Youth Unemployment

Lord Palmer of Childs Hill Excerpts

Tuesday 24th March 2026 Lords Chamber

[Baroness Stedman-Scott (Con)]

My Lords, I begin by making it very clear that we on these Benches believe it is vital that young people are supported into work. We wholeheartedly support the announcement about the new opportunities for young people, and we want to see them succeed. The evidence is clear that periods of unemployment at the start of a working life can have long-lasting and deeply damaging consequences. That makes early intervention not just desirable but essential. It is therefore welcome that the Department for Work and Pensions recognises the importance of this issue, but recognition alone is not enough.

The latest figures from the Office for National Statistics give us all, across this House, cause for concern. Youth unemployment among those aged 18 to 24 has risen to 14.5%, the highest level in nearly a decade. That represents a generation being denied opportunity: young people unable to take their first step on the ladder, to build skills or to contribute to the economy. It is no surprise that Helen Dickinson, chief executive at the British Retail Consortium, has said that

“the UK faces the prospect of a jobless generation ... this vital step on the career ladder is cracking under the high costs of employment”.

To be helpful to the noble Baroness, who I know shares my obsession with getting people, especially young people, into work, I just ask that when we turn to the past 14 years, she will not say that we had 14 years to sort this, because our record was not all that bad. Look at the facts. In 2010, the NEET rate stood at 16%, and by 2019 it had fallen to 10.7%. In turn, youth unemployment fell from around 20% in 2010 to 10.7% in 2022. We acknowledge that Covid created immense challenges and that the rates went up, but it was not all that bad on our watch. We did a lot of good, but we undoubtedly could and should have done more. However, youth unemployment has risen in each year under this Government, now reaching nearly 15% among 16 to 24 year-olds. It is against this deeply troubling backdrop that the Government bring forward this policy, with which we are pleased.

What we see from the Government here is part of a worrying pattern. When the economy fails to deliver the outcomes we all desire, the Government do not seem to pause, reflect or correct the course; instead they reach instinctively for an intervention to compel the private sector to behave as they wish. I have no doubt that the private sector would love to be creating jobs and getting young people into their workforce. This is the return of an interventionist doctrine that places political direction above market judgment. Many believed that this approach had been left behind, but it is now clearly back at the heart of government thinking. We see it in attempts to direct pension fund investment, allocating other people’s savings in line with political priorities rather than saver outcomes. We see it again here. Having failed to create the conditions for a strong labour market, the Government’s answer is not to enable growth but to intervene, to manage and to control.

We on these Benches are not merely supporters of employment, we are the party of work. Before the pandemic, employment reached a record high of 76.5%, while economic inactivity fell to a record low of 20.5%. That was not by chance; it was the result of a deliberate approach, one that trusted enterprise, rewarded effort and created the conditions for businesses to grow and hire. Opportunity should not be manufactured by the state, it should be generated by growth, and that is the approach we would like to see from the Government, but it is one that, sadly, they seem to have rejected.

I have several questions off the back of this Statement which I hope the Minister will address. If there are too many, I am very happy for her to write to me. How will participants be selected for these roles? There is always a tendency to go for those people who are easy to help. How will the Government ensure that those furthest from the labour market and in the most difficulty get help? Have private sector employers been driving the development of this policy, or has it come from Whitehall? How are the Government ensuring that employers are at the heart of this intervention? How will the Government measure the success of this policy, and over what timeframe? Will the performance be communicated to the whole House?

What will happen to young people at the end of the six-month placement? Are employers expected to absorb the full costs thereafter, and if so, on what basis? Do the Government already intend to extend the timeline? Does the Minister genuinely believe that short-term placements, particularly ones concentrated in sectors such as hospitality, will address the deep-rooted productivity and skills challenges in our economy? Crucially, what does the Minister believe is driving the current rise in youth unemployment? Is not the uncomfortable truth that the Government have taxed jobs and discouraged hiring, and are now asking taxpayers to subsidise the very employment opportunities that their policies have undermined? The British Retail Consortium is unequivocal, saying that in 2025 alone, the cost of employing a full-time entry-level worker has risen by 10%.

If the Minister is seeking the root cause of today’s labour market difficulties, I suggest that the Government need look no further than their own political record and policies. Businesses across the country point to the same pressures: burdensome employment regulation such as the Employment Rights Act, a sharp increase in wage and minimum wage costs, higher and inflexible business rates and ever-growing compliance obligations.

