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My Lords, I pay tribute to my noble friend Lord Younger on his 15 years’ service on the Front Bench. He was an outstanding public servant and is very much missed in your Lordships’ House.
All of us can remember our first job and the moment we got our first pay cheque—or, depending on how old you are, pay packet: cash paid in a little brown envelope with holes in it. My father was a wages clerk, and he always told me to open it instantly and count how much was in it. My first pay packet was £10 and I bought myself sweets, clothes and Airfix models. Then I moved on to working in my local pub, the Farmers Arms in Poynton, as a glass collector and bottle washer—hospitality and retail.
High streets and the NEET issue are inseparable. Hospitality and retail provide jobs in every high street in the UK. Hospitality and retail jobs are part of the answer to youth unemployment. Your first job is your first step. With businesses struggling with increased costs and additional taxes, they have been forced to cancel recruitment plans, cut staff hours and, in the worst cases, close. This has acutely affected part-time, entry-level and first jobs, feeding directly into today’s NEET crisis.
Let us look at some economic data and facts. Nearly 1 million young people between the age of 16 and 24 in the UK, one in eight, are NEET—not in education, employment or training. At the end of 2025, that figure was registered as 957,000 young people. If they formed a city, it would be the third largest in the UK, larger than cities such as Leeds, Glasgow and Cardiff.
This is a long-term issue, as over the last 25 years the NEET rate has fallen below 10% only during the Covid-19 pandemic, while at the end of 2024 it reached the highest level in a decade, 13.2%. The UK has a higher-than-average rate of young adults who are NEET compared to similar countries in the EU and the OECD. The EU average for 15 to 24 year-olds was 9% NEET. The UK used to be around the EU average, but now only Romania has a higher NEET rate. France had a similar NEET rate when it entered the Covid pandemic in 2020, but it is now lower. Denmark’s NEET rate for 15 to 24 year-olds was 8.4%. The Netherlands is currently around 4.1%. The UK has gone from being average to being an outlier.
In the early 2010s, most NEET young people were unemployed, seeking employment and ready to start. Now only 43% are. The other 57% are economically inactive. This is driven most by an increase in inactivity among men since the Covid pandemic. Six in 10 NEET young people today have never had a job, going up from four in 10 in 2005.
The duration that a young person is NEET makes a big difference on returning to employment. Some 65% of those who are NEET for less than a year return to employment the following year, but only 25% of those who are NEET for more than a year do so. While there are 7 million more jobs in the UK than in 2000, the number of workers who are under 25 has fallen. Young people have gone from making up one in seven workers to one in nine. At the turn of the millennium, 63% of young people were in work, but now it is barely 50%. In contrast, the employment rate for 25 to 64 year-olds rose from 74% to 80% over the same period. Unemployment among young people was 9% in 2022. It is now 16%. More than 250,000 young people have been unemployed for over six months, the highest number since 2015.
The Young People and Work interim report, the Milburn review, estimated that the NEET rate could increase to over 16%, or more than 1.25 million young people, within five years. Over the last decade, the proportion of those who say they are NEET due to a work-limiting health condition has gone up by 70%. The proportion of NEET young adults who are inactive due to sickness or disability has gone up from 11% in 2005 to 28%. The proportion of disabled NEET young adults who cite mental health as their main health problem has risen from 24% in 2011 to 42% in 2025. All those who fell into ill health-related economic inactivity between 2017 and 2019, almost eight in 10, were still NEET more than two years later.
A young person who first claimed health and disability benefits in 2019 is one-third more likely to be NEET five years later than someone who first claimed in 2010. Between 2010 and 2020, the proportion of young people leaving disability benefits within five years dropped by 40%. Today, around seven in 10 young people claiming a health and disability benefit are still claiming a decade later.
The Milburn review found that only one in five NEET young people in England are getting meaningful employment support from the welfare system. Around half the young people in the UK do not claim benefits and so are hidden from the system. Of those who claim benefits, only one-third get meaningful support in finding employment, and these are often those who face the least barriers to work. Almost half of those who first claimed a health and disability benefit aged 16 to 24 are not in work or education 15 years later.
