New Deal finds real jobs for only 3%, says report

Tony Blair's flagship New Deal scheme has managed to find real jobs for fewer than 3 per cent of its participants, according to a damning report published today by Parliament's financial watchdog.

The National Audit Office (NAO) discovered that only 20,000 youngsters out of the 700,000 who took part in the £3bn welfare-to-work scheme found jobs which would not have been created otherwise.

The New Deal, which was hailed by the Prime Minister as one of the key achievements of Labour's first term, had effectively cost the taxpayer up to £8,000 per job it created, the NAO found. The report, the first comprehensive assessment of the scheme, concludes that "many of these young people would have found work anyway without the help of the programme".

Such a verdict conflicts with Labour's claims that the New Deal was a ground-breaking and successful project and is bound to embarrass Downing Street and the Department for Work and Pensions.

The Tories seized on the revelations last night, claiming that the NAO had "blown apart" one of the Government's most cherished policies.

The New Deal for Young People, which was introduced in 1998, is compulsory for all 18-24 year-olds who have claimed Jobseeker's Allowance for more than six months. Those taking part are forced to either take a subsidised job, go into full-time education and training, join an environmental task force or help the voluntary sector. The scheme has so impressed the Government that it is being extended to lone parents, the disabled and the over-50s.

Ministers hailed the scheme as a success because youth unemployment fell by almost 130,000 to 226,000 in 2001.

The NAO discovered that the New Deal had placed 339,000 youngsters in at least one spell in employment, well above the Government's manifesto target of 250,000. This had increased overall national income by £200m a year.

However, it also found that only 20,000 of the jobs created were above and beyond those that would have been generated by the already buoyant state of the economy. The NAO also concluded that most of the extra jobs had helped to keep wage levels down because they had been low paid. While long-term unemployment fell, short-term unemployment rose.

David Willetts, the Tories' Work and Pensions spokesman, said the report disproved Mr Blair's repeated assertion that the New Deal was "not another 'skivvy scheme'".

"This report shows that the New Deal simply isn't delivering what ministers claim. It's creating very few extra real jobs for young people and failed to live up to Tony Blair's exaggerated rhetoric. No wonder it is seen by young people as just another scheme," Mr Willetts said.

Edward Leigh, chairman of the Commons Public Accounts Committee, which oversees the NAO, said the New Deal had cost some £140m a year, which amounted to £5,000 each year for each additional person in employment.

Sir John Bourn, head of the NAO, said that more targeted forms of help may be needed to tackle the "hard core" of unemployed who had not got jobs as a result of the scheme.