This debate comes down to a fundamental choice: do we continue down the path of higher taxes, heavier regulation and greater state intervention, or return to a model that genuinely creates opportunity, backs enterprise, rewards work and enables business to grow? That is the model that we used to deliver high, record employment. I am sure that the Minister and the Government are serious about tackling youth unemployment, but they must move beyond treating the symptoms and begin to address the causes. They must stop trying to control outcomes and instead create the conditions in which those outcomes can be achieved. That means easing the burden on those who create jobs, restoring confidence and recognising that sustainable employment is built not by government decree but by economic growth. Until they confront that reality, these policies will do little more than mask failure, at great cost to the taxpayer and even greater cost to the prospects of the next generation.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister very much—she did not repeat the Statement, but we have read it—and the noble Baroness, Lady Stedman-Scott, for raising so many questions the answers to which I look forward to hearing.

We have 739,000 young people aged 16 to 24—nearly 100,000 more than last year—unemployed and sitting on benefits of £338 per month. I make no apologies for repeating this figure, but I give it in numbers and not as a percentage, because percentages are misleading and you cannot really understand what they mean. These unemployed 16 to 24 year-olds are, on average, searching and applying over five months for hundreds of roles, with less than 1% success—so they give up entirely. Yet employers report millions of vacancies remaining unfilled. This is not a shortage of jobs but a failure of matching: the right opportunities for the right candidates remain unsurfaced and undiscovered.

Given that the DWP is already piloting matching technologies at some jobcentres, for which I congratulate it—I know about the one in Leicester—can the Minister set out the department’s timeline for scaling these tools nationally across all jobcentres? Critically, what measurable improvement in time to employment does the department expect from this rollout? Additionally, can the Government explain why they are removing the funding for apprenticeships for management? Will they rethink the impact of the national insurance contribution hike on hospitality, retail and tourism? If we dealt with that, it could substantially help with youth unemployment. This is a big problem and I hope the Minister can answer the few questions I have raised and those raised by the noble Baroness, Lady Stedman-Scott.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I am grateful for the questions from both noble Lords. I will come to them in a moment, but I think it is worth reiterating why we are expanding our support for young people now. While the UK’s overall employment levels are historically high, it has been a tough picture for young people in the labour market for some years. I am sure the noble Baroness, Lady Stedman-Scott, remembers that, in the three years running up to the election, the number of young people not in education, employment or training rose by 250,000, up to almost 1 million. This has not been helped by the 40% decline in youth apprenticeship starts in the space of a decade. The trends we have seen with young people in the labour market are long-term, deep-rooted and worrying. They did not start on 4 July 2024 and they are not confined to the UK, but we all have to address them.

As the noble Baroness said, and knows very well from her experience, if young people start their adult lives on the wrong foot, it has consequences for decades to come, both for them and for our country as a whole. Sir Charlie Mayfield highlighted in Keep Britain Working that, if a young person goes on to benefits in their 20s, they could lose out on £1 million of lifetime earnings and it could cost the state £1 million to support them. Tackling these trends is in all our interests and there should be good cross-party support for this, especially at the moment. At a time of rapid technological change, young people need our support.

We have already set out our reforms to refocus the apprenticeship system back on young people. I say to the noble Lord, Lord Palmer, that we have made some difficult decisions to focus apprenticeships on the young people who need this start early in their life, so we have focused our priority in that space. We had already announced a youth guarantee to help the young unemployed, including 300,000 work experience and training places and a jobs guarantee of subsidised work for 18 to 21 year-olds who have been long-term unemployed. Last week, my honourable friend the Secretary of State set out how we will go even further.

The noble Lord, Lord Palmer, asked about the timing. From this summer, we will introduce hiring bonuses of £3,000 if a business hires a young person who has been on universal credit for six months and there will be bonuses of £2,000 for small and medium-sized businesses hiring young apprentices. These bonuses can be combined if the young person hired has been out of work for six months. On top of that, we are introducing new foundation apprenticeships in retail and hospitality, as well as new short courses in AI, electrical vehicle charging point installation, electrical fitting and assembly, mechanical fitting and assembly and solar PV installation welding. We are also extending the jobs guarantee to those aged 22 to 24. Altogether, this will create 200,000 job and apprenticeship opportunities over the next three years. This represents £1 billion of new investment on top of the funding announced at the Budget, so our package of support for young people now comes to around £2.5 billion.

I am proud of the efforts we are making to ensure that young people can flourish. The noble Baroness must have got mixed up between this policy and something else, because there is no compulsion here. We are not making employers take on young people, but offering incentives for them to do so. We are offering subsidies for jobs. We are doing all the things to help make sure that the young people who are struggling most have a chance to get those jobs out there. That is not compulsion or controlling outcomes: it is giving young people opportunity, and I am proud that we are doing it.

