Welfare Reforms and Youth Unemployment

Lord Willetts Excerpts

Thursday 11th June 2026 Lords Chamber

[Lord Willetts (Con)]

My Lords, I congratulate my noble friend Lord Evans on his excellent introduction to this debate, full of relevant facts and analysis. Indeed, we at the Resolution Foundation—I declare an interest as its president—have tried to contribute to such an analysis. It is absolutely clear that this is a British problem. The NEETs rate in the Netherlands is 5%; in Britain it is 15%. This is not some pervasive problem of young people affected by social media. Other countries do better, and we should be able to raise our game. Part of the problem is simply the cost of employing young people. We have had some examples of those costs already, but it is worth recording that the minimum wage for young people this year is going up by 8.5%, compared with 4.1% generally. Does the Minister accept that the time has come to halt or pause the process of aligning young persons’ minimum wage rates with the wider adult population’s, because it is one of the factors driving the increase in unemployment?

There is more that we can do to lower the cost of employing people. Although there have been many references already to the Milburn review—an excellent document, brilliantly presented—I draw the attention of the House and the Minister to another report that has not had quite so much attention. It is the 27th occasional paper from the Social Security Advisory Committee, which came out in March, entitled The Influence of the Social Security System on Educational and Vocational Decision-making at Age 16. It is another very useful contribution to the debate and shows how, for households, the cost in benefits foregone of a 16 or 17 year-old going into an apprenticeship is really very considerable. I hope the Minister will look at that report alongside Alan Milburn’s.

There is already one very useful initiative, the youth guarantee, which guarantees a work placement or an apprenticeship for young people who are on benefits. It does appear to be effective. However, there are currently only 43,000 young people on it. It should be extended to young people who are not on benefits—we should remember that half of NEETs are not on any benefits—and to 22 to 24 year-olds. But this would cost money, and we absolutely cannot afford further increases in the total budget. I have been inspired by the interventions from the noble Lords, Lord Walker and Lord Liddle, because there is one obvious way of funding it: by getting rid of the pensions triple lock and linking pension payments to earnings. This would not be the tough regime we had under Margaret Thatcher, who I used to advise, when it was linked simply to prices, but we estimate that if we just said that pensions will rise with earnings, by the end of this Parliament that would save £650 million a year. What better use of that saving than instead shifting it towards young people who could gain from the guarantee?

When we look at how Britain compares so poorly with continental countries, the main gap, however, is not in employment but in people who are not participating in education and training. There is clearly a lot more we can do there. The apprenticeship levy has been captured by older workers and absolutely should be redirected to prioritise young people. Higher education can also make a contribution. It offers a large amount of vocational and technical education. It is very hard to measure this, but almost 80% of graduates in work say that they are directly using what they learned in higher education for their work, and graduate employment rates, at 88%, are significantly higher than employment rates among non-graduates, at 68%. Although there are, as we have heard, graduates who are NEET, they are far less likely to be NEET, so I ask the Minister, with her wide range of responsibilities, to recognise that higher education can be part of the answer, not part of the problem.