UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 281-xvi

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

WELSH AFFAIRS COMMITTEE

Globalisation and its impact on Wales

Tuesday 17 July 2007

CAROLINE FLINT MP and MR BILL WELLS

Evidence heard in Public Questions 1216 - 1266

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Welsh Affairs Committee

on Tuesday 17 July 2007

Members present

Dr Hywel Francis, in the Chair

David T C Davies

Mr David Jones

Mr Martyn Jones

Hywel Williams

________________

Memorandum submitted by MOS-EWR

Examination of Witnesses

Witnesses: Caroline Flint MP, Minister of State for Employment and Welfare Reform, and Mr Bill Wells, Economy and Labour Market Divisional Manager, gave evidence.

Q1216 Chairman: Good morning, welcome and welcome back. Could you, for the record, introduce yourselves, please?

Caroline Flint: Caroline Flint, Minister of State for Employment and Welfare reform.

Mr Wells: I am Bill Wells; I head the Economy and Labour Market Division.

Q1217 Chairman: Thank you very much for your memorandum; I know it was your predecessor who sent it to us, please convey to him our thanks for it, it was very helpful in preparing for this session. In the memorandum it refers to seizing the opportunities provided by globalisation; could you explain what you mean by seizing the opportunities on the part of Wales and to what extent these could be long term opportunities?

Caroline Flint: My understanding is that Wales actually out-performs the UK as a whole in terms of its ability both to access inward investment and also to break into some of the new areas where the jobs are. For example, the area of services accounts for almost 80% of employment in Wales, so for Wales clearly things are positive in that respect but to keep up there is a need to even more so make sure that people are equipped with the skills to compete in the high skill service areas such as IT, finance, energy and telecoms. That is something for Wales as it is for the rest of the United Kingdom. Clearly, Wales, in the same way as England, Scotland and Northern Ireland too, cannot compete with low-wage economies; where our strengths have to lie is in developing the knowledge of our workforce, the skills of our workforce and the macroeconomic policies of that sort of economy in which we have all seen, undoubtedly, whichever party you are in, huge growth in terms of employment in Wales and elsewhere in Great Britain.

Q1218 Chairman: We tend to use the word "challenge" rather loosely and very often it is euphemistic for problems. Could you tell us what are the challenges or problems for globalisation in terms of Wales' future?

Caroline Flint: Firstly, for the record, the employment rate in Wales has been going up as with other parts of the United Kingdom and that is very much to be welcomed, it is 71.7% at the moment compared to 74.3% in the UK as a whole, but I have to say the rate of employment has been going up faster in Wales than in other parts of Great Britain. In terms of the challenges, chairman, particularly there are those issues around those people who are not actively seeking work and that is one of the areas in which we are trying to look at how we can best support people, whether they are lone parents, whether they are people on incapacity benefit or supporting people with disabilities who want to work about how better we can enable those groups to fulfil what they want to do because most of them want to work. Certainly, there are a number of the different policies in Wales - for example Jobcentre Plus are working with the Welsh Assembly and others in partnership to try and address particularly in those areas how we can help those people move into the market too. That is a challenge. My own constituency in Don Valley is a constituency in Doncaster and South Yorkshire that for many, many years relied on mining as its major industry and so I have some common understanding with parts of Wales that have seen industries like that decline and the impact on, for example, claimants on incapacity benefit. Those are the particular challenges that we face.

Q1219 Chairman: Following on from that, Yorkshire in some respects is very similar to Wales in the sense that it is very difficult to describe one Welsh economy in the sense that there is more than one Yorkshire economy. How do you define the differing challenges in different parts of Wales in terms of globalisation and its impact on the labour market in the different regional economies of Wales?

Caroline Flint: It is about recognising that there are areas that do face different challenges, but even in the areas where we have had the lowest employment rates and the highest numbers in terms of claiming non-employment benefits we have seen some progress - in fact I think I am right in saying that the rate of progress has been faster than in terms of other groups. Having said that, though, there are still some considerable barriers and that is why we have been working through the Deprived Areas Fund which gives resources to job centre managers, working with others to more flexibly apply that resource in particular areas. It is applied to 166 of the poorest wards in Wales to support particular activities in those areas. We have a City Strategy Partnership that is operating in two parts of Wales: the Heads of Valley is one partnership; Rhyl is another partnership, where through consortia we are providing some additional resource to try and see whether there can be more customised approaches in terms of employment programmes for the particular challenges in those neighbourhoods to address. It is that flexibility, not a one size fits all, whilst at the same time recognising that some of our national policies in relation to pathways to work and similar support have a role as well. Beyond that we are looking more closely at a much more personalised, customised approach where there still are challenges in terms of improving the employment rate, particularly those who are on the books as not active for work and how best we can support them.

Q1220 Hywel Williams: Thinking about the regional aspect of the economy within Wales, some people point to a weakness in some aspects of the public sector that is very large and the private sector that is relatively small, which is certainly the case in the area of Wales that I represent. Does the government here in Westminster have any view on that particular aspect of the Welsh economy; if you have what is it and what are you actually going to do about it, if anything?

