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Employment (Work Experience Schemes)

Volume 13: debated on Thursday 26 November 1981

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Motion made, and Question proposed, That this House do now adjourn.— [Mr. David Hunt.]

10.12 pm

I am grateful for the opportunity to bring the case of my constituent, Mr. Eric Donnelly, to the attention of the House, since I believe that his case is not only important to him and his future but has national implications.

Mr. Donnelly wrote to me on 3 October saying that he had been employed by Milletts in Swindon from 8 October 1979 until 26 September 1981, when he was made redundant, just a few days before completion of two years' service and thereby disqualified from receiving redundancy pay. However, on the day that he received his notice of dismissal he learnt that a young person was being interviewed by the firm under the youth opportunities programme. He found that situation curious, to say the least.

The reason given by Milletts for Mr. Donnelly's dismissal was that the company was experiencing adverse trading conditions. It is clear that Mr. Donnelly was a satisfactory employee, since the letter from Milletts informing him that he was redundant thanked him for his services and indicated that he would be considered for reemployment if trading conditions improved. Furthermore, Mr. Donnelly had gained a certificate from Milletts, following training in Reading, to show that he had completed the course satisfactorily.

I was naturally concerned about his case, especially as fears have been expressed by individual trade unions, the TUC and young people in my constituency and elsewhere that the youth opportunities programme is being abused by some employers who are sacking full-time employees and replacing them with YOP trainees.

I referred the case in the first instance to the Secretary of State, who passed it on to the Manpower Services Commission for investigation. The commission, to its great credit, carried out a thorough investigation. The chairman, Sir Richard O'Brien, wrote to me on 16 November to confirm that the work experience trainee who had been taken on by Milletts was displacing a permanent employee, contrary to the terms of the agreement between the commission and the scheme's sponsor.

Sir Richard's letter is as follows:
"Dear Mr. Stoddart,
Thank you for your letter of 6 October to Norman Tebbit enclosing correspondence from your constituent, Mr. E. Donnelly of 37 Elmina Road, Swindon who had been made redundant from Milletts in Swindon. Mr. Donnelly believed he had been replaced by a young person on a work experience scheme under the youth opportunities programme. As you know, your letter has been passed to me for reply, since the Manpower Services Commission is responsible for the programme.
I am sorry for the delay in answering your letter but in view of the seriousness of the allegation, I asked my staff to make a thorough investigation. As a result of this investigation it seems clear that the work experience trainee was"——
and "was" is underlined—
"displacing a permanent employee contrary to the terms of the agreement between the MSC and the scheme sponsor. As a result, we have had to give the sponsor a month's notice of closure of the scheme during which time another placement will be found for the young person at present on the scheme.
I am grateful to you for writing to me on this matter. As a result of this enquiry we are looking carefully into the position of schemes operating in Millett shops in other areas. I realise that this does not help Mr. Donnelly but at least he will know that the MSC takes a very serious view of such substitution and will not allow schemes to continue where there is sufficient evidence that substitution is taking place. I hope it will not be long before he is able to find alternative employment."
When I read that letter from Sir Richard I was appalled and angry to find that the youth opportunities programme, which I support absolutely, had been abused by an employer of some national repute to the serious detriment of my constituent.

Naturally, I wrote to Mr. Donnelly informing him of the outcome of the investigation into his complaint. I advised him that he could be successful if he decided to proceed with a case against Milletts on the ground of unfair dismissal. That is a course of action that he has decided to consider together with his legal advisers. In the meantime he is still unemployed, in spite of the fact that he searches day by day for new employment and spends his evenings studying art and design.

I am sure that all hon. Members will sympathise with Mr. Donnelly for the shabby and disgraceful way in which he has been treated by his former employer, who deprived him of his job and ensured that he should receive no compensation through redundancy payments.

The case has even wider implications. In the debate on the young persons' scheme on 16 November my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) said:
"it is believed that in too many places youngsters are being used in a productive capacity. I say 'believed' because the truth is hard to find."—[Official Report, 16 November 1981; Vol. 13, c. 126.]
Due to the diligence of the commission, the truth has been found in Mr. Donnelly's case. It seems that Milletts was prepared to abuse the scheme for its own profit at the expense of a full-time worker and at significant cost to the taxpayer.

