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Select Committee on Work and Pensions Minutes of Evidence

Examination of Witness (Questions 100-117)

MR KEITH FAULKNER

WEDNESDAY 8 MAY 2002

Rob Marris
100. We might be interested in seeing your Spanish operation if that comes off. You focus on the long-
term unemployed through employment zones, so you are associated with areas of the country both urban
and rural and inner city where unemployment is unacceptably high. Are there any common factors which
you discern which lead to unemployment being stubbornly high in those areas, given they are geographically
and agriculturally diverse as well?
(Mr Faulkner) The diversity between the areas in which we operate is what lies behind the original loss of
employment opportunity in those areas. The thing that is absolutely common is that unemployment is an
issue at an individual level. One of the difficulties we see, for instance in the design and delivery of New
Deal, is an attempt to categorise reasons for unemployment into ethnic origin, lone parents, disability. When
you work closely at an individual level, you often find that for the headline grouping you are dealing with,
say a lone parent, the real issue is something quite different. It may be a lack of skills. It may be other
social factors which are really getting in the way. Our view is that whether we are working in a rural area,
as we have just taken over this week in North West Wales as an employment zone, or in an intense urban
area like Southwark or Brent, the way we have to tackle it is to come right back and with each individual
who walks through the door make no assumptions about the reasons for unemployment and tackle that on a
one-by-one basis. That is actually the real secret of the success of Working Links: that the whole business
has been set up that way rather than by making any assumptions about the nature of the area we are
working or the nature of groups of candidates we are addressing.

101. You just take them one by one and tailor them.
(Mr Faulkner) Yes. Each of our clients has a permanent consultant. It is another difference between us
and the traditional way of dealing with it within the public service, where of necessity, when you visit you
see whoever is available to be seen. We make a very real effort to say you have a dedicated consultant
who will stay with you for as many months as we are engaged together.

102. Paragraph 8 of your memorandum is rather bleak. You talk about large numbers of people bouncing
along at the bottom of the labour market because of lack of skills and unimaginative employers who focus
on productivity or whatever. In light of what you said about the tailored approach and in light of what we
found when we went to the Netherlands, where they categorise people who are unemployed in terms of
their distance from the labour market, or as phase 4, as they categorise it, people who need help to get
back into work, do you think the Government are engaging enough in these issues?
(Mr Faulkner) The Government are not sufficiently engaged in this issue of people who are often not
categorised as long-term unemployed, the people I am referring to as bouncing along the bottom of the
labour market, who are frequently in and out of it without anything being added. The difficulty is that the
present remit for Jobcentre Plus does not give them much scope to intervene and support those people.
Employers in the main, with some very honourable exceptions, have shown little willingness to invest in
those groups and build an organisation which accepts attrition and works on the principle of minimum input,
maximum output, change staff, use that as a way of maintaining productivity. Some active intervention in
that area is very important. The difficulty we face is that as you categorise and focus, one of the
difficulties is that there is a wide number of Government initiatives and even within New Deal a whole
variety of initiatives are already indicated and sometimes not sufficient clarity about how all the agencies
that operate in this field and how all the various areas of Government policy that influence it can be joined
together. It is exactly the same problem we have with a major commercial business. How do you make
people down there in the lower levels of organisation understand what the overall aims are and act in a way
that is consistent with it? Some of us operating in the field sometimes see Government policy that way.
This is not a strong criticism because it is almost inevitable. Progress is being made: we should just like the
progress to continue.

103. Staying at the macro level, you cite in your memorandum the situation in the United States where
they have had a pretty strong economy for a number of years, arguably since Greenspan came in in 1987,
yet they have had widening poverty. What are they doing in terms of active intervention through effective
labour market policies, if anything, at that macro level?
(Mr Faulkner) The structure of the United States is different to the extent that much less is done at a
national level and much more is done on a state by state basis. Certainly in my other company, Manpower,
we operate very strongly in the States, we sit, we have a representative on the National Labour Board, so
we are fairly familiar with what happens there. There is a lot of variation between States. There is more
engagement with the private sector, there are many more private sector companies involved in working
with heavily disadvantaged people within the community. In terms of the overall policy, there is still a
feeling in the United States of a free market in labour. One of the views I have tried to bring through
strongly here is that you cannot afford with employment as such a key component in overall economic and
social policy to leave it to the free market. It is one of the areas where policy intervention is very
important. The difficulty in the United States is that at the macro level there is insufficient policy
intervention and this is what has led to this widening poverty gap. The policy is to encourage those who
can access work, who can be economically successful: there is not sufficient willingness to do other than
to tackle after the event the problems of those left out rather than go back to roots and try to introduce
more prevention. This was the initial success of the New Deal, that in focusing initially on the 18-24-year
olds, it was a very good example of getting as close to the root as we can and building from there.