Caroline Flint: It is about trying to provide that mix; the public sector is very important in terms of employment and the Government has invested resource into public sector spending, whether it is in health or education or other parts of the public sector, which I think is to be welcomed. At the same time, investment in the private sector and developing new jobs is clearly important too and the combinations by which we deal with that are first of all how do we develop the skill bases that are needed for those different sectors, how do we deal with investment, both investment that we have got within our country but also inward investment as well to make sure we can take on these different opportunities. Again, the partnership work through the City Strategy is about getting a consortium of people together from the public and private sector and agencies such as Jobcentre Plus and voluntary organisations as well to see how much we can capitalise, for example, on enabling some of the people that we have got on our books as customers to get into some of those jobs in the private sector as well as the public sector too.

Q1221 Hywel Williams: City Strategy might not be a particularly good name for the area in Wales that it covers. Do you have a corresponding rural strategy?

Caroline Flint: You are quite right to point that out because we have a number of city strategy pathfinders and the first thing I discovered is that some of them are actually not cities. For example, the Heads of the Valleys Strategy clearly is not just a city-based approach, but being only ten days into the department it is a term we have used but actually it is not exclusive to just a city-based approach, so I would like to reassure the Committee on that. It is an interesting title for something that maybe does not quite describe the areas where it is current. Importantly, it starts from the basis of focusing on some of those particular areas where, whilst employments rates have improved and the numbers of claimants have fallen, we would like to see faster progress and to allow, as I said, some flexibility and innovation at a more local level and a partnership to develop because we think that is a good idea and actually it has been shown that actually that can prove to have very good results.

Q1222 Chairman: Do you think that with your appointment and also the appointment of the new Secretary of State for Work and Pensions, and given what you said about your own constituency, you will both be bringing to your portfolios a new perspective given the really big challenges that face the former coal-mining areas?

Caroline Flint: In some ways the personal is the political, is it not? We all bring our own experiences to bear in the jobs that we have. I do not think that necessarily it is a change of policy direction, but an understanding based on our experiences of something I think we can bring. I have to say that my previous job in terms of public health is already proving helpful to me in this role because I know that if I overlay the health inequalities that exist against some issues around employment, some of the very same people who are currently not in work that we are trying to support often actually suffer some of the greatest health inequalities as well. In some respects I am glad to see that my two years at the Department of Health hopefully will give me some more insight, but again that working together between organisations not just on the employment side but with education and health, local authorities, community organisations and private and public sector employers too is all a jigsaw which needs to be brought together to have the sustainable impact that we want to make.

Q1223 Mr David Jones: Minister, you note or your predecessor has noted in the memorandum that Wales' employment rate is slightly below that of the UK as a whole, with the most recent data showing that the employment rates were 71.7% and 74.3% respectively. What would you say accounts for this difference in the employment rate and to what extent would you say this is a short term or a long term phenomenon?

Caroline Flint: Part of the reason is probably to do with the effects in terms of structural changes in the Eighties and Nineties. The fact is that Wales particularly, in terms of its industries such as coal-mining and steel and other heavy industries, suffered a huge decline in those sectors and also, I have to say, alongside that a particular impact on male employment. Again, there are some similarities to South Yorkshire I have to say in that respect too, so there were quite drastic changes in terms of the industries that existed at once and their decline, and its impact was large to say the least. Alongside that, again, the rate in terms of numbers who then went onto incapacity benefit was far higher than in other parts of the United Kingdom so, given that, the challenge both in terms of how do you reshape and provide the environment for new job markets to develop, the change in culture that is necessary along with education and skills is important too, as well as, at the same time, having to deal with a situation of large numbers on incapacity benefit which I have to say for a number of years before 1997 there was not particularly a very strong strategy about how to engage. We know that if people are left on incapacity benefit for too long, even two years, the likelihood is that they will stay on that, that is why the efforts we are making on pathways to work, the changes we are making in terms of incapacity benefit are very important. Those particular issues face Wales in a disproportionate way to the rest of England, although there are parts of England that have similar economies to Wales at that time who also suffered in a similar way through the loss of mining and steel jobs.

Q1224 Mr David Jones: The disparity in terms of unemployment is relatively little, but in terms of the proportion of the population claiming incapacity benefit, it is massively higher in Wales, is it not? According to your memo IB claimants make up 11.3% of the Welsh working age population compared to 7.3% nationally. It is over 50% higher in Wales than the rest of the country; to what would you attribute that?

Caroline Flint: I go back to the point I said before. We had a disproportionate number of people whose way of earning a living went, in just huge swathes, across communities, and I know from my own constituency the numbers of those, predominantly male, who then were moved onto incapacity benefit, and there is a whole debate that we can have around that. The rate is higher in Wales and we are completely transparent about that. What I would say though is that what is hopeful is the rate at which that is dropping is faster than is happening in other parts of the United Kingdom so that does suggest that we are making some inroads into this, plus the number of new claimants coming on is falling as well. That combination of support to those who are currently on IB to get off, as well as the falling numbers that are coming on, is a sign of progress but, yes, we are dealing with a bigger pool in Wales than we are across the UK as a whole and I have given, I hope, some reasons for that.

Q1225 Mr David Jones: Massively bigger. Forgive me, but my understanding was that incapacity benefit claimants were unable to work as a result of the state of their health, is that correct?

