A landmark government-backed report has warned that Britain risks a financial hit of £125 billion a year from a worsening youth worklessness crisis, as the number of young people not in employment or education has risen to over 1 million.
Alan Milburn’s Warning
Former Labour cabinet minister Alan Milburn, who authored the report, cautioned that Britain’s economy and public finances are losing billions annually due to the growing risk of a “lost generation” of young people. He urged the government to undertake a fundamental reset of policies covering schools, the health service, and the welfare state.
Speaking at the launch of his report, Milburn described the issue as “probably the most significant issue the country faces,” emphasizing that “far too many young people are reaching adulthood only to find the door to opportunity closed.”
Rising Neet Numbers
Figures from the Office for National Statistics released on Thursday showed that the number of 16- to 24-year-olds in the UK who were not in education, employment or training (Neet) rose to 1,012,000 in the three months to March, breaching the 1 million mark for the first time since 2013. This comes as overall unemployment in Britain reaches its highest levels since the outbreak of the Covid-19 pandemic, with young people bearing the brunt as businesses warn over the impact of tax increases and an economic downturn amid the fallout from the Iran war.
Economic and Social Costs
The Milburn review stated that the lost contribution to the economy and the cost to the state of supporting young people through the benefits system is leaving a multibillion-pound financial hole. However, Milburn stressed that “the principle cost isn’t borne by the taxpayer. It’s borne by the young person; being Neet has a long-term scarring impact. Costs to their confidence, costs to their health, costs to their future income.” He added, “It’s a deposit never saved, a home never bought, a pension never built.”
The report warned that the average lifetime loss in earnings due to a period of being Neet between the ages of 18 and 24 is equivalent to £52,000 a year. The cumulative annual cost to the country of nearly 1 million Neet young people is estimated at £125 billion, more than the amount spent on education each year. “The question is no longer whether the current position is affordable. It is whether it is sustainable,” the report said.
Potential Gains from Employment
If every Neet young person aged 18 to 24 had been in work last year, the report found it would have contributed £38 billion more to UK gross domestic product, while cutting the cost of the benefits bill for the Treasury. The lifetime public finance impact from a young person being Neet between 18 and 24 is equivalent to £29,000 a year on average.
The report highlighted that the government spends about £8.1 billion a year on benefits directly for young people through the welfare system, with more than half (£4.4 billion) allocated to Neets. Additionally, £3.2 billion was spent on disability benefits through the personal independence payment. Milburn estimated that £3.2 billion of the total benefits bill could have been avoided if Neet young people had been in work and earning above earnings thresholds.
Call for Welfare Reform
Milburn described it as “shocking and shameful” that for every £25 spent on welfare, the government spends only £1 on employment support. Only one in five Neet young people receive meaningful help to find work, leaving them “trapped on benefits.” He stated, “The welfare system must always protect those who cannot work … that is non-negotiable. But for young people who could participate, the welfare system should be supporting them to do so. Today it is not.”
However, any fresh attempt at welfare reform could prove divisive after the government’s chaotic benefits U-turn last year, with concerns that welfare cuts would risk driving up poverty amid the cost of living crisis.
Government Response
Speaking at the launch of the report, Work and Pensions Secretary Pat McFadden said the government had made a “major and important start” to address youth worklessness through its jobs guarantee. However, he acknowledged that ministers must take further action. “Although I commissioned this report, I’m clear that responding to it is not just the cause of one department or one secretary of state,” he said.
