Welfare Reforms and Youth Unemployment

Lord Young of Cookham Excerpts

Thursday 11th June 2026 Lords Chamber

[Lord Young of Cookham (Con)]

It is a pleasure to follow in the wake of my noble friend Lord Willetts and to join others in commending my noble friend Lord Evans on choosing this highly topical subject for today’s debate. He and I both sat on the Social Mobility Policy Committee, which focused directly on NEETs and youth unemployment. Only the House of Lords would put three old Etonians on a social mobility committee, but I challenge anyone reading Hansard to identify who they were. Our work has been complemented, as others have said, by the Milburn interim review. I read all 217 pages over the Whitsun Recess. It is one of the finest reports I have ever read—evidence-based, balanced, clearly written, without any jargon, and with the author’s commitment to social justice shining through. The difficulty is that he has raised enormously high expectations for his final report, due in the autumn.

I will just contrast for a moment the Government’s approach to youth unemployment with that of social care. The Milburn review was announced in November last year, with a final report in early autumn—less than a year. The Casey review into social care was announced in January 2025, with a report expected in 2028. Adult social care has been kicked into touch.

I will pick up two points from the review, one mentioned by my noble friend Lord Willetts. The Milburn review said that the apprenticeship levy

“has been captured by employers upskilling existing workers rather than bringing in new ones”.

It makes the point that only 2% of apprenticeships actually go to NEETs. That is a distorted priority that the Government should urgently correct. The second point is one paragraph of Milburn that I thought encapsulated the whole problem:

“Less than half of the total £8.1 billion currently spent on key benefits for young people aged 16 to 24 years old has any participation support or requirements attached to it”.


It is the polar opposite of what a participation-first welfare system should be providing and means that more and more people are being trapped on benefits. He concludes:

“This is a catastrophic failure”.


The Milburn review and our Social Mobility Policy Committee report both point in the same direction: tackle youth employment locally. Milburn said:

“There is a strong case for local leadership to address the NEET crisis. Labour markets are local. Transport is local. Employer relationships are local … Strategic authorities are bodies that have huge potential to enact change”.


That reflects the recommendation of the Select Committee:

“We recommend that the Government takes note of the successful local partnerships working with those who are NEET … They should support local and combined authorities in endeavours to develop the leadership of such local initiatives”.


We concluded:

“The current local government restructure and the creation of mayoral combined authorities is an opportunity for Government to devolve the power and resources needed for those authorities to lead work, through local partnerships with schools, colleges, universities and employers and Skills England, to promote social mobility and address the acute NEET problem”.


We saw that working in practice when we visited Liverpool.

I end with a radical suggestion that takes those recommendations to a logical conclusion and builds on the point that the noble Lord, Lord Shipley, made earlier. Pick as a pilot a mayoral authority such as Bristol and work out what the DWP would spend over the next 12 months on benefits for those aged 16 to 24. Give that sum—it is probably billions—as a lump sum to the mayor to work with the universities, the technical colleges and local employers, and challenge them to invest that money in new apprenticeships, work experience, training and voluntary work. Every claimant would of course keep the benefit to which they are entitled, but I believe that unlocking that budget in that way would have a major impact, by the end of the year, on the solution we all want—namely, more jobs for young people. Do the Government have the nerve to do this?

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

My Lords, I too thank the noble Lord, Lord Evans, for bringing forward this debate, which has been very constructive and wide-ranging. There was a clear consensus in it that far too many young people in this country are leaving education and not getting the chance to work. We must be clear about the scale and implications of this challenge that we face. It is, of course, not a problem that arrived in the last year, or in fact in the last two years; it is deep rooted and long term.

The number of young people not in education, employment or training has been rising for years, increasing by a quarter of a million in the three years leading up to the election. As many others have said, it is now close to a million, which is far too high. But it is not inevitable; it is a crisis of opportunity and one that we should not accept.

