YOUTH EMPLOYMENT, SOCIAL ENTERPRISE AND INNOVATION Clare Elliott, UK Department for Work & Pensions Tracy Fishwick, Manchester Commission on the New

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1 YOUTH EMPLOYMENT, SOCIAL ENTERPRISE AND INNOVATION Clare Elliott, UK Department for Work & Pensions Tracy Fishwick, Manchester Commission on the New Economy

2 DWP Innovation Fund: testing social impact investment to support disadvantaged young people

3 Social Investment: Enterprise Social Investment Task Force reported in October 2000, Enterprising Communities, Wealth beyond Welfare. Recommended five key actions to achieve a radical improvement in the UK capacity to create wealth, economic growth and employment and improve the fabric of the poorest communities e.g. Community Investment Tax Relief, Community Development Venture Capital Funds, support for the Community Development Finance Sector Review in 2005 showed considerable progress in increasing the flow of investment to disadvantaged communities through enterprise through the creation and support for new mechanisms Could the same step change be made in the delivery of public services? 3

4 Social Impact Bonds an innovative financial product that provides a mechanism for aligning the interests of investors, providers and commissioners to deliver enhanced social outcomes to a specified target population. Public Sector Make payment based on defined outcomes Social Impact Intermediary Financial returns dependent on outcomes initial investment Investor(s) Improved social outcomes Reduced public sector costs Wider benefits to society Delivery Bodies Funds Services Information Target population 4

5 Social Impact Bonds: Peterborough MOJ and Big Lottery Fund pilot to reduce re-offending after a custodial sentence Managed by Social Finance (intermediary) who raise the finance ( 5m) and who support and fund the partnership of delivery agents Outcome payments for a reduction in re-offending across the cohort (10%+ improvement) Investors seek to recoup their investment plus a return (7.5-13% p/a) Long payback and evaluation period last payments in

6 Social Justice and the Innovation Fund Focus on prevention and early intervention (Allen Review) Tackling complex and deep seated barriers to (future) employment Significant role for the VCS in delivery Innovative commissioning model: black box and payment by results Innovative financing model social impact investment 6

7 Most under 25s are either full-time students, in work or in work-based learning. Employment rate of those not in FTE is 66.0% In work/ training or fulltime study 5.9 million Breakdown of year olds Work/training not FTE 2.8 million 7.3 million Full-time education 3 million ILO unemployed not FTE 731, ,000 Inactive not FTE but 1.4 million have left full-time education and aren t in work/training Not in full-time education or work./training (000s) Part-time study > 12 months 6-12 months < 6 months ILO unemployed Part-time study Other reason Disabled Looking after family Inactive Part-time students are not counted as NEET (those not in work/training or any education) year olds 1.4 million aren t in work or full-time education 731,000 unemployed and 713,000 inactive. Most are NEET, a group that counts all the above except part-time students. About 200,000 workless people say they are part-time students, though most are not attending a formal course. 880,000 on benefit. JSA caseload has doubled since 2008 but the number in other groups has been more stable. Some benefit claimants work part-time or are students, so the figures 7 are not a pure subset of the 1.4 million while there are about 880, year olds claiming out-of-work benefits 483,000 Out-of-work benefits by duration (000s) 155, ,000 23,000 > 12 mths 6-12 mths < 6 mths 40,000 JSA ESA/IB Lone parent Carer Other

8 Innovation Fund: Objectives Deliver support to help young people who are disadvantaged, or at risk of disadvantage to participate and succeed in education or training and thereby improve their employability, reducing their longer term dependency on benefits Test the extent to which the Innovation Fund generates Annual Managed Expenditure (AME) savings, other wider fiscal and social benefits, and delivers Social Return on Investment. Support the development of the social investment market, the capacity building of smaller delivery organisations and generate a credible evidence base which supports social investment arrangements 8

9 Design principles: Provision will last for up to 3 years Up to 30 million is available in total over two bidding rounds. 100% payment by results. Up to 3 million per year to any single contract - expect most to be substantially less Focus on young people aged 14 upwards Assumption that support will target the most disadvantaged Must generate employment related outcomes Must use social investment models to deliver (but don t have to be SIBs) Delivery partners are fully funded and are separate legal entities to the investor. Investor takes 100% of the risk 9

10 Innovation Fund: Timetable Round One: Successful Bidders announced; January 2012 Delivery commences; March 2012 Round Two: Initial bids received 28 February Full ITT; early Spring 2012 Contracts awarded/delivery commences; late Summer

11 Successful Bids in Round 1 Private Equity Foundation: 14 year olds at risk of becoming NEET in 10 participating schools in London APM UK Ltd: year olds from Birmingham who are NEET or at risk of NEET Indigo Project Solutions: year olds who are NEET or disengaged and least likely to reach independence without significant support Triodos Bank: Targets young people in hot spots in Greater Merseyside focusing on care leavers, learning disabled and young offenders Community Links: year olds with multiple issues in three London Boroughs Nottingham City Council: year olds with multiple disadvantages including young parent, offending record, ESOL, drug use in most disadvantaged areas. 11

12 _Communit y Budget exemplars_p Round 1 Investment Models Two single investor, four multiple investors through an intermediary Number of investors in each bid ranges from one to five The majority of investors are philanthropic/charitable Expected return to the investor (where known) ranges from 1.6 to 18.7% 12

13 Other initiatives Big Society Capital Ministry of Justice/Peterborough prison pilot Work Programme Cabinet Office pilot projects to explore how social investment can be used to turn around troubled families Work by Manchester and Birmingham local authorities to develop an evidence base on fiscal and social returns using the approach pioneered by the Washington State Institute 13

