How Welfare to Work will succeed (yet still fail)

on help for the jobless

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Labour has staked its social aspirations on the success of Welfare to Work - the Government's one big spender. Over the next five years, starting in January, the huge sum of pounds 3bn will be invested in putting 250,000 young unemployed people into work. But the economic recovery and associated boom in jobs are now running so far ahead of the New Deal that astonishingly, by January, there will only be 120,000 young unemployed left. It is now impossible for Welfare to Work to fail.

But even if it cannot miss its numerical target, the scheme could still waste a great deal of money that would be better spent elsewhere. And it could fail to spend money where it certainly should.

Employment experts are becoming increasingly convinced that the centrepiece of the scheme is an expensive mistake: the plan to offer employers pounds 60 a week to take on a young unemployed person. Evidence from the United States suggests this bribe is of dubious value. An existing British scheme that exempts employers from National Insurance for taking on the long- term unemployed has been a signal failure. Past experience suggests pounds 60 a week may not tip the balance and entice reluctant employers to give a job to a difficult, risky-looking young person. Meanwhile, some employers are already volunteering to help with the scheme - but because they are public spirited, not because they want the money.

How should we judge the ultimate value for money of the New Deal? It will be hard to measure, for in the end what matters is not the number of people the official statisticians can tick off the register - there will be more than enough of those. What matters is rescuing a relatively small number of wretched and hopeless cases destined by their miserable childhoods to an underclass life or worse. But is that the direction in which the scheme is heading?

Inside the Department for Education and Employment, planning is reaching a crucial stage. Yet those working most closely with the young unemployed are growing increasingly uneasy, as they can get no assurances at all that their highly successful and proven schemes will be included and funded.

Here is one. Originally a French idea, "Foyers" is a remarkable movement that has taken off all over the country in response to the distressing sight of hosts of young people sleeping rough on the streets or dumped into homeless hostels. Foyers offer accommodation and intensive training, counselling and help for all their needs to the young homeless, unemployed and unskilled. Some 56 have been built in just five years, with another 46 opening next year. The Foyer Federation has set itself a nationwide goal of 450 by the year 2007, with enough places for 20,000 young people. That, they reckon, would be enough to take in all the homeless and rootless young people across the country and set them on their feet. To date their success rate has been phenomenal.

Everyone thinks Foyers are wonderful. So wonderful that Gordon Brown himself launched Welfare to Work from a Foyer in Camberwell. Tony Blair singled them out for praise in his Peckham housing estate speech. This is not surprising, for the Foyer movement's ideology is entirely New Labour.

Before Foyers there were hostels which sorted out young people, helped them claim their social security and their housing benefit and helped to get them flats. They were given a roof and a giro but often as a result set up for a lifetime of dependency. Even the limited aspiration of getting them to move on and out often failed: kids from care or from hopeless families couldn't manage their money, bills, shopping or cooking and often ended up back on the streets, thrown out by their landlord or swamped by other homeless squatters moving in on them.

Foyers are firmly anti-welfare dependency. The young people they take in have to sign six-monthly contracts. They are required to train, look for work and take any part-time job they can while on courses. They get literacy and numeracy teaching and attend colleges to gain NVQs or more. They are pointed towards drink or drug projects if they need them. They are taught to cook, shop, clean and maintain their flats in the Foyer, budgeting their tight social security money.

Last week I visited one of the first Foyers in south London. All the residents are black and they come from an area with 60 per cent unemployment among young black men. All these young men and women were homeless, some had been sleeping rough, many came from care and some were ex-offenders. Yet by the time they move out into flats of their own (usually in about a year), half have jobs and another quarter are finishing their training courses. Only two people in five years have failed to keep up the tenancies in their new flats. That is success indeed.

But will that count as success under Welfare to Work? Will the figures reflect the achievement of succeeding with difficult cases? Will it all just be crude numbers of young people getting jobs? The New Deal will allow pounds 250 per person for the period of assessment and preparation for one of four training or work programmes. Foyers need pounds 800 a year per person, because they are giving them far more intensive help. As currently drafted, it is understood that the New Deal rules will not allow the local Employment Service to hand out more than pounds 250 per head to any agency - including the Foyers.

Carolyn Hayman, chief executive of the Foyer Federation, has been beating on the doors of the relevant ministers, especially Alan Howarth, to try to get an assurance that Foyers will be fully funded. No such assurance has been given. The cost of pounds 800 per head a year is being regarded as expensive - but in fact it is remarkably cheap. Foyers' capital costs are borne by housing associations, housing benefit, the EU social fund and various other sources. But running costs have to be raised, haphazardly and with great difficulty. This money ought to come from central government's Welfare to Work fund, since Foyers are saving what may be whole lifetimes of benefit dependency, bringing in lifetimes of income tax. The standard New Deal plan will not be able to cater for these most difficult homeless cases.

To cover the running costs of all the 450 planned Foyers would only cost pounds 30m a year, less per head than the Rough Sleepers Initiative. That is so little money I had to check and recheck that there weren't some zeros missing. Thirty million pounds is only one per cent of the Welfare to Work budget, a bargain for taking on 20,000 of the most difficult people on the unemployment register.

If the residents of Foyers are not fully funded out of Welfare to Work money, it will be the clearest possible sign that the whole scheme has gone badly off the rails. After all, with relatively so few unemployed young people, there ought now to be more than enough money to give the best chance to the worst cases. Yet so far, there is nothing in the plans that would shift money to these schemes. Here is a task for the new Downing Street Social Exclusion Unit: it needs to step in and put this right.

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