Welfare Reforms and Youth Unemployment

Baroness Meyer Excerpts

Thursday 11th June 2026 Lords Chamber

[Baroness Meyer (Con)]

My Lords, it is an honour to follow my noble friend’s excellent speech. As many pointed out, the Alan Milburn review was a wake-up call. I am not going to go through all the facts and figures again, because they were so clearly presented by the noble Lord, Lord Evans, in his opening speech, and followed up on by many others who spoke before me. But the reality is, as Alan Milburn warned, we risk creating a lost generation trapped in economic inactivity and long-term dependency, and that should concern us all. Work is about far more than earning a living; it provides purpose, dignity, self-respect and independence. A society that leaves a growing number of young people without work is failing them.

I therefore welcome the Government’s recognition that the current welfare system is unsustainable and that economic inactivity must be reduced. But recognising a problem and solving it are two different things. The welfare bill is projected to exceed £400 billion a year. Our national debt is approaching £3 trillion, while debt interest payments alone now exceed £100 billion a year. I imagine that the Minister will remind us that Britain’s borrowing remains below the average of the G7 economies, but is that a fair or comforting comparison? It is a bit like claiming that freedom of speech in the United Kingdom is excellent because it is better than in Russia or China.

The reality is that a country cannot indefinitely spend more money than it creates, yet I fear that the Government are not confronting these challenges with pragmatism. The Chancellor’s doctrine of securonomics rests on an assumption that the Government can play a central role in directing growth and wealth, but history suggests otherwise. Governments can create the conditions for growth but they do not create wealth itself. Wealth is created by businesses, entrepreneurs, innovators, investors and workers. The role of the state is to enable growth, not to substitute itself for growth.

This matters because it exposes a fundamental contradiction at the heart of the Government’s welfare reforms. Ministers say they want more people in work, yet they continue to increase the cost of employing them. They say they want to reduce welfare dependency, yet they burden the very businesses that create jobs and provide entry-level opportunities. They say they want growth, yet they pursue policies that discourage investment, enterprise and wealth creation. As has been pointed out many times before, the sectors that traditionally provide young people with their jobs—hospitality, retail and small businesses—are already under immense pressure. Young people are being locked out of the labour market before they have even reached the first rung of the ladder. This is not a coherent economic strategy.

The current incapacity benefit system illustrates the problem perfectly. Too much of the debate focuses on what people cannot do, rather than on what they can do. The system asks people why they cannot work; a better system would ask them what support they need in order to work. That is a fundamentally different philosophy. Of course we must support those who genuinely cannot work, but the challenge is not simply to reduce welfare spending but to increase employment. A welfare system should provide a safety net, not become a destination. The Government cannot claim to be tackling worklessness while simultaneously making work more expensive, more regulated and harder to find. That is not pragmatism; it is ideology.

Does the Minister agree that Labour’s economic policies are undermining its own welfare system? Even Sir Tony Blair has warned that the Government lack a credible plan for growth and has questioned whether their current approach is sustainable. If the Government accept that work is the best route out of dependency, can the Minister explain why they believe that increasing the cost of employing people will help achieve their objective?