Mr. Donnelly was paid a gross wage of £62 a week, on top of which is the employers' national insurance contribution. The saving to Milletts is £70 a week or £3,640 a year. The cost to the taxpayer, even at the present inadequate rate of £23·50 a week paid to YOP trainees, amounts to £1,222 a year. To provide the firm with an additional profit of £3,640 a year an adult worker has been sacrificed to the dole queue and the taxpayer is being milked of £1,222 a year.

In addition to the debate to which my hon. Friend referred, there was another debate on the YOP scheme in which I participated. I named firms in the high street that were abusing the scheme. The Minister denied it. Since that debate, I have received letters of support from all over the country confirming what is going on. What are the Government planning to do about it? Will they stop the abuse or allow it to continue?

I have heard of that useful debate. It brought abuses to light. I understand that my hon. Friend the Member for Ashfield (Mr. Haynes) received a letter from one of my constituents naming another firm in my constituency. Perhaps my hon. Friend will send me a copy of that letter. I shall ask the Minister what he intends to do about the case that I have described and other abuses of the scheme.

I was referring to Milletts and the milking of the taxpayer. That milking can only be described as fraud. It is nothing less than fraud. If a claimant of supplementary benefit, unemployment benefit or any other State benefit cheated the taxpayer out of a similar amount, he or she would be clapped in gaol. I know of a case in my constituency where the amount involved was much less than £1,222 and the person concerned has been gaoled.

The fraudulent conversion of taxpayers' money is bad enough, but it is only one aspect. If the youth opportunities programme is to succeed in its objectives, everybody must have confidence in it and be certain that it is not abused by unscrupulous employers. I am sure that the Minister will agree.

There is a widespread feeling among young people that they are being used as cheap labour and that they might be doing their older brethren out of jobs. There is a growing suspicion among older workers who fear that their jobs are in peril. The honest and public-spirited employer must think that the abuse of the scheme by rogue employers will result in unfair competition. Unless the fears can be allayed by Government action, the work experience scheme is bound to run into trouble. We all wish to avoid that.

I appreciate and accept that the huge majority of firms co-operating in the scheme are entirely honest and are participating solely to assist young unemployed people. I emphasise that and make it clear that that is my view. It is important to them that the black sheep in their ranks should be rooted out and dealt with.

It is also necessary to deter firms that wish to take part in the scheme for their own profit in a similar manner to Milletts. I hope that the Minister will outline the additional measures that he intends to introduce to prevent such abuses in future.

I realise that this is a voluntary scheme, but I hope that consideration will be given to the possibility of prosecuting firms that convert moneys allocated under the scheme to their own profit. That is one of my suggestions to the Minister.

The Minister might also consider whether victims of abuses of the scheme might be awarded levels of compensation for unfair dismissal that would be penal for the employers. After all, the Secretary of State announced on Monday of this week that he would introduce substantially increased compensation in other areas of unfair dismissal. Therefore, that should be possible. I sincerely hope that the right hon. Gentleman will consider that aspect seriously.

I hope that the trade unions and individual employees will be given a greater say in the monitoring of schemes not only on a national or regional basis but on a local firm-by-firm basis. I expect, too, that local offices of the Manpower Services Commission will be asked to ensure, when agreeing to schemes with sponsors, that there is no possibility of a full-time employee being displaced by a YOP trainee. The right hon. Gentleman and his right hon. Friend the Secretary of State should ensure that adequate staff are available to the MSC for that task.

I urge the right hon. Gentleman to bear in mind Mr. Donnelly's case when putting the new young workers' scheme into operation. I hope that he will heed the warning sounded by my hon. Friend the Member for Flint, East (Mr. Jones) in the debate on the scheme on 16 November when he drew attention to the possibility of similar abuses being perpetrated.

I pay tribute to Sir Richard O'Brien and his staff at the MSC for the speed and depth of their investigation and for the directness with which the results were reported to me. It is important that the MSC should be seen to be open and even-handed in its operations. It has come up to my expectations in this case.

I repeat, Mr. Donnelly's case has angered me considerably. One cannot help feeling uneasy at the thought that, but for the youth opportunities programme, he would still be in a full-time job. That should worry us all. Therefore, I sincerely trust that the Minister will join me tonight in forthright condemnation of Milletts for its duplicity and action in bringing into disrepute the YOP, which he and I and the whole House support. I also hope that he will do everything through his Department to find Mr. Donnelly other employment and to obtain redress for the shameful manner in which he has been treated.

