§ 3.25 a.m.
§ Mr. Robert Taylor (Croydon, North-West)
I am glad to have the opportunity to raise in this debate the question of the added expenditure, which we are expected to approve tonight under Class IV, Vote 15 and, in particular, that amount of money which comes under Subhead B and is to be voted to the Professional and Executive Recruitment Service. It amounts to only £730,000 but it also amounts to an increase of 14 per cent. over the original gross budget for this service, which amounted to £5,182,000, and it is over one-third of the net budgeted figure for this service, which I calculate by taking the figure of £5,182,000 and subtracting the anticipated fee income that the service is expected to obtain.
The subject of the Professional and Executive Recruitment Service has been closely scrutinised on a number of occasions by the Public Accounts Committee, of which I am a member. It was also the subject of criticism by a number of hon. Members when we debated the report of the Public Accounts Committee on 9th December last. I make no apology for returning to the subject this morning and declaring once again that I believe that this service should be disbanded, 1158 particularly when the Government are looking for economies in public expenditure, and that the placing of executive and professional people should be left to the established and experienced firms in the private sector.
If one examines the accounts that are before us, the first figure that strikes one under this subhead is that the fee income shows a substantial shortfall over the estimate. The fee income amounts to £2,940,000, and the estimated figure was £3,405,000. There is a shortfall of £465,000. That shortfall of income coming into the public funds is additional to the £730,000 that we are expected to vote tonight.
Again, if we examine these accounts from a different angle and compare them with last year's report of the Manpower Services Commission, which has a separate sub-account showing the detailed income and expenditure account of the Professional and Executive Recruitment Service, we see that the figures are more than disturbing. Although it is admitted that the fee income for the current year is up substantially, from £1.7 million to £2.9 million, the salaries and general expenses of this small service have increased from £2.7 million to £5.9 million. That is a very substantial increase.
While I know that the service is intending to expand in various parts of the country, I feel that the increase in the fee income should have been much more substantial for this expansion to be justified.
What it means is that apart from grants that the service is to obtain from other Government Departments, I calculate that the net loss has risen from £1,024,000 last year to £2,140,000 in the current year. I suggest that for this service, which has been established since 1973 and which was expected to be a profitable service, that deficit is unacceptable.
On 16th June, in the Public Accounts Committee, Mr. O'Brien, the head of the Manpower Services Commission, expressed the hope that the Professional and Executive Recruitment Service would break even by 1978—in other words, in the coming financial year. It would appear now that that hope is very unlikely to be realised. I asked Mr. 1159 O'Brien how the loses would be funded if they continued at the present rate, and he replied:We shall have to reconsider the future of the service.That was an admission that the future of the service is not sacrosanct, and that it could be re-examined. I hope that the Minister will announce such a re-examination in the light of that statement.
There is not a shred of evidence that any vacancies filled by the service would have remained empty had the service not existed. There is no evidence at all to suggest that different applicants would have filled the vacancies had the service not existed. It is very likely that if the right men have been placed in the right jobs by the service that would have occurred anyway had the matter been left to the private sector. Also, had it been left to the private sector the current year's losses of more than £2 million could have been made available for much more worthwhile projects in some other field where money is needed desperately. No one would have had less chance of being placed in a job if the placing had been left to the private sector.
I do not know whether the service is subject to a cash limit—I assume that it is—but it would seem that the cash limit has been broken, because it is unlikely that it would be more than last year's losses when the service is supposed to be breaking even. Does the Minister accept the statement of the Chairman of the Manpower Services Commission that the service should be carefully reviewed to see whether it should be continued? Will he say whether the service is subject to a cash limit, and whether this limit has been exceeded?
§ 3.34 a.m.
§ The Under-Secretary of State for Employment (Mr. John Golding)
With the permission of the House, I shall reply to the debate—and I am disappointed that no one has objected. This is an important subject, and I thank the hon. Member for Croydon, North-West (Mr. Taylor) for raising it. I am sorry that more hon. Members have not taken part in the debate.
Certainly, although nothing in politics or in social policy is sacrosanct, I do not think that any examination of the profes- 1160 sional and executive recruitment service would be undertaken with the view of discontinuing the service. It provides a service for many people that would not be provided by the private sector. Many people go to PER for assistance when private firms just would not bother with them. That is very important.
The hon. Member talked as though PER was an entirely new service. In fact, the public employment service, under the old Ministry of Labour, and later under the Department of Employment, has included a separate service for the recruitment of professional executive and technical staffs since the end of the war. I think it was Ernest Bevin who decided to create such a service.
It is wrong to imagine that PER is an entirely new venture that has existed for only the last two or three years, since the modernisation of the employment service. PER has the benefit of many years experience in the public sector, and we believe that this experience has been put to good use in modernising and developing the old service and equipping itself to operate more effectively in the highly specialised competitive business of management recruitment.
When I visited the PER offices in Manchester on Friday morning, I was pleased to find the organisation most impressive. I was pleased, also, to learn that the shrieks from private placing agencies are becoming louder. The greater the resistance to the existence of this organisation by private agencies, the greater must be its success.
§ Mr. Robert Taylor
Is it not obvious that the shrieks from the private sector are probably because this agency is not funding itself but is being totally subsidised by the taxpayer, and that in many cases the private agencies that are successful and profitable find that the taxes they pay are used to subsidise this loss-making service?