Caroline Flint: Actually I have a number of people who have been on IB who, through pathways to work and other schemes, have been supported to get back into work.

Q1226 Mr David Jones: Forgive me, Minister, the point I was making was that an incapacity benefit claimant is ostensibly unfit to work because of ill-health, is that correct?

Caroline Flint: The situation is that people are put on that because they are at that point in time unfit to work, the question is whether those people are unfit for any sort of work. That is crucial and, what we are looking at more now is what people can do rather than what they cannot do. There will be some people who are on incapacity benefit who, because of their health and the conditions that they have, are likely to be unable to work and that is a reality. We know that an awful lot of people on incapacity benefit, given the right support, can get back into the workplace. My sadness is that for many, many years before 1997 there were not the sort of policies to engage with that group of people and they were written off.

Q1227 Mr David Jones: Forgive me, Minister, without wanting to be overly political and I am sure you are not being either, but your government has actually been in power for ten years, is that not right?

Caroline Flint: In those ten years we have seen people supported to come off incapacity benefit, we have seen the claimant rate for incapacity benefit reduce and fall as well, which is an indication that even where someone may have a health condition they will be supported to both stay in work and, if they have to come out of a particular workplace because of that condition, they are being supported to get back into work. It may be not the same type of work that they left, but certainly back into work and, as I say, we have an employment rate which is at its highest level ever, the claimant rate is going down and significantly we are seeing amongst people with disabilities that the numbers who are actually getting into work are increasing too. There is a lot more to be done, there is no doubt about that, but we have put in place a number of mechanisms as well as resource as well as understanding to tackle this issue, but we inherited a legacy of people who had been on incapacity benefit for many, many years. As I have said before, all the research evidence shows that the longer someone is on incapacity benefit their chance of actually coming off that benefit into work reduces enormously.

Q1228 Mr David Jones: Forgive me, a further question. Just so that it can be clear, Minister, the position is that ten years after the beginning of this Labour Government the incapacity benefit rate in Wales is over 50% higher than in the rest of the United Kingdom; that is correct, is it not?

Caroline Flint: It is higher, yes, certainly, but at the same time it has fallen faster and it started from a baseline that was considerably higher because of the market that it had and, since 1997, on incapacity benefit, the numbers have fallen by 15,000.

Q1229 David Davies: Ms Flint, in your role as a constituency MP you must have seen, as I have, people bounding up three flights of steps to see you in a surgery who are on incapacity benefit and 20 year olds suffering from stress who do not want to be interviewed about it because it is too stressful and they are on incapacity benefit. What is your estimate of the number of people claiming incapacity benefit who are absolutely healthy and should be out working? Do you have an estimate?

Caroline Flint: I do not think we have an estimate on that on the basis that we proceed on the basis that people who apply for incapacity benefit have to fulfil the conditions of it. If people are defrauding the system and in terms of what they are claiming it is not correct, clearly we have to deal with that and I think I am right in saying - it is not my direct responsibility - that the progress we have made in terms of defrauding the system, people who are claiming benefits when they should not, situations as you cite where people claim a health condition but are clearly involved in activities that suggest that that is not the case, the number of investigations that have been successful has improved enormously, so that happens. Part of what we are doing as well in changing some of the approaches with the introduction of the employment support allowance is also to look at how, first of all, we talk about what people can do rather than what they cannot do, and that is a change and a shift in culture, but also with an emphasis on more work-focused interviews to actually discuss with people what they can and cannot do. I have to say, you know, if people try to defraud any system we have to try and identify that and deal with that, but actually what we do know is that as with lone parents the vast majority of people on incapacity benefit and on non-employment benefits actually would like to work, given the chance. Whilst we can all have anecdotes about individuals in the way that you suggest, there are an awful lot of other people who actually face significant barriers and need the right sort of support to get them out of a particular place they have got after many years.

Q1230 Hywel Williams: What actually concerns me are the practicalities that incapacity benefit claimants face in trying to return to work in these areas where there are actually 50% more claimants than average. When they are looking at this marginal job, this one job that they might be able to get, they are going to be facing more competition from, perhaps, able-bodied people and also a large number of other people on incapacity benefit. That is the practicality that they face. Can I ask you about the Government's willingness and its ability to tailor strategies specifically for that sort of situation, or is it a one size fits all, and also not only tailor strategies but also tailor sanctions, which certainly does concern some of my constituents?

Caroline Flint: I might come back to you about the second part, to ask a bit more about what you mean by the sanctions, but on the first part it is about engaging people, about looking for work. You are not going to find a job if you are not looking for one and one of the issues that we have been addressing through, for example, lone parents or those on incapacity benefit is engaging them in terms of more interviews that are work-focused, if you like, and making them aware of the support that is available. When you do that the evidence seems to suggest that actually people are opening up to ideas that they may not have considered before. If you are not looking you are not going to find, so how do we start that process of looking and giving support to it? Alongside that are the sort of partnerships that can work in areas such as you suggest where local employers, whether in the public or private sector can work with Jobcentre Plus and other agencies in Wales to give some sort of pathway for those people who are currently claiming, and there have been examples in different ways where employers have said we want to do our bit by the local community, we will seek to take people from the claimant list and work with different agencies if there is particular support in terms of skills or what have you for that person to start that job. That is one part of it and it is something that we are very interested in developing, and the City Strategy (although it is not city entirely) is one of the ways of getting that sort of engagement. But first of all it is getting people who may become accustomed to being in a group that does not look for work to actually look for work and, secondly, to reassure employers that there is support there for them in actually taking some of these people on. We are talking about a wide range of people, people who may have physical health problems as well as mental health problems; there are some challenges for the individuals themselves but there are challenges for others who want to actually employ them and work with them as well and we are just trying to find a way that we can support that.