I agree with those who said that what it is not is a failure of ambition among young people. There are many young people keen to learn and work who are not provided with that opportunity. It is too often a failure of the system to provide the opportunity and support that they need. As others have said, it is not only a social challenge; it is an economic one as well, and one that needs early intervention and work across the whole of government. That is why I am so pleased that I sit now in two departments: the Department for Work and Pensions and the Department for Education. One of my bosses, the Secretary of State for Work and Pensions, commissioned Alan Milburn to examine the underlying drivers of rising youth inactivity, because we were clear that this is not a single issue with a single cause. Also, as the right reverend Prelate the Bishop of Leicester identified, this is a series of individuals, quite often with differing needs and reasons why they are not working, learning or earning. In many cases, they very much want to work.

Another area of consensus in the debate, I think we all agree, is that Alan Milburn’s report provides a very important, serious assessment of the challenge. Having read quite a lot of Government-produced or prompted reports in my time, I agree with the noble Lord, Lord Young, that it is very much better than a lot of them and certainly well worth a read.

On the point made by several noble Lords about the position of the economy and costs in the labour market, I am sure noble Lords will recognise, as I pointed out to the House the other day, that Alan Milburn makes it clear in paragraphs 264 and 266 that it is not actually about the national insurance contribution increases or the national minimum wage. If we look at the way in which both of those impact on the labour market, but also the reliefs that are available to employers, particularly with respect to national insurance contributions when they take on young people, we see that this is not at the heart of the cause of youth unemployment. We have the fastest-growing economy among G7 countries. We have 416,000 more people in work in this country now than a year ago. Our unemployment is lower than in most OECD countries and the EU average. There are specific issues that young people face in being able to access the labour market; we need to respond not only to the economic conditions but to all the other issues too.

The other important thing about the Milburn report is that it brings into sharper focus the nature of what we face, not just its scale but its persistence: what has been described as “stickiness”. Too often, once a young person falls out of work or education, they can become stuck outside the system and, the longer that continues, the harder it becomes to return, with lasting consequences for their prospects, their health and their earnings. The report highlights the growing number of young people who are not only out of work but who are assessed as having health-related barriers to work. That underlines that this is not simply a labour market issue but one that cuts across employment, health, education and welfare. That is why it cannot be a challenge for one department alone. There must be a whole-of-government effort and, as the noble Baroness, Lady Stedman-Scott, mentioned, a broader campaign across the country to tackle it.

As the Chamber has also recognised today, when so many young people are outside work or education, we constrain labour supply, limit productivity and store up long-term costs for individuals, for the Exchequer and for the economy. That is why this Government have acted and are investing. In response to the noble Lord, Lord Mohammed of Tinsley, this Government are investing now to save for the future. There is an additional £2.5 billion in the youth guarantee and the growth and skills levy, in support of young people and employers over the next few years, including a £3,000 youth jobs grant for employers hiring a young person who has been out of work for six months. There is also a £2,000 incentive for small and medium-sized businesses taking on young apprentices.

We are turning the focus of apprenticeships back to young people, including the full funding of training costs for SMEs employing apprentices under 25. I strongly agree with my noble friend Lord Austin and the noble Lord, Lord Willetts, about the need to achieve this pivot of the apprenticeship system back to young people, and to reverse the sharp decline in apprenticeship starts among young people, which have fallen by 40% over the last decade. That is why we are expanding opportunities for young people through new foundation apprenticeships. It is why we have introduced a £2,000 hiring payment for non-levy-paying employers. We are removing the requirement for small businesses to fund any element of training, and there will be additional investment for taking on apprentices if they are out of work.

This is backed by an additional £1 billion investment and will support 50,000 more young people into apprenticeships over the next three years, providing a clear route into skilled work and helping businesses grow with the talent that they need. My noble friend Lord Austin is right to emphasise the role of government here. I am proud that our estates strategy at the Department for Education, as we repair and rebuild schools, will provide places for 13,000 more apprentices and T-level placements.

I say to the noble Lord, Lord Willets, that we are considering the report of the Social Security Advisory Committee on the impact of apprenticeships on benefits, and we will have more to say about that.

Another element of the youth guarantee is the expansion of youth hubs across the country, bringing together employment skills and the sort of wider support that the right reverend Prelate the Bishop of Leicester rightly identified in local communities.