10.28 pm

I am glad that the hon. Member for Swindon (Mr. Stoddart) has found an opportunity of raising this important matter this evening. The Government are well aware of the considerable concern that is being expressed by trade unionists and others about substitution in YOP, and I welcome the opportunity of discussing the matter and of hearing what the hon. Gentleman has had to say about this particularly unpleasant and regrettable case. In fact, I hope to show that the case confirms the correctness of the action that everyone has subsequently taken. The Government naturally have nothing to hide on this issue, but we all have something to learn from it.

I want to, deal first with the general question of displacement, of which this case is an example and then move on to look at this particular case the hon. Member raises, the case of Mr. Donnelly.

First, I shall define displacement. Displacement is one facet of a larger question, which can be described as the replacement of normal employees in a business by YOP trainees. That replacement can be one of two types. First, there is a factor that is sometimes called "deadweight". That is the extent to which an employer recruits YOP trainees instead of permanent recruits in the YOP age range of the under-18s. Secondly, there is the use of YOP trainees instead of permanent recruits aged 18 and over, which is termed substitution. Both facets of displacement can, of course, occur at the point of recruitment, without obvious or verifiable breach of YOP rules.

There is also the form of substitution that occurs—of which Mr. Donnelly's case is an unhappy example—when a full-time employee is dismissed to make way for the subsequent recruitment of a YOP trainee.

Those are the two components of a problem that can arise where YOP schemes are sponsored. The next job is to assess the extent of the problem. A survey of YOP work sponsors in 1980 showed that the level of deadweight was 24 per cent. and that the level of substitution of both kinds was 5 per cent. giving a total of 29 per cent. in that part of the programme. Those are the proportions in the work experience element of the YOP scheme.

Displacement is not considered by the Manpower Services Commission to be a problem in other sectors of the programme, and we can see why. Community projects and training workshops are usually set up specifically in the YOP context and there are no pre-existing employees for whom they might be substituted. In view of the amount of work experience in the programme, we can say that displacement over the programme as a whole is about 20 per cent.

That was in 1980. A more recent survey, held in May this year, has found that the levels of substitution had not changed significantly, although the programme has more than doubled in size.

So we find that about 20 per cent. of YOP places may be displacing someone else from more permanent employment. But that does not necessarily imply that that is the proportion of jobs lost. Sponsors may be substituting, not by having a YOP trainee instead of one permanent employee, but by using the period on work experience as an induction period, with training paid by the Government, before offering suitable young people permanent jobs. In short, there is no simple way to define the problem of substitution, nor can we arrive at really accurate estimates of its level. It is as well to remember that YOP can also lead to the creation of new job openings for trainees and has real employment advantages for those taking part. In dealing with a negative aspect of the programme this evening, we must not lose sight of its positive advantages—which are considerable—and which were endorsed by the hon. Gentleman.

However, we accept that substitution exists, and that it is a valid cause for concern. Indeed, I share that concern. The credibility of the programme as a whole is put at risk by employers who abuse it in that way, and I value the YOP too highly to see it being damaged.

One reason why I am not anxious to pursue the course of action recommended by the hon. Gentleman to deal with the recalcitrant and unrepresentative minority—that of strong penal sanctions—is that it would deter the majority of bona fide and honest potential sponsors from running the risk and coming forward.

Against that background, I turn to the practical steps that we are taking to combat substitution, about which the hon. Gentleman wished to have some advice. The first action that we take comes when a potential sponsor first approaches the MSC with an inquiry or application for sponsorship. The commission's staff draw to the employer's attention the rule that YOP trainees must be supernumerary—addition to normal staffing requirements. The sponsor is visited by MSC staff and the opportunity is taken to explain how the programme works and what its aims are. Inquiries are made at local jobcentres and careers offices to check the sponsor's normal pattern of vacancies and to see whether there has been a change in the recent past.

Finally, it is required that relevant trade unions should be consulted by the sponsor and their views taken into account before he proceeds with his application. In the case of establishments where there are no trade unions, the MSC is in the process of agreeing a procedure whereby scheme proposals are notified to its area boards, which can ask for more information if board members have any doubts about the application. In some sectors, for example, agriculture, special arrangements also exist whereby the relevant trade union and the employers' organisation are consulted locally about applications.

So much for the launching of new schemes. The MSC also takes action to prevent abuse on existing schemes. They are monitored by MSC staff to ensure that the sponsor is operating them correctly. The hon. Gentleman may like to know that in October no fewer than 9,500 schemes had monitoring visits from MSC staff. That is the highest monthly total ever—it is substantial—and is strong evidence of our desire to prevent such abuse. Furthermore, our monitoring procedures were reviewed and amended as recently as September to concentrate on those schemes that seemed to be most at risk or most in need of advice.