Chairman: We need to make progress. Mr David Davies, briefly.

Q1231 David Davies: My question will be very brief, Chairman, I do not know about the answer. The question is how many people are actually involved in Wales in investigating incapacity benefit fraud?

Caroline Flint: I will write to the Committee on that if I may.

Q1232 Mr Martyn Jones: Good morning, Minister. Can I come back more towards what the Committee is supposed to be looking at, which is globalisation. Particularly in my area one of the important factors in employment is the amount of immigration, a lot of it coming from the former Eastern European countries, the A8 countries, the accession countries. In your memorandum you note that migration has "made a small, but nevertheless important, contribution to the employment needs of ... Wales". Could you outline for the Committee the particular areas in which migration has made a contribution and the extent to which these areas might change in the future?

Caroline Flint: The largest proportion of migrants work in public administration, education and health sectors, some 36%, followed by distribution and restaurants 20% and manufacturing 15%. As our memorandum indicated, the number of migrants in Wales is small, the foreign-born population in Wales is about 120,000 or 4% of the population and that compares with a national proportion of 10.1%. The primary impact of migrants I would suggest is actually to increase total employment, and our research suggests that there is not any indication that migrant workers in Wales are having a negative impact on employment opportunities in Wales. I understand there are perceptions locally that differ from that, and that is where we need to have a debate about dealing with the perceptions and what is in fact statistical evidence.

Q1233 Mr Martyn Jones: That is true, that is the kind of evidence we have been getting and it is certainly the evidence that I see locally in my area, that they are a positive benefit to the economy of the area. You also note in your memorandum at paragraph 6 that there is a general trend towards less migration to Wales than the rest of the UK. I would like to know how you work that out and, secondly, although that is true of Wales as a whole, as you have already pointed out there are pockets where there is a huge amount of migration and you can perhaps talk about the implications for the Welsh labour market and the economy of those two factors.

Caroline Flint: Like other parts of the United Kingdom it is often places like London that have tended to attract more migrant workers because of the concept that the jobs are there or there are established patterns of migration following one after the other. That probably in many respects is why Wales has a low number of migrant workers but, again, in Wales where it does exist in large numbers it mirrors England, for example, it is the city. It is places like Wrexham, Cardiff, Newport and Powys that tend to be the main attraction for migrant workers where that happens. We continue to look at and research the impact of migration, particularly from the expanded EU, but in terms of where do they go and why do they go there it is usually where there is the highest level of jobs and where actually there are patterns of migration before and, to be honest, the social and community aspect that there are already people from Poland working there so they follow that route as well. That is primarily the situation. The second part of your question was?

Q1234 Mr Martyn Jones: What the implications are for the economy and the Welsh labour market? Do you see any negative implications or is it all entirely positive?

Caroline Flint: There is little evidence that migrant workers are substituting local workers in the labour market and, as I said before, we have conducted and we continue to carry out research on this impact of migration from the expanded European Union. The inflow of A8 migrants into Wales numbered 15,000 from May 2004 to December 2006. While the employment rate for that group is high, something like 81.5%, that is a small fraction of, for example, the 170,000 plus moves into work in Wales in the last year, and the vacancy rate in Wales for jobs is still high, so there is a buoyant job market there. Going back to our earlier discussion, the question is not that migrant workers are taking jobs, it is those people who are currently inactive in the workplace, in the marketplace, who we need to address about how they can be equipped to actually look for work and therefore take jobs on.

Q1235 Mr Martyn Jones: Can I ask how exactly you do the research?

Caroline Flint: Can I pass to Bill for that one?

Mr Wells: We carried out a number of different ways of looking at the research. One of the most important elements was to consider where the people from the new Member States had settled and whether there was a discernible pattern in claiming unemployment and various other labour market variables, so if there were more migrants in one part of Wales was there a bigger rise in claiming unemployment in that area? The result from that was that we could not find a discernible effect. We also have examined various other elements which are consistent with that approach, that there is not a correlation between where people from outside have come into Wales and changes in the various labour market variables in employment or unemployment and so on.

Q1236 Mr Martyn Jones: It is well-known that not all the migrant workers actually sign up for the workers registration scheme, for example. Have you any idea what percentage do?

Mr Wells: That is quite a difficult question but from a variety of sources the numbers who do not sign up may not be enormously large unless, if they do not sign up, they also do not sign up for national insurance numbers and so on, because there are various different measures of where people are in the labour market and the workers registration numbers are relatively similar to the numbers for national insurance numbers. That does not mean that there will not be people who are not on either of those things and they will be completely outside.