James Purnell
104. You said in your memorandum that you would like to see the Government continuing at an adequate
level of funding. Does that mean you think the current level of funding is adequate? Do you think there are
areas which should be expanded, areas which should be cut back in the light of a successful programme?
(Mr Faulkner) I would not be willing to answer the question: is the present level of funding adequate? It is
very difficult to put your arms around and say what the present level of funding is. I sit on the Central
London Learning and Skills Council, so I am fairly familiar with the Learning and Skills Council. It has a
massive budget nationally, which at first sight is a very substantial investment. When you sit on a local
Learning and Skills Council and you realise the amount of that money that is already committed to support
established institutions that require maintenance, when you look at the targets which are set and have to
be responded to, the amount of free money which is actually available to support innovation, to support
new local initiatives that are being developed, is actually very small. My answer to your question is: almost
certainly the total level of funding is likely to be sufficient without being able to put my own arms around it
and be quite sure about that. The amount that is available to do new things, to encourage people with
good ideas, to bring them forward and develop them in a supportive environment, is inadequate at present.

105. May we just dig into that? Just for the moment talking about the Jobcentre Plus/New Deal area of
the money and employment zones and action teams for jobs, if the money is following customers, will it
reflect the level of demand in the sense of the number of people coming through the door? Does that work
well, having the money following customers in that sense? Could we move more in that way or should there
be more money earmarked for innovation?
(Mr Faulkner) Those two do not contradict each other. As has been said in other submissions which you
will be tackling later this morning, if the Government identifies that organisations are truly producing the
right outputs, they are not just delivering services they are producing sustainable employees and those
organisations are supported, then the money following the individual will also encourage and support
innovation. It has to be managed effectively and this is true across wide areas of Government activity. The
Government needs—and again it is no different to private sector management—to give more freedom to
those who are close to the ground to develop solutions, but to be stronger in managing the outputs and
demanding of those organisations that what goes into original bids actually gets delivered two years down
the line.

106. How closely does the current situation conform to that? With all these different schemes is the
money going along the model you have just described or if we were interested in upscaling the model and
spreading the idea, more devolution of funding, more freedom for local areas, does the current funding
system allow that, or would we need to change that radically?
(Mr Faulkner) The employment zones and action teams are models that work extremely well. They have
considerable flexibility in them and they do not define the solution. New Deal—and we are currently going
through a round of bidding on a new round of private-sector-led New Deal, there is still excessive definition
of how the funding will be directed. Although there is funding there, there is also a strong definition of the
processes that clients must go through and that is restricting the ability of the people delivering, to do
what in our case we would really like to do with those clients.

107. Later in the inquiry we have a number of Government Departments to give evidence to us,
particularly round the area of co-ordination of Government initiatives. Are there any things you would like us
to ask them in particular?
(Mr Faulkner) The area I have already touched on is exactly how we can more effectively co-ordinate the
efforts. I should like to see more active engagement between those departments and some of those
organisations from which you are taking evidence this morning have actually demonstrated capability. We
have a great deal of experience and I have already indicated that I believe the Government's role is to
provide the environment and the policy framework to allow those who have the ground experience to
develop the solutions. I should like to see more of that done jointly. I contributed under New Deal to the
task force on lone parents and on job retention. Those were the two areas on which I worked. Those were
very valuable exercises in bringing together Government Departmental representatives who sat on those
and a number of organisations that could contribute in that area. I should like to see more of that being
done. I should also like to see more effective use of the output, because, as often happens, a lot of
recommendations which came through from those reports still sit in the reports rather than on the ground in
delivery.

108. Given your position on the Learning and Skills Council involved in delivery of employment programmes,
has the change in the organisation of the Department for Education and Employment, into having skills in
the Department for Education and Skills and employment policy in the Department for Work and Pensions,
split the employment side from the skills development side in an unhelpful way?
(Mr Faulkner) I must admit that in my own experience I see no evidence of that at the moment. It is early
days to make that judgement, but in the main I would say it is more positive than negative. We have seen
more clarity now of role.