14 Key Issues (delivery) Immature Market/imperfect competition VCS capability and capacity/investment readiness Investor awareness and understanding High/unknown levels of risk Long timeframes for outcomes 14

15 Key Issues (policy) Challenges to working across Departmental boundaries/objectives (powers and funding) You get what you pay for need to be clear on objectives and avoid perverse incentives Establishing Value for Money criteria ex ante valuation of fiscal and social benefits Challenge to evaluation balancing innovation with the need for robust evidence 15

16 Conclusions Considerable interest and potential But largely untested in the UK Not suitable for all types of services Big on-going challenges around joining up funding and commissioning (and initiatives) Scaling up / making a step change the new venture capital Is Government giving sufficiently clear and strong signals about future direction? 16

17 Welcome to Greater Manchester!! Tracy Fishwick New Economy the economic development company for the Greater Manchester Authorities

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19 Local authorities in Greater Manchester Bolton Bury Rochdale Oldham Wigan Salford Tameside Manchester Trafford Stockport

20 Overview of this session What is GM trying to achieve? A period of significant change: economy; government; local A focus on young people

21 The GM Employment Strategy How can we make sure everyone can benefit and contribute to economic growth and prosperity - inclusion How can we have one overarching strategic framework that is a true collaboration - partnership How can we ensure job creation reduces unemployment - employers

22 who is out of work has changed over 30 yrs

23 The barriers to work are about systems and individuals Crime and Anti-Social Behaviour Economic Dependence Worklessness Early Years and Foundation Stage Teenage Pregnancy Addiction Educational Failure and Low Skills Mental ill health

24 If employment is the best route out of poverty there must be Higher skills and qualifications Jobs and mobility Job security sustained employment is key A living wage 50% of children in poverty in a home where someone is in work Progression skills and qualifications are the single biggest predictor of income AND Whole system strategies to create the conditions that support people out of persistent poverty and in to work

25 Pre-recession the UK and GM focus was on deprived areas A poverty, skills and work focus Place based regeneration Prevention / early intervention Actions that mitigate the lifelong effects of social exclusion What do we mean by Social Inclusion? Creating the conditions where everyone can take advantage of and have choices in: education; employment; economic growth

26 The recession hits the UK: headline statistics m lost their jobs in the first year 1 in 5 households is workless in the UK That s nearly 4 million households with no adult in work And nearly 2 million more children living in workless households Deprived areas are doing worse

27 At the same time the biggest change in welfare reform ever The challenge of welfare reform IB reform /reassessments between now and 2014 Lone parents - obliged to seek work when youngest child is 5 years (From Oct 2011) Further cuts to welfare spend of 4bn (on top of 11bn announced in June) Introduction of the Work Programme Universal credit Housing benefit changes

28 The need for action Young people have been hit hardest by economic downturn: Youth unemployment increasing faster than unemployment for all other age groups Long-term youth unemployment highest in 16 years = lifelong scarring effects Young people particularly hard-hit by the way employers have responded to this recession

29 Youth unemployment became top priority:

30 Two Governments : Two approaches Backing Young Britain: Future Jobs Fund 1bn, transitional employment VS Work experience, volunteering, employer focus, apprentices..which is which..?

31 About Future Jobs Fund A 1bn deliberate stimulus to create jobs for young people why? Re attach them to the labour market Experience and skills Confidence and social inclusion benefits Community benefit / green jobs Additional jobs not displacement

32 GM Principles We can do more together more ambitious as a city region Add value and create economies of scale Harness & maximise all funding Quality and integrity Transitional employment, not a job / end in itself

33 The GM minimum standard

34 Ethos and language is key Jobs not provision Applications not referral forms Interviews not matching Choice not mandatory Employer led not referral Employees not clients Transition not an end in itself Real work not make work

35 Jobs 8,000 new jobs created and filled Care work, admin, leisure, culture, ground workers, outreach and engagement workers, community centres, sport, reading buddies...employment advisers, Travel Support Officers, Metrolink extensions, health advocates Direct employment OR 3 rd party employing agent Wrap around 6 month minimum wage job Delivered via a non profit as the managing agent

36 All 10 Councils Host employers Fire, police, health agencies, housing, transport Voluntary, community, social enterprises national and local Some private employers e.g. Manchester Airport

37 Key outcomes 8,000 people in to jobs in 18 months 85% very happy with their job 99% feel more employable More than 20% moving on to their next job before 6 months 50% remained off benefits after FJF

38 National evaluation 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Off-flows from JSA: year olds claiming for over 6 months year old FJF starts (estimated)

39 Value for Money Net cost per participant: 3,900 Net cost per job outcome: 9,200 (at job outcome rate of 43%) FJF participants spend 70 days fewer on benefits (not including FJF job) Cost per job and time off benefits are comparable to New Deal for Young People Potential for cost-neutral temporary jobs models

40 Legacy Inclusive approaches to recruitment Employers something to build on Community projects that continue Successor programmes in the making Peoples lives and families have changed Wider public service impact health, crime

41 Lessons

42 Continued need for action Young people in particular are suffering in the current labour market + The economy looks unlikely to naturally fix this problem in the short and medium term + These short and medium term effects have lifetime impacts = A strong case for demand-side interventions like waged employment programmes/ilms

43 The GM story continues But the policy landscape is very different Employer focused now have 7 different employer subsidies in the UK! Apprenticeships and sustained jobs are key GM commitment to youth employment

44 Key components of the GM campaign A call to employers: Offer work experience Create apprenticeship jobs Change recruitment practices Access Govt support Corporate social responsibilities

45 A local additional incentive Subsidy top up if the employer recruits a young person who is: not in employment, education or training Claiming out of work benefits Lives in GM area

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