If it is established that abuse of a particular scheme is occurring, the commission will immediately withdraw the scheme in accordance with the terms of the legal agreement between the sponsor and the MSC. However, allegations of displacement are, alas, easier to make than prove, and a lot of work is involved in establishing misuse of the YOP. We are particularly grateful to those who draw doubtful schemes to the MSC's attention and to hon. members like the hon. Gentleman who bring matters to our attention.

I have just mentioned some ways in which substitution can be controlled, but we have also felt the need for a thorough investigation of the MSC's operating procedures of the YOP to see whether we can identify new ways to tackle the problem and to intensify our present efforts. I am glad to say that such a review has recently been carried out and a report on it prepared. The report has now been submitted by the authors to the MSC, which is studying the recommendations; indeed I am advised that action on some recommendations is already being taken.

Of course, this is a report on operational matters, and it is, therefore, of concern mostly to the MSC, but my colleagues and I expect to learn something of what it has to say shortly. However, I know that among the wide range of areas tackled, the problem of displacement and how to curtail it has received careful and specific attention. The key here, I am advised, is monitoring schemes once they have been set up, because it is when they are running that we can most clearly assess the use the sponsor is making of the trainee. I look forward to seeing the details of how the MSC propose to improve its efforts, but for the present I can assure the hon. Gentleman that that aspect has been thoroughly investigated.

However, in the longer term there is another very most important way in which abuse of the YOP can be tackled, and here the efforts that the MSC is making to improve the training quality of the programme are particularly relevant. As the degree to training improves—as release to off-the-job training increases and as the progression from one element of the programme to another or from one small works experience scheme to another increases—the chances of an employer being able to abuse the programme by using a work experience trainee for full-time, substitutionary work will diminish, because he will be, in a sense, a bird of passage, moving from one part of the scheme to another.

Hon. Members will know that in a statement to the House on 27 July the Prime Minister said that we were looking at an improved training programme that would eventually replace the existing YOP. In fact, I think that the YOP is already developing towards that programme and control of displacement—substitution is part of the present process of qualitative improvement. Our aim is a training programme, with the accent on training first and last, and my right hon. Friend the Secretary of State will be making an announcement about that shortly.

I turn to the case raised by the hon. Gentleman on behalf of Mr. E. Donnelly of Swindon. Mr. Donnelly, as the hon. Member already told us, was employed by Milletts, the camping goods shop in Swindon. On 8 September he was told that he was to be made redundant, and he finished work on 26 September. On 29 September, a YOP trainee started on a work experience scheme at Milletts. The scheme had been approved earlier, on 12 August. Mr. Donnelly wrote to the hon. Gentleman who wrote to my right hon. Friend the Secretary of State.

A full investigation was made by MSC staff of the Bristol area office, and it became clear that substitution of the worst sort had indeed occurred. Accordingly, the sponsor was given one month's notice of termination of the scheme, during which time efforts would be made to place the trainee on another scheme. I am pleased to say that the scheme at Milletts has closed and the trainee in question has moved to another.

I do not think that it would be proper for me to say any more about Mr. Donnelly's position, as I understand he may be taking his case to an industrial tribunal.

What lessons can we learn from what has happened? I think that there are several. First, there is a need for that continual monitoring and checking both of existing and proposed schemes which I have already referred to. I must emphasise that this is no easy task—there are about 160,000 schemes in existence and proper oversight of them calls for the very best use of inescapably scarce staff and resources. The recently completed review of the management of the YOP indicates the importance the MSC and the Government attach to the monitoring.

Secondly, it is clear that when cases of suspected abuse are raised, the review procedure does work and the abuse in this instance has been identified and stopped.

Thirdly, YOP is a collaborative venture. The Government provide the money, the MSC provides organisational support and operating guidelines, and the sponsors, the trainees and the community at large provide the programme. It is in all our best interests if the YOP is not discredited by misuse such as substitution and displacement, and, although the MSC is quick to respond, it is also the duty of all concerned with the programme to help it operate in the way intended.

I have no doubt that the publicity attending the debate, and the hon. Gentleman's representations, will assist in achieving a wider awareness of the potential for abuse and the way it can be nipped in the bud—

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at eighteen minutes to Eleven o'clock.