109. Would you like to see some freedom for the Learning and Skills Councils? You say that a lot of the
money is already committed to sustaining institutions. Would you like to see them having more flexibility to
spread the money?
(Mr Faulkner) I should like to see them having more flexibility and I should like to see, and there is some
attempt to do this, a change in the balance of control between the central organisation in Coventry and
the individual Learning and Skills Councils. At the moment still too much is directed from the centre as a
matter of overall policy, which neglects the individual situation that each of them faces. We have some
excellent chairs and chief executives around the new LSCs and strong potential organisations. There is
some frustration with some of them that they do not have the freedom to put in place the solutions we
have already identified are needed in various areas where we operate.

110. In your memorandum you speak about the need for companies to invest in training in periods of
downturn in particular. Is that likely to happen, given that in a period of downturn people will be looking to
cut cost? How can that be encouraged perhaps through tax breaks? Could you tell us in particular about
the experience of Manpower with training IT workers in Glasgow and whether that could be spread more
widely?
(Mr Faulkner) If I take the first part of that, it is extremely difficult and it is very hard to see how the
Government can intervene very much to persuade private businesses to behave very differently. There is
an inevitable temptation when a business's profit is under pressure and the shareholders are shouting to
find areas to cut costs quickly. It has been a Manpower policy to strengthen our training during downturn
periods, because it does bring competitive advantage at the end of it. My own experience says that the
Government trying to incentivise that does not make a lot of difference. This is more a matter, particularly
through the DTI, of continuing to work with organisations like the CBI to try to get that message across to
management. It is more about communication than fiscal incentive in that particular area. As far as
Manpower's activity is concerned, this is an interesting illustration of exactly that challenge. We began a
programme to take long-term unemployed people and deliberately to take that mix of people from a wide
gender and racial base, whereas IT traditionally has been white male, if you look at the statistics of
employment in that territory. When we began we were in a very buoyant economy and we had a very, very
high level of employer engagement from a number of prominent IT companies. As we are moving now to
conclusion of that programme, we are finding it very difficult in the present environment, because we all
know the difficulties IT and telecom are facing, to maintain that engagement. The simple fact that most of
the senior executives who originally sponsored the programmes have now left those organisations is not
very helpful. This again brings me back to the point where Government providing the right framework is
critical because Government can provide a long-term view and maintain a strategy. I am afraid the private
sector will ebb and flow in their commitment according to the economic environment we are in. I do not
know that there is a lot we can do to manage that, other than to take organisations like Working Links, who
are working at ground level, to make sure that at least there is some flow of funding to maintain activity at
that level. We can engage with employers. Every piece of evidence that is being given this morning
emphasises the importance of programmes being employer led and organisations like ours being very close
to employers. The only thing I regret from the evidence is that it is surprising how little mention there is of
Jobcentre Plus in that. I think Jobcentre Plus has to be part of the vehicle for making that connection with
employers and we need to do more in that area.

Chairman
111. You seem to be embedded in the heart of policy as it is developing. Do you feel in your own
experience that you are listened to by the people who are developing this policy? The people in Jobcentre
Plus, the people in Adelphi House and folk of that nature? Do you feel that you are a voice that is being
heard at that level in the development of this policy?
(Mr Faulkner) We have a voice which is being heard. I do not think it is being heard sufficiently clearly.
The headlines are coming through; there is not sufficient opportunity to contribute actively to developing
some of the detail.

Mr Goodman
112. How do you think you have managed to take two private companies, elements of a departmental
agency and put them all together and make the whole thing work?
(Mr Faulkner) I have to be extremely honest about this. This is nothing to do with organisations, it is to
do with individuals. You can put names on it. Leigh Lewis, as Chief Executive of the Employment Service
and now Jobcentre Plus was absolutely committed to this concept and has championed throughout this
model of private and public sector working effectively together. Bill Cook, who headed up the government
division of Cap Gemini Ernst and Young was the person who had led their policy of supporting compulsory
competitive tendering in-house teams. He really believed strongly in what he was doing and I, as a senior
director of Manpower, had that same commitment. At that time I was holding a public affairs brief. I had
been very engaged with New Deal. You had three people all at a senior board level—chief executive in the
case of Leigh Lewis—actually committed and sitting around a table and saying "This you will do". Had it
been passed down as a contract opportunity to see whether we could work together to produce a joint bid,
if it had been done at the next level I think it would have failed.

