Labour is preparing to propose new welfare reforms after a government-backed report revealed that youth unemployment in the UK costs the economy over £125 billion annually. The report, led by Alan Milburn, highlights a growing crisis with more than one million young people neither working nor studying, marking the highest figure in over a decade.
Why this matters
The high level of youth unemployment and inactivity is creating significant economic and social challenges. The report warns of a “lost generation” and estimates that the lifetime cost to the exchequer of a young person not in education, employment, or training (NEET) is around £29,000 per year. This situation not only strains public finances but also limits the future earning potential of young people, who may lose an average of £52,000 annually over their working lives.
Key developments
- Alan Milburn’s review calls for a comprehensive reset of the welfare system, involving schools, employers, and welfare support.
- The government currently spends about £8.1 billion annually on benefits for young people, with over half going to NEETs, and an additional £3.2 billion on health and disability benefits.
- Milburn emphasized that the current ratio of spending on welfare to job support is imbalanced, with £25 spent on welfare for every £1 on employment support.
- Labour leader Keir Starmer has committed to working with Milburn to develop further measures, including a “youth guarantee” scheme to provide education, training, and apprenticeship opportunities for 18- to 21-year-olds.
- The government is already introducing some initiatives aimed at addressing youth unemployment, but acknowledges more action is needed.
Background
The report comes amid rising overall unemployment in the UK, the highest since the Covid-19 pandemic began. Young people have been disproportionately affected by economic challenges, including tax increases, a rising minimum wage, and global factors such as the Iran war. The number of young people not working or studying has surpassed one million for the first time in over ten years.
Milburn’s review criticizes the government’s previous welfare reforms, which faced backlash and a chaotic U-turn after Labour backbench opposition. He argues that welfare reform should focus on increasing employment rather than simply cutting costs.
What to watch
- The second part of Milburn’s review, expected in the autumn, will provide detailed recommendations for welfare reform.
- A separate report on disability benefits by Social Security Minister Stephen Timms is also anticipated later this year.
- Labour’s ability to implement reforms may be affected by political developments, including a potential leadership challenge to Keir Starmer.
- Charities and campaigners have cautioned against using welfare reforms to penalize young people, warning that pushing those with mental health issues into financial hardship could worsen their condition.
Government response
Keir Starmer acknowledged the seriousness of the youth unemployment crisis and the need for further action. Speaking at a training centre for apprentices, he said, “Clearly we need to do more,” and confirmed ongoing collaboration with Alan Milburn to develop additional measures.
Work and Pensions Secretary Pat McFadden described the government’s efforts as a “major and important start” and emphasized the need to understand the problem in detail to create effective solutions.
Recommended reading
For more context, see related Peack News coverage and explainers linked below.
