How Labour could improve on the Youth Contract

by Jonathan Todd

The plan for Labour general election victory launched by Uncut at Labour party conference last year included identifying how to fund a radical Labour alternative. Making deeper cuts in certain areas to free funds to spend elsewhere. We identified £34bn of additional cuts to pay for free, universal childcare, 1 million new jobs in areas that need them most through a revived, regionalised Future Jobs Fund, and 1 million new homes.

Last week, Demos published a report in which I argue that this strategy of reallocating public resources from where they are having least impact to where they could have most has the potential to increase the number of apprenticeships delivered. The failings of the Youth Contract have been well documented. In contrast, other schemes – such as the Creative Employment Programme – have much more rapidly increased apprenticeships.

The solution is as simple as it is potentially powerful: reroute funding from the Youth Contract to schemes like the Creative Employment Programme. If we look closely at these schemes, it’s clear why one is performing well and one isn’t.

Since April 2013 the Community Employment Programme has committed funding to create 634 apprenticeships, and 655 paid internships across 491 employers. Nearly three-quarters (73 per cent) of these positions have been created through ‘consortiums’, whereby a lead applicant such as a local authority, LEP, trade body, or larger employer stepped forward to make an application on behalf of a number of employers who might not otherwise understand how to create apprenticeships or what combination of the myriad of funding they may be eligible for.

This excellent performance sharply contrasts with that of the Youth Contract, which missed its employment target by more than 92 per cent in July 2013. It was revealed at that time that the flagship national scheme to tackle youth unemployment had paid out for less than 4,700 placements for its target group of 18–24 year olds who have been out of work for more than six months, despite the wage incentive to employers that is part of the Youth Contract.

While the Youth Contract may contain a wage incentive, it lacks what the ‘consortiums’ within the Creative Employment Programme have: networks, effective partnership working, improved communication and links. These attributes might be said to amount to a community of trust.

In contrast, there seems to be a lack of trust in the mechanisms of the Youth Contract, which even its wage incentive cannot overcome. Employers are encouraged to recruit apprentices within communities of trust and are less likely to do so when not supported within such a community. Within these communities, employers are asked to take on apprentices by someone whom they know and trust and are supported through this process. The process for accessing funds through the Youth Contract, however, appears more daunting and bureaucratic.

I am grateful to Liam Byrne, Shadow Universities, Science and Skills Minister, for speaking warmly of my Demos report at its launch last week. He spoke about how the next Labour government would build upon the work of Labour’s “civic pioneers”, like Richard Leese in Manchester and Keith Wakefield in Leeds, who are finding new means to increase apprenticeships within the local authorities that they lead.

Warren Buffet coined the phrase ‘skin in the game’ to indicate that participants have incurred monetary risk by investing in a shared goal. More generally, we can think of ‘skin in the game’ as being a situation in which individuals or organisations understand their wellbeing to be dependent on securing some goal held in common with one another. This is relevant to both sector and geographic based apprenticeship schemes.

We need local authorities with ‘skin in the game’ of the skills of their residents and businesses and trade bodies with ‘skin in the game’ of the skills of their members. Local authorities and trade bodies can broker their existing relationships with business to build either geographic or sector based communities of trust, focused on increasing apprenticeships and improving skills.

These communities could be grown and strengthened by diligent rerouting of funds presently being under-accessed behind the bureaucratic complexities of the Youth Contract. The prize is considerable. My Demos report notes that England needs 150,000 to 300,000 more high quality apprenticeships to catch up with the best performing countries. Given the productivity gain associated with apprenticeships, this would add £4bn to GDP.

It is likely that Labour will have to fight the general election amid an economic recovery. But what this recovery is for remains to be determined. In part, it should be for investing in an expansion of apprenticeships, which would tackle the UK’s twin weaknesses of youth unemployment and low productivity. Switching funding from the Youth Contract would help this.

Jonathan Todd is Deputy Editor of Labour Uncut and Chief Economist of Demos 

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