§ Mr. Golding
I hear what the hon. Gentleman says, but I shall come to the figures to show that that is not the case
1161 It was in 1973 that the service underwent a radical reorganisation, with two main objectives in mind—first, to get a larger share of the work, to take work from the private agencies, and, secondly, to reduce the cost to public funds. I am sure that the hon. Gentleman would support that.
The number of vacancies notified by employers to the old service—and I emphasise "the old service"—did not keep pace with the rapidly increasing volume of applicants, and too often the old service was looked upon primarily as a job-finding agency for unemployed managers rather than, in addition, an agency to provide a recruitment service for employers. The only way for the service to become more effective was to put it on to a commercial fee-charging basis, to equip it with modern computer techniques, to speed up the selection process, and to reorganise its internal management and staff structure.
All that was clearly going to cost more money, but the old service was already costing 10 times more for placing than the general employment service, and the increase in cost could be met only by charging employers. With large numbers of employers using the service and with the prospect of more vacancies being achieved, the aim of the new service was to be financially self-sufficient within three years. In spite of the world recession, which has led to such high unemployment, PER has finally established itself in a competitive field and is currently earning more than £2 million a year in fees.
Recruitment services provided for employers have been developed in a number of ways. A recruitment advertising service has been introduced and an interview service has been developed which produces a final short list of applicants selected as suitable for a vacancy. A special unit has been set up for the recruitment of executive secretaries and a salary advisory service has been established through the regular publication of statistical data on the range of salaries offered in different occupations.
The range of services has also been extended for those looking for appointments. More information is available to them now than ever before. There are group seminars about employment and 1162 training opportunities, Training consultants help in identifying training needs and there are self-presentation courses to help candidates.
Apart from these improvements and despite the general reduction of the levels of recruitment, there has been a gradual and consistent improvement in the number of vacancies filled, as a proportion of those notified. The proportion is now about 25 per cent., and we realise that it will have to be increased if the service is to become financially self-sufficient. After about £2 million has been disregarded to cover the social obligations, it is estimated that the deficit will be about £400,000 this year. This compares with a deficit of £609,000 last year and £1 million in 1974/75. At the risk of being told off for being tediously repetitive, I think that I should repeat those figures.
§ Mr. Robert Taylor
What is the total amount, in each of those years of subvention from other Government Departments? The figures that the Minister has given are not the same as those received from the PAC, which indicated that last year's subvention was more than £1.1 million.
§ Mr. Golding
The figures that I have been given show that the subvention to cover the cost of the PER's social services is running at just over £2 million. It is estimated that this year's deficit will be £400,000, compared with £609,000 last year and £1 million in 1974–75. The PER expects that this improvement will continue next year, when the deficit is expected to be about £100,000. There has been a continuing improvement in the financial position, from a deficit of £1 million in 1974–75 to an estimated deficit of £100,000 in 1977–78.
I strongly support this subvention. It is important that there should be a State agency that is prepared to help unemployed professional and executive people to become more employable. One would not expect that service automatically to be provided by a commercial organisation. It is essential that it should be provided by a State system.
The Public Accounts Committee referred to PER in its Sixth Report and expressed some doubts about the service in its present form. In particular, there was some concern about the provision of 1163 office accommodation that was separate from the general employment service and about some of the criteria for assessing the amount of social subvention. The Committee therefore recommended that my Department should reconsider with the MSC and Treasury the justification of the service in its present form and the posibility of carrying out its work at the new job centres. I understood that the criticisms were not of the existence of the service itself but of the form in which it was being provided.
§ Mr. Robert Taylor
I selected by words carefully. I said that the Public Accounts Committee scrutinised the service, and added that there was criticism from hon. Members in this House during the debate of 9th December. Several of them said, as I have said tonight, that the service was superfluous.
§ Mr. Golding
Some Opposition Members would oppose any State service if it were to take one penny piece from the pockets of private individuals who were in the business purely for profit.
The Committee suggested that the working of the service should be examined—that is always worth while in any Government Department—but the Committee did not suggest that the service should be discontinued. The Commission has recently reviewed the PER and has accepted the need for it to become financially self-supporting within the next two or three years. It will be closely monitoring the performance of the PER during that period and has set up a special committee under the Chairman of the Commission for that purpose.
As for merging the PER with job-centre services, the Commission believes that since this would mean abandoning fee charging and thus lead to a net increase in public expenditure, and since it is difficult to assess PER's prospects at present, it would be wrong to make such change at this stage. However, the Commission, with the Department and the Treasury, is now reviewing the social subvention and the financial and other implications of such a merger. It would be wrong for me to prejudge its findings or to anticipate what it will say.
We should not forget the solid achievements so far. The PER has faced and still faces considerable difficulties since 1164 it was reorganised, which are none of its own making. Its staff have worked long and hard to develop a much more sophisticated and comprehensive service and the range and coverage of its facilities are second to none. Although the financial objective has not yet been met, the PER has succeeded in providing a greatly improved public employment and recruitment service at substantially less cost to public funds than the service it superseded. That is a creditable achievement.
I look forward to the time when the PER provides even fiercer competition for private agencies. I am certain that that day will come. Following my visit to Manchester I believe that the PER has a dedicated staff who are determined to make this State service a great credit to us all.