Welfare Reforms and Youth Unemployment

Lord Grayling Excerpts

Thursday 11th June 2026 Lords Chamber

[Lord Grayling (Con)]

My Lords, I congratulate my noble friend on today’s timely and important debate. I was Employment Minister back in 2010. We inherited a country in which unemployment was heading to 3 million, youth unemployment was close to 1 million and the system had deep flaws. We also inherited some good things, which have been lost over the years. I will set out some of the things that worked.

My noble friend rightly made the point that, over the decade that followed, we saw some significant improvements in relation to the number of children growing up in workless households and the level of youth unemployment. We achieved the lowest unemployment levels since the 1970s. Part of that was down to getting the economy right. The noble Lord, Lord Walker, is absolutely right about the need for growth; I hope he will use his position on those Benches to put pressure on the Government, with whom he clearly does not entirely agree, to change some of the things they are doing.

Three key elements are needed to get to grips with the issues in the welfare system. Clearly, there are big issues around education, as we have heard, and we have an Education Minister responding today, but I will focus on issues within welfare. First, there has to be a central element in the system that is face to face. In 2010, we inherited in the disability living allowance a system where people had largely self-referred. That cannot be right. We changed it, but I freely admit that under the last Government that was significantly lost during the pandemic. That needs to change—we need to get back to a situation where people cannot self-refer to benefits but are subject to challenge, question and assistance. They should not be able simply to enter the system and stay there.

The second thing that needs to happen is around activity. I very much welcome the youth guarantee, but the work programme we put in place after 2010 made a genuine difference. If Ministers look back at the official findings of the 2016 report that assessed its effectiveness, they will find that it was cost effective for taxpayers and highly effective for claimants. It required those who were stranded on benefits to get involved in significant programmes to do things and be subject to constant challenge. We need to make sure that that is a central part, so that no one is sitting at home doing nothing but they are getting out and doing things. The youth guarantee is positive, but it needs to be spread so that no one is left at home doing nothing.

How do you pay for that? The Minister needs to have a conversation with the Treasury about the DEL/AME switch. The way that worked was very simple: the money saved by getting people off benefits was used to pay for the programmes that helped them get there. If you keep somebody in work for a couple of years, they are almost certain to stay there. At that point, the Treasury generates a genuine saving, it becomes extremely high value for money for the taxpayer, and it deals with a long-term social issue. So I encourage Ministers to go back and look at the work programme, the DEL/AME switch and the innovative things that providers did. These private sector, yes, but also voluntary sector providers were brought into the network and the system by the previous Labour Government, and I commend them for that. There were some first-rate organisations and charities, some of which were quite close to people sitting on my Front Bench, and they did a first-rate job.

Thirdly, there have to be consequences and sanctions for those who will not participate. It is simply not good enough. I have sat in meetings, assessments and all kinds of processes where people were subject to help, challenge and assessment. I have seen at first hand how different people respond, including people with mental health challenges. It can be done, it can make a difference, and we can turn those lives around. However, if people will not engage, there must be consequences. They cannot expect simply to carry on drawing benefits while refusing to engage with the system. Again, part of that was lost during the pandemic. I say to Ministers that it is now time to put some of the sticks back in place alongside the carrots. The bloc of people who will not engage, but would benefit from doing so, must be brought into the system.

Ultimately, the welfare state should be a ladder up which people climb, not a place in which they live. All the evidence shows that, if people are on benefits long term, they are less healthy, die younger and are less happy. That cannot be good for any of us.