The noble Baroness, Lady Stedman-Scott, pointed to some of the policy choices this Government have made. As I pointed out, youth unemployment has been rising since 2022 and the OBR predicts that overall unemployment will peak this year and fall in every year of the forecast. She mentioned tax rises, I am guessing in reference to national insurance contributions. She will remember that employers are exempt from paying employers’ national insurance contributions for workers under 21 and apprentices under 25, unless they are earning over £50,000 a year. She mentioned the Employment Rights Act and the reaction of employers. The problems young people are facing in the labour market go back rather further than that. They are not new. What is new is this package of support, which has been welcomed by large businesses such as Amazon, PwC and the Kier Group, and the Federation of Small Businesses, which called it a game-changer. In terms of hospitality, the chef and businessperson Tom Kerridge said that

“these incentives will give our industry a great boost”.

The noble Lord, Lord Palmer, made the important point that there are vacancies in the economy. There are 700,000, including 50,000 in manufacturing. There are jobs out there. Our job is to help young people get the support, skills, training and experience to get them and—I completely agree with him—we need to match the young people with them. He made a really important point. That is why we are setting out this package today and why it matters so much.

We have already started to reform the system, but we have to do all the things that will make the difference to help them get those jobs. The noble Lord asked about timing. The £2,000 apprenticeship incentive for small and medium-sized enterprises will take effect for those starting apprenticeships from 1 October, as long as they have joined their employer within the last three months. The £3,000 hiring incentive, the youth jobs grant, will be delivered from June this year. The expansion of the jobs guarantee to include 22 to 24 year-olds will be from this autumn, and the first set of new short apprenticeship units is launching from next month. We are not hanging around; we are getting out there to do the work.

I was really grateful to the noble Lord for acknowledging what jobcentres can do in supporting young people. We all know there are young people out there who want these jobs, but they often need the help. They may not have the skills or the work experience.

In response to the noble Baroness, Lady Stedman-Scott, different things are obviously open to different people. What I think she was asking was what would happen after somebody was put specifically into a guaranteed job. If they have been out there looking for work for 18 months and they have not got a job, we will guarantee them six months of a job. We would hope that, by the end of that, the employer would see their potential, with all the support they had getting up to that point, and would want to keep them on. If for any reason they did not keep them on, such as if it is not a good fit, or if they did not feel they had the right skills, then all the support will be there from jobcentres and the range of our youth offer, to make sure that, with their new work experience, we can get them out there and get them a new job. Or maybe they would want an apprenticeship to acquire more skills so they can build a career.

[Lord Palmer of Childs Hill (LD)]

I am sorry to interrupt the Minister, but perhaps at this point she could tackle the point I raised, which she touched upon, which is the matching of vacancies with jobs. I gave the example of the Leicester jobcentre, which is doing this. My question, which I hope she answers, is: how are we going to spread that out?

[Baroness Sherlock (Lab)]

This is already happening in lots of different places and in lots of different ways. Jobcentres are doing it. For example, we are setting up youth hubs in 360 locations across the country, where we can bring together employers and young people, as well as lots of other services, so they can meet them. We also have jobs fairs, which my colleagues have been visiting, where employers are brought in to meet with potential jobseekers. This is the everyday work of jobcentres, of going out there and matching people together. But I would be very interested to talk to the noble Lord about what he saw in Leicester and what he found particularly helpful about that, because it is really good to learn what is out there.

I have very little time left, but I will just say two other things very quickly. First, even though there are jobs out there, the challenge is always going to be that the young people who are farthest from the labour market are going to find it hard to get them. That is why we have to give particular support to them. I know these are tough times generally, but we have to try to do all we can to give those young people a chance to get those jobs. If they can get the experience at this crucial moment, it could be transformative down the line.

Secondly, we will evaluate this very carefully. We are already evaluating what is out there and we are using the evidence base. The noble Baroness, Lady Stedman-Scott, pushed me on wage subsidies, for example. We have looked at the evidence from Kickstart, introduced by her Government, and from the future jobs fund, introduced by our Government, and the evidence is really quite strong. In trying to shape incentives, we are working on what we know works. The development of the youth guarantee was underpinned by that kind of evaluation and evidence. A DWP evaluation of work experience shows its high impact on employment prospects. For example, we have assessed the sector-based work programmes, which were found to be a really effective intervention.

Finally, we are evaluating the eight youth guarantee trailblazers and will use the learning from the different things happening around the country in different mayoral authorities to work out and inform the design of the youth guarantee as it goes forward. We are using evidence from the past, evidence we are gathering now and all that we are learning to make this the best it can be. This should be a national mission, and I am proud that we are doing something for it.