The noble Baroness, Lady Shephard, and the noble Lord, Lord Cameron, in particular raised the issue of rural unemployment. We recognise that transport can be a barrier for young people in rural areas. That is why we design youth hubs to be flexible, to work with local partners and to tailor delivery to what works best in each area, including flexible opening hours or choosing locations that can align with local transport patterns. Youth hubs bring together employability support from jobcentre work coaches with mental health, housing, essential skills and employer engagement support in community settings, so that young people have access to local opportunities and support tailored to community needs.

We are also, in doing that—I think the noble Lord, Lord Young, is right about the need for more place-based funding and the ability to address this problem—actively testing and evaluating place-based delivery models. This includes how we reach a diverse customer base, including those with specific needs and in hard to reach areas, such as through jobcentre vans: mobile units are being tested in nine areas including Bolton, the highlands of Scotland and north Wales. In particular, the youth guarantee trailblazers, where we are working with mayoral strategic authorities in eight areas, are testing the ability of those strategic authorities with government investment to test innovative approaches to identify and deliver support to young people who are NEET or at risk of becoming NEET. I am sure the noble Lord, Lord Cameron, will be pleased to hear that in the west of England one of the ideas in rural north-east Somerset is to facilitate e-bike loans for young jobseekers to be able to travel.

On another element of the youth guarantee, young people on universal credit looking for work will get support through the youth guarantee, with a dedicated gateway meeting and intensive support if they are still not earning or learning after 13 weeks. Nearly 900,000 16 to 24 year-olds will be able to benefit from that dedicated session and four weeks of additional intensive work coach support, including work experience and the ability to enter into and benefit from sector work-based academies as well.

Finally in the youth guarantee there is a jobs guarantee, providing six months of paid government-subsidised work for young people who remain unemployed in the long term after all of that other support. I welcome the comments of the noble Baroness, Lady Neville-Rolfe, about her experience at Tesco. She is absolutely right that these are not easy cohorts of young people by definition if they have been out of work for 18 months. The delivery partners we are working with are not consultants. They are organisations with exactly the experience of getting young people to work and getting them there on time. I agree with the noble Baroness about all those requirements; perhaps we should send the noble Baroness, Lady Stedman-Scott, round to get them up in the morning. It is the Government’s intention—we have expanded the investment in this—to enable this job guarantee to provide the six months of paid work to 90,000 young people by virtue of our investment.

I will just touch on retail and hospitality—which was raised by several noble Lords—not least because, as we know, retail and hospitality have traditionally provided those first experiences in work for young people. We know that employers want to play their part in supporting young people. For instance, I welcome the announcement just this week from Marks & Spencer that it is launching a training programme for 1,000 young people.

I had a very good visit to B&M, where, in a meeting facilitated by the BRC, I met other retail employers; and I was able to join the BRC HR leaders’ webinar just the other day. Of course, while there are concerns about the costs and risks of employing young people, I found there was also a lot of enthusiasm from retailers to be involved with, and be a part of, the Government’s youth guarantee, and to play their role in it. In exchange, we want to support and work with employers to develop opportunities for young people. In the DWP, we continue to expand our current network to more employers in key sectors, such as retail and hospitality, where there is a critical demand for workers. We have expanded opportunities through new foundation apprenticeships in hospitality and retail, in addition to our new V-level in marketing and retail, which we aim to introduce in 2028.

Noble Lords also raised an important theme about how we prioritise prevention: how we make it easier to identify young people who are at risk of becoming NEET, and how we stop that from happening. As the noble Lord, Lord Storey, identified, we know that these barriers emerge early in life. As a Government, we are focused on ensuring that young people get the best start in life, which many are not currently getting. That is why we are bolstering our prevention measures. Through our child poverty strategy, we are taking steps to lift 550,000 children out of poverty. We have committed to ensuring that 75% of children reach a good level of development by the end of reception, so that they can engage in learning. We know that persistent absence from school is not just a short-term problem but closely linked to young people becoming NEET later on. That is why we welcome the action that has led to the fastest improvement in attendance in a decade.