Q1237 Mr Martyn Jones: According to your memorandum again, 22% of migrants report that they are degree-educated, compared to 15% of those who are UK born. Similarly, while only 13% of migrants report no qualifications, that figure amounts to 17% of those born in the UK. What are the implications of this for the Welsh labour market and the economy, now and in the future, and to what extent is this a positive or a negative?

Caroline Flint: It is true that in certain areas migrant qualifications are higher. In terms of A-levels and GCSEs amongst Welsh born people they are higher than the migrant population coming in. It is also true to say that amongst migrants something like 32% report qualifications as "other", i.e. it is difficult for them to equate it to the standards we have in the UK, so there is a mixed picture in terms of qualifications, but the important lesson with migrants or without migrants, to be honest, is the issue about how we skill our workforce and potential workforce for the jobs of the future, so I would suggest that in terms of skills and qualifications our mind should be on that global competition rather than necessarily a threat from migrants in terms of their qualification base.

Q1238 Mr David Jones: I would like to take you back, Minister, to paragraph 8 of the memorandum that you quoted from a few moments ago which says that the inflow of A8 migrants numbered only 15,000 from May 2004 to December 2006. I must say I was astonished that it was such a low figure. This Committee has been taking evidence now for several months and estimates have varied fairly wildly from I have not a clue to as many as 120,000. Where does that figure of 15,000 come from, please?

Mr Wells: There are a couple of different sources but of the two main ones, one is the workers registration scheme and the second is national insurance numbers, and they both come out at roughly the same amount. I should also say that the experience is that these are the numbers coming into Wales. Some of them will leave and go back to the country where they originate from. It should also be said that there are quite a lot of migrants who are not A8 migrants and so it is quite important to consider which group you are considering and also whether it is the numbers coming in, the numbers who are still there at the moment and therefore the numbers who are going out. As I said before, the numbers of A8 migrants have tended to be roughly the same numbers from the official sources of the workers registration scheme and the national insurance numbers.

Q1239 Mr David Jones: How robust a figure is that 15,000?

Mr Wells: As I have said, if they are working and they are not on either the workers registration scheme or the national insurance number they will be illegal workers. How robust it is - the measurement of illegal working is obviously very difficult, but what estimates there are for the UK but not necessarily for Wales show that illegal working is not a particularly large part of the UK system compared to other places. However, there is a growing amount of migration in Wales as elsewhere so it may be a growing issue. As I said, I do not think we have much evidence that it is a substantial problem from the A8 countries.

Q1240 David Davies: Mr Wells, Eastern European workers on the workers registration scheme cannot claim benefits, can they?

Mr Wells: No.

Q1241 David Davies: So it is rather fatuous to say that nearly all applicants to the workers registration scheme are in fulltime employment and virtually none are claiming benefits; that is fairly obvious, is it not, they would not be allowed to claim benefits.

Mr Wells: They may not be in work.

Q1242 David Davies: They would not be allowed to claim benefits.

Mr Wells: No.

Q1243 David Davies: It is a pointless statement, is it not?

Caroline Flint: There is a point, to make sure that people understand that because sometimes people do not understand that and therefore make assumptions. I do not think it is necessarily a bad thing to state it, even if it is maybe stating the obvious.

Q1244 David Davies: Would it not have been clearer to have made that point in the paragraph and to say that those Eastern European workers are not allowed to claim benefits, because the impression here is being given that there is no problem with lots of people coming into this country because none of them are claiming benefits, whereas in actual fact in about five years time or less they will be able to claim benefits and presumably rather a lot of them will.

Caroline Flint: I will have a look at the wording if it needs finessing, but the main point is that people who are coming in through these schemes are coming because they want to work and most of them are single, young, looking for work, often go home and are not drawing on other aspects of our welfare or benefits system in that respect. I am happy to look at the wording; we are not trying to make a big deal out of that, we are just making the point.

Q1245 Mr David Jones: To what extent would you say that the employment rates in these various regions of Wales are improved or exacerbated by the influence of globalisation?

Caroline Flint: The employment rate in Wales overall has improved and even though the employment rates in some areas of Wales are much lower than the Welsh top line figure, or for that matter across the United Kingdom, in some of the toughest areas actually the rate of improvement has been faster, so it is still at a lower base than we want in many respects - places like Blaenau Gwent, Merthyr Tydfil and other places - but actually the rate of improvement has been faster than in other more affluent areas, so that is why we are looking at these different strategies to see if we can get a much more localised response, greater partnership working, more flexibility into the system as well. It is why, as I said earlier, the Deprived Areas Fund is being targeted to those 166 wards in Wales that suffer the most deprivation, so that is what we are trying to do there. Again, there are all sorts of reasons for those areas. We could go back to the discussion about the loss of the economies and the jobs that those particular areas relied on, which is just a fact, and therefore how do we create in those areas the opportunities for the jobs coming in and people getting those jobs? Again, it is very important that the skill base and the education base enable people to be equipped not just for today's job market but for tomorrow's as well.

Q1246 Mr David Jones: Would you say that there are any parts of Wales where the impact of globalisation on employment is more marked than other parts of Wales?

