The extension of the furlough scheme to September 2021 has meant that the real impact of the COVID-19 pandemic on employment is unclear. The Department for Work and Pensions (DWP) faces the challenge of monitoring this impact once furlough ends, to ensure it can adapt and provide the appropriate support to the right groups of people at the right time.

Today’s report by the National Audit Office (NAO) provides an overview of the impact of the pandemic on the labour market, how DWP responded to the pandemic, and how it supports claimants through its front-line jobcentres and work coaches. It sets out the challenges the Department faces given its need to develop employment support schemes rapidly and in the face of uncertainty around the impact of the pandemic on employment. The NAO will be reporting later on specific schemes, including Kickstart.

The Department increased spending on programmes to support people to work from £300 million last year (2020-21) to a forecast £2.5 billion this year (2021-22). These new programmes were set up at a time when the furlough scheme was due to end in October 2020, but the end to that scheme has since been extended to September 2021.

The new employment schemes were set up in the expectation that unemployment would rise significantly once furlough ended. However, the pandemic’s full impact on the labour market is not yet clear. Furlough has prevented much of the expected rise in unemployment, but unemployment, economic inactivity and the claimant count have risen and there are fewer vacancies in the economy. It is also not certain whether all people on furlough will return to work or what will happen when furlough ends. DWP may need to adapt its schemes as the full extent and nature of unemployment following the pandemic becomes clear.

So far, data from the Office for National Statistics suggests that the impact has been greater for groups who were already most likely to be unemployed before the pandemic1. Young people (age 16-24) had the highest unemployment rate at 14% in October-December of 2020. Within that group, young black people experienced the highest unemployment rate, reaching almost 42% – an increase of over 17% compared to the year before2.

DWP targeted its new employment support schemes at the newly unemployed and on avoiding the “scarring” impact of the recession, particularly for young people, having considered evidence from previous recessions and the early data from this one. Before the pandemic, DWP focused much of its support on disabled people, and people who had been unemployed for some time, or were not ready to work straight away.

DWP’s employment support is provided mostly to Universal Credit claimants and through jobcentres. The Department met its target to recruit an additional 13,500 work coaches in 2020-21, who work to match claimants to the most appropriate support. It has also increased the number of jobcentres. However, training and ensuring all these additional work coaches perform at the appropriate level is a significant challenge. In 2019, the NAO reported that DWP had limited ability to ensure consistency across jobcentres3 of work coaches’ performance and their judgement on the most appropriate support for each case. DWP has since implemented some better monitoring of work coach referrals and meetings with claimants.  

DWP aims to coordinate its national programmes with local skills and training, local job opportunities and employers’ priorities, and employment support provided by others. The NAO found that some local partner organisations would like greater transparency and data sharing about what the Department is doing for claimants locally.

DWP set up major new schemes such as Kickstart4 and Restart5 at pace so that they were ready for what had been the expected peak in unemployment. The NAO has previously found6 that implementing employment support programmes at speed can increase implementation challenges. It can make it difficult to ensure that schemes are appropriately targeted at the people that most need them. It can also make it harder to ensure that schemes create employment beyond what would have happened anyway. The NAO will be looking at how DWP has managed these risks in its future work.

Full report:  Employment support

Notes for Editors

1. This data represents the change between Oct-Dec 2019 and Oct-Dec 2020. The Office for National Statistics has found unemployment increased by 3.1% for 16-24 year olds, compared to 1.3% for the overall UK population during 2020. It increased by 3.7% for ethnic minorities and by 1.5% for disabled people. Data on unemployment is taken from the Office of National Statistics Labour Force Survey (LFS), May 2021 release.
2. Data on unemployment for 16-24 year olds by ethnicity is taken from an Office of National Statistics (ONS) Labour Force Survey (LFS) March 2021 data request release on unemployment by ethnicity. Data not seasonally adjusted.
3. Supporting disabled people to work, Session 2017–2019, HC 1991, National Audit Office, March 2019.
4. The Kickstart Scheme provides funding to create new jobs with employability support for 16 to 24 year olds on Universal Credit who are at risk of long term unemployment. It went live in September 2020 and is expected to end in December 2021. Our upcoming work will examine the Kickstart Scheme in more detail: https://www.nao.org.uk/work-in-progress/dwp-employment-support-the-kickstart-scheme/
5. The Restart Scheme will provide tailored support to help long term unemployed (those who have been out of work for at least 12 months) into sustained employment. It will go live in June 2021 and is expected to run until June 2024.
6. See Gaining and retaining a job: the Department for Work and Pensions’ support for disabled people, October 2005; Train to Gain: Developing the skills of the workforce, July 2009; The introduction of the Work Programme, January 2012; Preventing fraud in contracted employment programmes, May 2012; The Work Programme, June 2014; Outcome-based payment schemes: government’s use of payment by results, June 2015; Contracted out health and disability assessments, Jan 2016​; Supporting disabled people to work, March 2019​; The apprenticeships programme, March 2019.

About the NAO

The National Audit Office (NAO) scrutinises public spending for Parliament and is independent of government and the civil service. It helps Parliament hold government to account and it uses its insights to help people who manage and govern public bodies improve public services.

The Comptroller and Auditor General (C&AG), Gareth Davies, is an Officer of the House of Commons and leads the NAO. The NAO audits the financial accounts of departments and other public bodies. It also examines and report on the value for money of how public money has been spent.

In 2019, the NAO’s work led to a positive financial impact through reduced costs, improved service delivery, or other benefits to citizens, of £1.1 billion.