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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 pandemic. 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 jobcentres 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 Kickstart and Restart at pace so that they were ready for what had been the expected peak in unemployment. The NAO has previously found 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.

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