Caroline Flint: I would not say necessarily that it is globalisation in and of itself, I think the loss of industries in which whole communities were pretty much entirely dependent on one industry, when that goes you have to have in place strategies to offer an alternative. In some respects that was quite slow in some of those communities, but it is that combination of investment, education, better partnership working as well as, I have to say, over-arching all of this is a stable economy which we have had for the last ten years, not affected by the sort of recessions we saw in the decades before that. That in and of itself has helped us deal with globalisation. If you look at the employment rate in Wales it is overall higher than places like Japan, Italy, France and other colleagues in the G7 but there are still some particular barriers that we have to deal with and we are just trying to work, through Jobcentre Plus, with the Welsh Assembly and in partnership with others to tackle some of that. We make no bones about it, there are still some barriers there and challenges to face. I do not think it is globalisation itself that was necessarily the cause of that, but if we are going to tackle the fact that we live in a world economy and a low wage response is not the answer because it cannot work, we have to look for other alternatives, and that is where it is skills, investment, adaptability and flexibility to changing markets.

Q1247 Mr David Jones: Forgive me, Minister, what I actually asked you was were there some parts of Wales where the impact of globalisation on employment were more marked than other parts of Wales and you have not really answered that question.

Caroline Flint: Most of Wales has actually improved and we see actually faster improvement in some of the poorer parts of Wales.

Q1248 Mr David Jones: Are you saying there is no differential effect at all?

Caroline Flint: What I am saying is that there are variations across Wales in terms of the employment rate. There are a number of factors leading to that, the nature of which are that in those communities and regions of Wales the economy relied, particularly as I say, on heavy industry and mining. The loss of those industries and the reduction of those industries clearly have had a disproportionate impact on those communities. What I am saying in terms of where we are today in the world of globalisation in which we live now as opposed to what happened in terms of those communities and their job market 20 odd years ago, the impact of it is that across Wales the employment rate is improving, but they started at different baselines. What I am saying is that despite what some people might think is the threat of globalisation, the rate of improvement in some of those poorer areas has been at a faster rate than some of the other more affluent parts of Wales. That does not indicate that globalisation in itself is having a disproportionate effect on those communities.

Q1249 David Davies: I appreciate you will not have the information to answer this question now, so I am going to ask you if you could answer it if I table a written question, because a lot of answers come back that the information is not collated centrally. Do you centrally collate information on the numbers of people who have made claims under the refugee back payments scheme?

Caroline Flint: I am happy to write to you on that.

Q1250 David Davies: Do you centrally collate that information?

Caroline Flint: I would have to check that, I am sorry.

Q1251 David Davies: Would you have figures on the amounts of money paid out under the refugee back payment scheme?

Caroline Flint: I will have to write to the Committee on that.

Q1252 David Davies: When the integrated loans scheme is set up would you happen to know whether or not the repayments will be deducted automatically from any benefits claims, or will it be up to the individual to make voluntary repayments?

Caroline Flint: I will write to the Committee on that one.

Q1253 David Davies: I am sorry, they must be quite difficult questions. I think you have already answered the one I have got in front of me here, could you tell us what you are doing to update the skills of people who are on incapacity benefit at the moment and not in the workplace?

Caroline Flint: Part of what we are doing is seeing how we can engage people in looking for work, and part of that engagement is to look at what skills they currently have and how they can be supported to improve those skills. That is done through a number of different programmes that operate. We do a lot of work through Jobcentre Plus in partnership with the Welsh Assembly as well in terms of the various different skills initiatives they have on basic skills and so forth, and in those different ways we try to make sure that we first identify where the skills shortages are amongst individuals and how best we can improve that situation for them, because that in itself will help them get work.

Q1254 David Davies: To what extent do the skills of migrant workers pose a challenge to the labour force in Wales?

Caroline Flint: As I said before I do not think the skills of migrant workers in themselves are posing a challenge. It is a small number of people, the number of vacancies that exist for jobs in Wales is buoyant and very live. The number of vacancies per head of population in Wales is actually far higher than across Great Britain, so that suggests that jobs are out there, there is not a shortage of jobs. As I said before, our challenge is those people who are not actively seeking work and how we best reach some of those people. For those people who are seeking work the number going in and out of work is healthy and, as I said, buoyant; the issue is those people not in work. For those people who are not in work and not actively looking for work, their challenge is not just migrant workers but they are competing against other Welsh born workers who have skills and have qualifications and have already been in work. That is the challenge in terms of those particular people.

Q1255 David Davies: Finally, how long do you think it would take to write back to me on the earlier questions?

Caroline Flint: I will have to check when I get back to the office.

Q1256 David Davies: Would three weeks be enough?

Caroline Flint: I will let the Clerks Committee know; hopefully as soon as we possibly can.

Q1257 Hywel Williams: It was Mr Wells who said earlier on that migrant workers moving into Wales have no negative effect on unemployment as such. I would like to just ask you some further questions about that; to what extent does globalisation provide a buffer for the labour market in Wales, particularly in respect of people who are economically inactive and people who are disengaged? Is globalisation actually in some way postponing tackling those particular people; is it just putting the problem off?