113. How have you prevented internal tensions between the three elements?
(Mr Faulkner) To date we have managed internal tensions effectively. You have to bear in mind that
almost days before Working Links was formed two years ago, Ernst and Young merged with Cap Gemini and
our partner there became a French owned business. The French had some difficulty understanding the
concept of a public/private sector joint venture and why they had got involved in it. Those sorts of
tensions have arisen. The resilience is that the model is a very strong one. As we have brought other
managers from the organisation into it, two years down the road success does attract support. A lot of
people are now very willing to associate themselves with it, but I would say in the first six to 12 months,
any policy or development area really demands this. You have to have real champions at the senior level
and we were fortunate in having that, people who had the weight to push the decisions through.

114. What difficulties have you had in your relationship with the Department and Jobcentre Plus?
(Mr Faulkner) We have had relatively few relationship difficulties with Jobcentre Plus, although I would
have to say at a local level, some managers within Jobcentre Plus are uncertain as to whether they see us
as allies or enemies. Indeed, although Working Links has an arrangement with PCS, we are unionised as an
organisation and we have developed our strategy alongside PCS, because PCS policy is to oppose private
sector engagement in employment zones, there is that same tension: is this actually a threat to the public
service engagement long term in public service employment or will it actually support it? Our very strong
view is that it does support it. There are views within both the union and some of the middle management
of Jobcentre Plus that it is the reverse: it will eventually diminish public sector engagement in this area. Not
while I am Managing Director.

Chairman
115. Is sustainability important?
(Mr Faulkner) Sustainability is absolutely critical. One of the difficulties we face is that there are no good
mechanisms available to us through our public sector partners in this for measuring job sustainability beyond
13 weeks. That is too short a period. One of the other pieces of evidence before you today talks about
sustainability after 12 months. We would have great difficulty and would have to divert quite a lot of
funding, which we are not willing to do, to make that measure at present. There are no Government figures
available to us where we can readily check it. We believe that is probably the critical period. If we were to
say we were truly successful, we would want to know how many of those people we placed in work were
still not necessarily in the same job, but still active in the labour market 12 months later. In some of the
areas where we operate, we are exceeding 90 per cent job sustainability after 13 weeks. We are putting a
lot into aftercare opportunities. We are still in contact with both the employers and the individuals, but
frankly once we get six or nine months out we are beginning to lose sight. We think they are still there. If
we are truly successful they should still be there. We should like stronger measures.

116. Is there anything else you would like to add to the evidence you have given us this morning?
(Mr Faulkner) The only thing I should like to give emphasis to is that there is always a choice when you
are directing funding as to whether you direct it towards employers to encourage them to make jobs
available—and some of the subsidies within New Deal took that direction: let's make it easier for employers
to take people on—or whether that funding should be directed towards the individual, to support them back
into employment. We have the very strong view that it has to be focused towards the individual with
employer engagement through programmes like this and we do work very strongly with New Deal. You do
not develop a very strong commitment with those types of incentives which are directed towards the
employer. At the end of the day employers, particularly when economic conditions are difficult, want an
employee who fits the need and does the job. Someone who does not, but has a subsidy attached,
whether it is a tax break or a direct subsidy, is not attractive.

117. Yet the evidence is compelling and powerful, but how sui generis is it? If you had not got you, Leigh
Lewis and some understanding Frenchman who has stumbled into this partnership, could you do this again?
You say there are possibilities for expansion, but it is the actors on the stage who are so committed in
dragging this forward that you may say if you all decided to go and work in Spain and run your own
contracts then the thing might collapse.
(Mr Faulkner) No, the model is entirely replicable based on the experience we have gained. I doubt
whether we would have said that a year ago, because we were not far enough in to be confident that we
knew how we were operating and how we were bringing those two factors together. If you look at our
management structure today, it is very hard, as you look around the organisations, to know who comes
from private, who comes from public, within the business. We know how we got there and we could do it
again and we could do it again in education, we could do it again in other areas.

Chairman: Thank you very much. That has been very, very helpful. Thank you for appearing and thank
you for doing what you are doing.

© Parliamentary copyright 2002 Prepared 13 June 2002

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