One of the key aims of the initiative is to help the most disadvantaged into work and young people regarded as more employable may have to pay the price, according to a senior civil servant at the Department for Education and Employment.
Some employers may dismiss existing staff in order to take advantage of the pounds 60-a-week government subsidy for providing work for young people on the New Deal. For the same reason, it is also likely that more capable job applicants will be rejected in favour of "sponsored" recruits.
Ministers hope the "substitution and displacement effect" will be limited and argue that it is a price worth paying. A briefing paper issued by the department yesterday admits that some of those in the target group - 18 to 24-year-olds who have beenout of work for more than six months - may get jobs at the expense of others "who either become unemployed, or stay in unemployment when they would have left it".
It adds: "These will largely be people who will be able to find jobs without much intervention from us. If the overall employability of the workforce is raised, this should over time increase the economy's capacity to grow."
The scheme has been piloted in 12 "pathfinder" areas since 5 January and not one participant has so far fallen foul of the rules which ultimately provide for a 40 per cent cut in benefit, ministerial advisers said.
After a "Gateway" period of up to four months, participants are offered four options: a place on the Government's environmental task force, work with a voluntary organisation, full-time training or education, or a subsidised job. Ministers are fond of saying that there is no "fifth option".
Officials yesterday were at pains to point out that the New Deal may have a spurious impact on labour market statistics. Unemployed young people who move into a subsidised New Deal job for instance, will be shown as moving from the dole into employment.
Advisers accepted that this would only be "real" employment if the young person was kept on when the subsidy came to an end. The Government wanted to be open about such effects and did not want to be accused of "fiddling the figures".
Ministers were not interested in simply switching young people off benefit into dead-end jobs or schemes, they wanted to transform the long-term prospects of the most disadvantaged, the briefing paper said.Reuse content