Caroline Flint: I do not think we are putting the problem off. There is the welfare reform legislation and the Committee will know - but I cannot obviously go into detail today - we are publishing a Green Paper this week on the next steps to full employment. We are not putting anything off; a number of the strategies we have put in place are aimed at very much seeking to support those people, lone parents, people with disabilities, on incapacity benefit, into work. The number of people for example with disabilities who are accessing the job market has actually improved enormously and is increasing at a faster rate than some other groups, so I think what we are doing has been shown to be working and the next step is to see how better we can be. Part of that is what sort of people can we bring in to support us with this work from the private voluntary sector, what engagement we have with people earlier on in terms of the time they come onto benefits, as well as - we were talking earlier about the different more personalised approaches for different areas that do face different challenges in terms of what is available locally, transport issues and so forth as well as, I suppose, the education and skills agenda which obviously Wales leads on - we do not in England but certainly from our perspective from the DWP and Jobcentre Plus we want to see through our various arrangements how best we can support that education and skills agenda in Wales.

Q1258 Hywel Williams: I do not think migrant workers make a huge contribution and I am not in any way decrying that, it is just the point I made earlier about the marginal job where you night have someone who has disengaged long term from the economy and there is only one job, whom does the employer choose? It seems to me common sense basically, a highly skilled migrant worker would be chosen above someone who has disengaged.

Mr Wells: It is important to realise just how many vacancies there are coming up all the time. Although the numbers of migrants are larger than they were in the past, relative to the number of jobs that are coming up there is still a relatively small number. Part of the reason why we got the result that we had was actually that in the most disadvantaged areas there had been the biggest improvements in terms of employment and unemployment; similarly amongst the most disadvantaged groups there had been the biggest improvement. So it remains the case that the levels are really quite high, but there has been some catching up even during the period when the number of migrants into Wales has increased although it is still relatively low compared to the rest of the UK.

Q1259 Hywel Williams: I did note some of the figures that you provided us in your supplementary evidence in respect of the registered workers scheme, and it seemed to me that the lowest levels of registration are probably in the most deprived areas such as Rhondda Cynon Taf, for example, where presumably the greatest gains could be made very quickly. Can I just ask you finally, therefore, if you state there is no evidence to suggest that recent migrant flows have had a negative effect on claimants' unemployment levels - again that might be the case now, I do not know, but that might be your contention - is that sustainable into the future, are we looking towards any changes within, say, the next five years?

Caroline Flint: Obviously, we cannot predict the future as clearly as that. We do, as I said, research the flows of migration but I have to say again the threat to prospective jobs and work in the future, in the environment of globalisation that we live in, is about whether or not people in Wales are equipped to be able to fit the jobs for the employers who might want to locate or stay in Wales and where that fits in terms of their skill base and knowledge base. As Bill said, you gave the example of two people going for one job. From the information we have the numbers of vacancies in Wales are very high, so the question in that respect is where are the vacancies, is there access to jobs in some of the regions and areas of Wales that there should be and how best can we support that, what is the skill base of Welsh people and how can we improve that for those who have no qualifications or do not have the right qualifications. That will be necessary regardless of what is happening in terms of migration if we are to keep up. The other side of it of course at the end of the day is how strong our overall economy is because that overarches everything else we are trying to do in Wales with different partners and what have you. That has created the framework in which our economy is healthy and, compared to other countries in Europe, we seem to be doing better, a lot better.

Q1260 Mr David Jones: To what extent, Minister, does your department work with the Welsh Assembly Government in addressing the challenges posed by globalisation?

Caroline Flint: As I said earlier, Jobcentre Plus is a key partner in, for example, Value Wales, which looks at sustainability in public sector procurement. That project looks at training, skills development and employment of some of our priority customers in Jobcentre Plus to support them into the workplace. They are also exploring opportunities to help small and medium size employers in Wales to become more competitive and better placed to compete for public sector contracts. The Jobcentre Plus works closely with Assembly business advisers and others to see where we can assist through training and employment support to actually maximise the opportunities that are available locally, so on a whole number of different fronts Jobcentre Plus is working very constructively with the Welsh Assembly.

Q1261 Mr David Jones: Do you think that the dual role of your Secretary of State will assist this process and smooth the way?

Caroline Flint: It obviously helps in terms of an insight. As I said earlier we all bring our experience in government, our experience as MPs and also from our previous lives to being a Member of Parliament. Certainly, Peter as Secretary of State for Wales will have a very good understanding of the joint working that we can achieve but also what more we need to do.

Q1262 Mr David Jones: You have mentioned that the number of job vacancies in Wales is very high. You may have heard in fact that Quinton Hazell Automotive in my constituency has announced that it is to make 120 of its staff redundant with effect from next year. Can I take it that your department and the Welsh Assembly Government will be working closely together to ensure that those workers who are about to be made redundant fill some of those job vacancies locally?

Caroline Flint: I certainly would hope so. My understanding is that where there are redundancies in communities Jobcentre Plus, working with different organisations in Wales, has tried to see what they could develop as packages to support people for redeployment into other work. I am happy if Mr Jones has not got information already to find out what currently is happening on that in his particular constituency. It clearly is very important that it is not just about getting people into jobs but where jobs go and what opportunities we can provide for people to remain in work is clearly important.

Q1263 Mr David Jones: You are clearly aware of the document that your Department recently published in partnership with the Welsh Assembly Government called Wales - Towards Full Employment. Could you outline to the Committee the effects that this document has had and expand on how its proposals are now being taken forward?

