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Job Seeker's Allowance

New Deal (UK)

This page is about the UK programme of government policies. For United States President Franklin D. Roosevelt's legislative agenda see New Deal
The New Deal is a programme of active labour market policies introduced in the United Kingdom by the Labour government in 1998, initially funded by a one off £5bn windfall tax on privatised utility companies. The stated purpose is to reduce unemployment by providing training, subsidised employment and voluntary work to the unemployed. Spending on the New Deal was £1.3 billion in 2001.

The New Deal architecture was devised by LSE Professor Richard Layard, who has since been elevated to the House of Lords as a Labour peer. It was based on similar active labour market policies in Sweden, which Layard has spent much of his academic career studying.


The New Deal introduced the ability to withdraw benefits from those who refused "reasonable employment". A complementary project was introduced in 1999, the Working Families Tax Credit. This is a tax credit scheme for low income workers which provides an incentive to work, and to continue in work.

Professor Richard Beaudry, from the Department of Economics at the University of York, defined as follows the New Deal in a 2002 paper, Workfare and Welfare: Britain’s New Deal (pp.8-9) : "The New Deal reforms promise eventual reform of welfare assistance for all benefit recipients."

Although originally piloted on the youth unemployed (18-24 year olds), the New Deal programmes have now been expanded to include many different groups. These include:

New Deal for Young People (NDYP) – has received by far the greatest proportion of New Deal funding (£3.15 billion through to 2002 ). It is targeted to unemployed youth (aged 18-24) who have been unemployed for 6 months or longer.

New Deal 25+ – is targeted to adults (aged 25+) who have been unemployed for eighteen months or more. In terms of funding, £350 million was allocated through to 2002.

New Deal for Lone Parents – addresses, as the name suggests, the employment reintegration needs of single parents with school age children. £200 million has been directly allocated to the program, not including additional assistance for child-care.

New Deal for the Disabled – assists those receiving disability benefits to return to work. £200 million has been budgeted for this program through 2002 (Peck, “Workfare” 304-305).

New Deal 50+ - for those aged 50 year old and above.

New Deal for Musicians - for aspiring unemployed musicians.

The greatest emphasis of the government so far has been the NDYP, which is obviously being used as a pilot phase for the more ambitious New Deal reforms with other groups. The NDYP begins with an initial counselling session, referred to as Gateway, that focuses on improving job search and interview skills. This training is provided by an external organisation such as CSV, YMCA Training or A4e. If the search for employment is still unsuccessful after the Gateway sessions, in order to receive benefits, one of four options must be chosen:

• A subsidised job placement. The subsidy is £60 per week, and lasts 6 months; a £750 training allowance is also available to participants. Clients are paid a wage from the employer.

• Full-time education and training, for up to 12 months.

• Work in the voluntary sector, the client is paid the equivalent of the JSA and an income top up of around £15.

• Work with the Environmental Task Force.(DWP website; Peck, “Workfare” 304; Glyn 53)

Participation in one of the four options is mandatory in order to receive benefits, refusal to participate will lead either to a reduction or suspension of benefits.


Critics claim that participants fail to see the value in the programmes, and the programmes are not effective in equipping participants for work. Critics have tried to establish that attendees often end up feeling less motivated than they did to begin with. The sufficiency of the staffing for these programs has also been called into question. Large scale resentment of the New Deal stems from the perception that it is not aid at all, instead being a way for the government to pressure people into the labour force.

Another criticism is that unemployed people attending the Options stage of the NDYP are not counted towards the Government's official figures for people of working age who are claiming unemployment benefit. Some say that New Deal was designed with this in mind, to allow the Government to release lower figures for unemployment. However the NDYP has led to a considerable decrease in JSA claims for 18-24 year olds.

More criticism about New Deal is the Gateway To Work two week course towards the end of the Gateway stage of New Deal. Even though new participants see the course as helpful in the search for employment, other participants who have done the course before see it as pointless and a waste of time if they have already attended it but are forced to go on it in order to continue claiming Job Seeker's Allowance. The Option stage has also drawn a lot of criticism since this stage is when the New Deal puts participants with a training provider to find them work placements. This stage lasts for 13 weeks and it has been known that the work placements see the participants as basically free labour and don't bother hiring them after the Option stage is finished. This stage has also been criticised by participants who the New Deal makes them work full time with the work placements for only £60 a week and thinks that they should only work part time in order to get better experience, though it depends on which Option the client is participating in.

Further criticisms have been aimed at the increasing number of 'retreads' on the NDYP. Figures suggest that around one third of all NDYP clients have returned to the program for a second time after another 6 month period of sustained unemployment. Whether the figure of a third displays the program's success is debatable.


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