Smart Moves: New Deal in the dock

Companies and employees are finding fault despite all the hype, writes Alex Watson

Unemployment has fallen to its lowest level for 19 years, the Office for National Statistics has announced. The Government may claim this is largely the result of the New Deal, its welfare-to-work scheme for unemployed people aged 18 to 24, which was introduced nationally in April last year. A new report, however, reveals that in reality the New Deal is riddled with problems.

The New Deal begins with a Gateway period of up to four months, during which the Employment Service (ES) helps people become more employable. Those who do not find a job at this stage must choose between subsidised employment, full-time education or training, a job with the Environment Taskforce, or a job in the voluntary sector.

The Government says it is a programme that has helped 123,000 people find jobs, more than 91,000 of which are permanent. This, it claims, is why the New Deal has been extended to single parents, disabled people and anyone aged over 25 who has been out of work for more than two years.

"The New Deal brings key advantages to your business," employers were assured in a publicity drive before the launch. "New skills, financial support and the opportunity to tackle skills shortages."

So 54,000 employers signed up, ranging from McDonald's to the Salvation Army Housing Association. The report, entitled What Works? Young People and Employers on the New Deal, by the Prince's Trust, a youth charity, and the Employment Policy Institute (EPI) - claims most employers joined up because they believed it made commercial sense, rather than signing on for altruistic reasons. The subsidy was also important, with 44 per cent of employers surveyed admitting it was the primary factor.

Nevertheless, a lot of companies have been unimpressed with the results. Many complain of having to wait months for recruits and others say they are poor quality. Employers have also criticised the ES for its lack of support and flexibility. Travel Dundee, for instance, which is part of National Express, had problems trying to recruit bus drivers. The New Deal requires young people to have at least six months' training but drivers can be trained in six weeks. It took four months to persuade the ES to change its stance, by which time the company had only three vacancies.

Small employers are particularly keen on emphasising the need for improvements. David Hands, deputy head of press and parliamentary affairs at the Federation of Small Businesses, says many employers find it is not worth their while because of the amount of paperwork and the inconvenience of day-release training. He says: "Small business owners will be more confident of the scheme if unsuitable candidates are filtered out before employers waste time on interviews."

The Government has started responding to complaints and has provided pounds 3.5m for 12 pilot projects to give recruits more basic skills training. Andy Westwood, director of development at the EPI, believes that the Government will continue to make changes because employers are in the driving seat.

But the report also reveals that employees can suffer under the New Deal, which is why the Government has promised to bring in checks to ensure employers stick to their commitments. One of the report's findings was that many employers are failing to meet the requirement to train recruits. One in three of those surveyed had provided no training and 21 per cent had none planned.

Mr Westwood says this is unacceptable: " Most of the New Deal jobs are low-level jobs but the key is that they provide training, since without this they are worthless."

Taking the subsidy and using New Dealers as cheap labour can only be justified, he says, if training is provided. Otherwise employers are exploiting both employees and the New Deal.