Caroline Flint: The report was something that we were very pleased to work with the Welsh Assembly on. What it demonstrated was that despite the progress that has been made there are some significant challenges and we have addressed some of that already this morning. Not all areas in Wales, all groups within society have benefited equally from improvements we have seen today, so how we secure sustainable employment for those people is often very hard to reach and that is something that we need to address. The first stage of welfare reform has clearly delivered in the sense that we have the lowest claimant unemployment for 30 years. The new deal programmes and the support in different ways provided in Wales have helped to tackle long term unemployment in an incredible way. As I said before, the key task next is how we address and engage and support those people who are on non-unemployment benefits and, as I mentioned earlier, in taking forward the Welsh paper on full employment, the Green Paper we will be publishing this week will be taking further forward some of the issues that that paper addressed on how to tackle these particular groups even better than we have done already.

Q1264 Mr David Jones: You will be working hard to ensure that the number of incapacity benefit claimants in Wales ceases to be over 50% higher than the rest of the UK.

Caroline Flint: We would all want to strive to achieve that.

Q1265 David Davies: Just on that, the thrust of this and other documents has been that migration has had no effect on unemployment and that other factors are causing some people not to be able to get into work. Therefore, does the Government feel that migration can continue at its current levels each year without having an impact on employment or is there any upper limit at which large numbers of people migrating into the country might have an impact on employment of indigenous people?

Caroline Flint: As I said before we do not have any evidence that it is having a negative impact. Sometimes - and I do appreciate this - in some communities it may seem that way, particularly if you are in a community that is not used to people from other countries with other languages being around. I know in my own area, again, very often what I get from constituents is there seems to be a lot of people coming in, and when you actually get down to the facts it is a very small number but they stand out because if you are in an area that is not like London, is not like a big city, differences amongst people often stand out and that is a perception that people then have. It is important in that to make sure that we talk about these issues so that perceptions do not lead to misinformation about what is happening in the local job markets, and to that end there is not any evidence that migrant labour in Wales is actually contributing in a negative way. In terms of the future, I do not think it is necessarily about having an upper limit. We continue to monitor the situation and look at that; clearly in terms of the A2 countries the Government has taken a particular position in relation to those two countries and put in place some particular requirements for entry, but as I said before ultimately the importance is do we have a healthy economy, is it stable, are we equipping our people with the necessary skills to get the jobs that currently exist as well as have the skills for the jobs of the future, and that is the area where we need to be making sure we have our attention because if we do not do that we will not get the jobs coming here because we will not have the skills that employers want, and actually whether it is migrant workers or any other workers we will be leaving a number of people in a position where they cannot enter the job market. That is where our focuses should be, and if we do that then we are giving people as good a chance as any to be able to work for now and the future.

Q1266 Chairman: Could I end by thanking you for your responses this morning, but I would like to ask you this final question. You have clearly given us the message that whilst globalisation is an issue that faces us all, in terms of the challenge in relation to Wales and particular parts of Wales there are some internal structural issues that we need to address anyway as in most post-industrial societies. In Wales we are faced with the close correlation between economic inactivity, ill-health, low educational skills attainment, poverty and high levels of caring. Could you describe to us how you think we ought to be moving and developing a more sophisticated strategy in relation to the Welsh Assembly Government, particularly where we have still relatively high levels of economic inactivity. The question is about the inter-relationship of activity between yourself and the Welsh Assembly Government.

Caroline Flint: There is a whole number of ways in which - and I hope it is received this way in Wales - the DWP and Jobcentre Plus are very much engaging with the Welsh Assembly on a whole range of different programmes to tackle exactly what you have outlined. We have things like the work-based learning improvement board where Jobcentre Plus is a member of that, which is helping to look at how we can develop for those post-16s the sort of skills that they need in Wales, we are a member of the Assembly's Raising Economic Activity Rates group on how we can improve economic activity, and clearly that is very important in parts of Wales that do not necessarily have the same advantages as some of the other parts in terms of Cardiff, Wrexham and elsewhere. There is the Want to Work Programme, again Jobcentre Plus working with the Assembly to again look in a more targeted and I would say coherent way how best we can engage those who are not economically active. There is often, I have to say, and I do not think this is just in Wales but elsewhere, quite a lot of programmes around, but how coherent they are and how they piece together for the individual - it probably is always worth looking at to see if that can be better. That is where the consortia on the Heads of the Valleys and the Rhyl Strategies are very important because that is part of what we are saying to the consortia: can you address this using your partnership, using your knowledge. We also are involved in the Wales Economic Advisory Panel as well as on the basic skills agenda, so there is a whole number of areas where I hope it is understood that we certainly are engaging and finding that way in which we can both get the best out of our national responsibility to Wales as the Department for Work and Pensions but also harness the very best of devolution to make sure that there is an approach that can deliver - that is really important - but is attuned to the particular needs within areas of Wales. I hope that is something that we can continue to develop, particularly following the Green Paper we are publishing this week.

Chairman: Thank you both for your attendance, it has been extremely helpful and it has certainly been interesting and a good preparation for next week because we have the Secretary of State for Wales appearing before us on his annual report. No doubt his new responsibilities will also figure in that session.