past and replacing them with a single, clear taper set at around 65%.
We’re also doing everything we can to help young people get work ready, breaking down the barriers that stop them finding work and taking it up even when it is financially worthwhile to do so.
That’s what the new Work Programme is all about, paying the best of the private and voluntary sectors for the results they achieve in getting people into work - and then keeping them there.
Extra support for young people
But these reforms are by no means the be all and end all of our response to the youth unemployment challenge.
There is still more we must do for young people in particular, including the 16-17 year old group which has been so badly neglected in the past.
We have looked carefully at the form this extra support should take and we have worked hard to design a programme which helps young people access real opportunities that provide a route into sustainable careers in the private sector.
Just last week the Prime Minister and Deputy Prime Minister confirmed our commitment to 100,000 work experience placements over the next two years across the whole of the UK.
To date, 100 large companies have pledged to offer work experience places and tens of thousands of small companies around the country have also been engaged by Jobcentre Plus - up to 25,000 places have been pledged so far.
And in England we have committed to 250,000 extra apprenticeships over the course of this Parliament, of which 40,000 will be exclusively for young unemployed people.
And I am pleased to note that the Scottish Government appears to be on the same page as us on this issue with their commitment to investing in Modern Apprenticeships.
16/17 year olds
But what I really want to focus on here is the new support we are targeting at 16-17 year olds specifically.
Last week we announced that we are introducing dedicated work support from a personal adviser for 16-17 year olds who are claiming Jobseekers Allowance for Hardship reasons.
I have decided to start re-establishing that crucial link between young benefit claimants and the employment support provided by Jobcentre Plus.
This will include spending more time at the start of the claim assessing the person’s needs and setting clearer and more tailored goals around job searching and access to education and training.
Jobcentre Plus will also work in partnership with voluntary organisations to offer access to training, including help with interviews, CVs and job applications.
The key here is flexibility - we will give Jobcentre advisers the freedom to look at each young person in their own right, tailoring a package of support to suit their specific needs.
Alongside this, we will ensure that once this group of young people hit 18, if they are still claiming JSA, we keep them firmly on track by giving them early access to the Work Programme after just three months in recognition of the more significant barriers they are likely to face in getting back to work.
And we have also committed to a new Innovation Fund, worth £30 million over three years, which will be used to support social investment which addresses the needs of disadvantaged young people, as well as other vulnerable groups in society.
- We know that there are lots of organisations out there who have a vast amount of experience in working with the most disadvantaged young people, but they simply don’t have access to the money they need to make that happen.
- The new Innovation Fund will provide a funding stream and help to bring these bodies together with organisations who have the relevant finances to support the delivery costs.
And we are in discussions with colleagues in the Scottish Government to agree how we can work together to introduce this in Scotland.
So we are finally taking steps to support a group which has been forgotten about for far too long.
I’m also pleased to note that the Scottish Government has a dedicated plan for this age group in their areas of devolved responsibility, and we want to work closely with them as we move forward to ensure our plans match up.
Unemployment is a blight on everyone whether you be 16 or 60, and we need to help to resolve this.
However it is a particularly tragic state of affairs when someone of 16, 17, or 18 starts their adult life without work.
We know that future prospects rely on a good start, one that builds skills, develops self-motivation and results in self-confidence.
To be out of work at that point makes it much more difficult to help a young person to develop the ‘work habit’ and understand the importance of work as a lifelong commitment.
This is particularly the case if they come from a home where no one works.
The economics are vital to this process and the systems must be focussed.
Yet the human dimension of this lies in the dependent and dysfunctional families, the missed opportunities, and the lost generations.
When politicians take what might appear to be short term decisions they can have long lasting consequences.
Ten years on from the ending of the Youth Training commitment we see how devastating that can be.
Now’s the time to work together to think about how can provide the support that 16 and 17 year olds need in the future, and avoid losing another generation of young people.