We know that the transitions between school, further education and employment are too often simply not strong enough to keep young people engaged and moving forward, and we know that the curriculum needs change. That is why we set up the Curriculum and Assessment Review, which will enable young people to have more of those skills that are necessary to operate in the modern job market. It is why we are reforming post-16 qualifications to increase the number of young people who can do T-levels, and it is why, as I said, we are introducing the new V-level qualification, which will be closely linked to occupational standards and involve working with employers, providing a high-quality vocational route for young people.

I welcome the further push from the noble Lord, Lord Baker, on the UTC Sleeve, and I will come back to him on that.

I also hear what noble Lords are saying about work experience. One of the things that Alan Milburn identified is the way in which it is much harder now for young people to get work experience, which is why, through our youth guarantee, we will find 300,000 placements for work experience and sector-based work academy programmes, backed by major employers such as Manchester Airports Group, JD Sports and Gatwick Airport. We are strengthening work experience in schools, with a guarantee of two weeks’ high-quality work experience for every young person. As my noble friend Lady Nargund said, volunteering also plays a very important role in this.

There are other deeper challenges at play as well. More than one in six young people who are not earning or learning had a mental health condition as their primary condition in 2024, more than double the rate in 2012. That is why it is so important that this week we were able to show how the expansion of mental health support teams in schools is progressing. Six million children now have access to mental health support in their schools. We know that young people with SEND and those who struggle to achieve at school face a significantly higher risk of becoming a NEET. The noble Lord, Lord Shipley, is right. There are supported internships, which I was fortunate enough to see in practice at Whipps Cross Hospital last week through Project SEARCH, which I note is also now working with Amazon on a very big expansion. Supported internships are important for those with education, health and care plans—but the Government are also investing in research as to how we can develop them for those who do not have EHCPs.

This is about much more than education or employment alone: it is about early support and well-being, and ensuring that our systems work together around the young person. It is about more responsibility on schools to identify early who will become a NEET, with the improved risk of NEET indicator tools that we are developing. It is about ensuring, as we are doing, that we build on the existing guarantee of a place in education or training for every 16 and 17 year-old. Much of this, particularly the youth guarantee, is welfare reform, but we are reforming the welfare system more widely as well to ensure that it supports people to engage with work wherever possible. That includes legislating for a right to try, so that disabled people can take steps into work without fear of automatic reassessment. It means changes to universal credit to reduce disincentives to work and investment in personalised employment support, including for people with health conditions.

These reforms reflect a broader shift under this Government, from a system which can too often write people off to one that acts as a platform for opportunity, now also essential to ensuring the long-term sustainability of the system, supporting those who need it while enabling more people to move into and progress in work. We are clear, however, despite this significant progress, that more must be done, because for many young people, the barriers to work do not begin at 16. As I have said, they often have their roots in poorer health, disadvantage and unequal access to opportunity. As our population ages and migration falls, we will depend more than ever on the talent and potential of our young people. We cannot afford economically or socially to leave so many outside work and education. We will take determined action; we will learn from others, which is why my right honourable friend the Secretary of State at the DWP is visiting the Netherlands, possibly even at this very moment, to learn from it.

We look ahead to Alan Milburn’s full recommendations in the autumn, but our objective is clear: to build a system that places opportunity and work at its heart—

[Lord Young of Cookham (Con)]

My noble friend Lord Evans asked at the beginning of the debate when the Government would respond to the Select Committee report on social mobility. The report was published in November; the government convention is to reply within eight weeks, and it is now almost six months. When will we get a reply?

[Baroness Smith of Malvern (Lab)]

I am sorry that there has not been a reply yet. I think there should have been, and I have already made that point to both the DfE and the DWP. I will undertake to ensure that we get that back as quickly as possible.

Just to reiterate, our objective is clear: we need to build a system that places opportunity and work at its heart, one that is not concerned only with what people receive but asks a broader question of how we help people to change their lives. That is the challenge before us, and it is one that this Government are determined to meet.