Leaked memo predicts cash shortage

April 10, 1998

UP TO 30,000 young people are expected to take up full-time education or training under the government's New Deal to get the young unemployed off benefit and into work. But the scheme could run out of money as too many youngsters opt for a subsidised job, according to a leaked memo.

More than 118,000 long-term unemployed 18 to 24-year-olds are soon to be compelled into full-time education or a job, or risk losing their benefit, as the New Deal went "live" this week.

But a memo from Employment Service head Leigh Lewis warns ministers that the Pounds 3.5 billion budget could be insufficient, as up to 40 per cent of youngsters are expected to choose employment subsidised at Pounds 60 a week.

Although Mr Lewis said that it was impossible to predict the numbers eventually flowing into each of four pathways, early indications from pathfinder pilot areas have shown that about 23 per cent of New Deal clients are choosing education, while up to 40 per cent are choosing a subsidised job.

The pathfinder figures are broadly consistent with original planning estimates that about 30,000 of the 118,000 client group would choose full-time education or training, although some of the 30,000 may already be in colleges under the Job Seekers' Allowance 16-hour rule.

All New Deal clients who choose not to go into full-time education will be given the opportunity of day-release training for one day a week.

Further education colleges, alongside Training and Enterprise Councils and private training providers, have been bidding for a proportion of Pounds 700 million made available by the government for education and training. But despite the launch this week, no one at the Employment Service could provide figures for who had won contracts, as the information has not been collected nationally.

It is understood that colleges have gained most of the money. "Typically, colleges or college consortia have won the bids to be the major New Deal providers in each area," said Mr Lewis.

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