Britain risks a financial hit worth £125bn a year from a worsening crisis in youth worklessness after a rise in the number of young people not in employment or education to more than 1 million.
In a landmark government-backed report, Alan Milburn warned Britain’s economy and the public finances were losing billions of pounds a year amid the growing risk of a “lost generation” of young people.
The former Labour cabinet minister said youth disengagement was a mounting economic risk to the country, as he urged the government to undertake a fundamental reset of policy covering schools, the health service and the welfare state.
Figures from the Office for National Statistics on Thursday showed a rise in the number of 16- to 24-year-olds in the UK who were not in education, employment or training (Neet) in the three months to March to 1,012,000 – breaching the 1m mark for the first time since 2013.
It comes with overall unemployment in Britain now at the highest levels since the outbreak of the Covid pandemic, with young people bearing the brunt as businesses warn over the impact of tax increases and a downturn in the economy amid the fallout from the Iran war.
In a major report published on Thursday, the Milburn review said the lost contribution to the economy and the cost of supporting young people through the benefits system was causing a multibillion-pound financial black hole.
Sounding the alarm over the long-term damage for young people, the former Labour health secretary’s report warned the average lifetime loss in earnings due to a period of being out of work, education or training between the age of 18 to 24 was the equivalent of £52,000 a year.
“The longer a young person is outside work or learning, the harder and more expensive it becomes to help them back. In this review we estimate the cumulative annual cost to our country of almost 1m Neet young people at £125bn. That is more than we spend on education each year,” the report said.
“The question is no longer whether the current position is affordable. It is whether it is sustainable.”
If every young person aged 18 to 24 who was Neet was in work last year, the report found it would have contributed £38bn more to UK GDP, while cutting the cost of the benefits bill for the Treasury.
The report warned the lifetime public finance impact from a young person being Neet between the age of 18 to 24 was £29,000 on average.
In analysis showing the government spends around £8.1bn a year on benefits directly for young people through the welfare system, it said more than half – £4.4bn – was allocated to Neets.
The report showed around £3.2bn was spent on disability benefits through personal independence payment, which is available to people both in and out of work. However, the report said young people could be helped to find a job through a rise in spending on employment support and a retooling of the education system and Britain’s labour market.
Milburn estimated that a total of £3.2bn could have been avoided if Neet young people had been in work and earning above earnings thresholds.
Calling for a reset of the system, Milburn will describe the welfare state as “exacerbating inactivity”, while arguing that new work programmes alone would fail to tackle far deeper-rooted problems.
However, any fresh attempt at welfare reform could prove divisive after Starmer’s chaotic benefits U-turn last year, amid concerns that welfare cuts would risk driving up poverty amid the cost of living crisis.