A young person who first claimed health and disability benefits in 2019 is 34% more likely to be NEET after five years than someone who first claimed in 2010, but this is different from what those surveyed for the Milburn review claimed they wanted. In a survey carried out for that review, 64% of NEET young people said they wanted to find a job or an apprenticeship, and 19% wanted to enter education or training. Of the young people who are claiming disability or health benefits and were surveyed by the Milburn review, 90% are working and 49% believe that they could work, either now if the right support was available or in the future if their health improved. Only 32% feel that they will not be able to work again.
This is not what the system supports. Less than half of the total £8 billion currently spent on key benefits for young people aged 16 to 24 has any participation support or requirement attached to it. It is an issue that affects the whole system. More than 4 million people claim universal credit, with no requirement to look for work. In 2024-25, DWP spent less than £0.2 billion on funding employment support programmes for young people, plus a share of the £1.4 billion spent on jobcentres, which support all ages.
The Milburn review estimated that, in 2024-25, £25 was spent on benefits for young people for every £1 on employment support for them. The amount of money spent on PIP for young people alone is expected to rise from £3.2 billion to £6.5 billion by 2031-32. The Milburn review estimated that, if the spend on DWP employment support stays at the levels currently funded through the youth guarantee, by 2030-31, for every £1 spent on employment support for young people, around £10 will be spent on welfare support for them.
The Milburn review estimates that the cost to the 45% of today’s NEET 24 year-olds who have never had a job will be almost £300,000 in earnings over the course of their lifetime. Their cost to the state could be up to £240,000. The estimated direct total potential output lost due to NEET 18 to 24 year-olds is £38 billion, and the estimated scarring impact on output is £63 billion. The estimated forgone tax revenue for 18 to 24 year-olds who are NEET is £3.2 billion and the estimated scarring forgone revenue is £10.8 billion. The cumulative annual cost to the UK of almost a million NEET young people is £125 billion. The UK’s welfare expenditure is set to rise by £18 billion this year, up to around £333 billion. That is an eye-watering figure, given that we need to spend more on defence and elsewhere.
When I was a Member of Parliament in the other place during the coalition Government, the Conservatives’ approach, working together with the Liberal Democrats, achieved some significant thresholds. Workless households fell to a record low; there were over half a million fewer children growing up in workless homes; youth unemployment was cut in half; and £20 billion was saved from the annual welfare bill. OBR analysis concluded that UK government policy reduced social security spending by £19.6 billion in 2015-16 alone, relative to the 2010-11 baseline. That shows how, by working together cross-party, savings can be made that are fair to the recipients of welfare but also fair to those taxpayers who have to pay for it.
What about the employers who will employ young people? Make UK, the manufacturers’ representative association, has set out a range of challenges, from an employer perspective, that are making it more difficult to recruit, train and retain young workers. It cites overall employment costs as the most significant concern for manufacturers in 2026, as overall hiring appears to be slowing as a result of higher costs. There are constraints on apprenticeships, with a lack of the right local provision, while increasing training and employment costs are limiting employers’ capacity to offer apprenticeship opportunities. On wider skills and technical education, there is insufficient exposure to vocational and technical routes, while lack of employer engagement from schools is limiting awareness and understanding of skilled employment opportunities for young people in sectors such as manufacturing. Consistently high increases in both the national living wage and national minimum wage and their age-based rates, plus the proposed reduction in the national living wage age threshold to 18, mean restricting opportunities for young people. On labour market regulation and the Employment Rights Act 2025, measures such as the right to guaranteed hours may limit opportunities for young people to be employed flexibly.
At the beginning of my speech, I mentioned hospitality and retail, which cite the tax burden that recently fell upon the sector. Since the 2024 Budget, the hospitality sector has been battling an increase of £3.4 billion in annual costs and, more recently, an existential crisis in business rates. Hospitality has been disproportionately and repeatedly hit with taxes by successive Budgets. The sector has accounted for nearly half of all job losses in the UK since the Budget, confirming that it is the hardest hit by tax increases. Hospitality is the biggest employer of young people, with 39% of its workforce being 16 to 24 years old, by far the highest of any sector. Young people have typically been able to rely on a job in their local high street as their first job, and job losses in the hospitality sector affect them most acutely.
The changes to employer national insurance contributions brought in at the 2024 Budget are costing the hospitality sector £1 billion annually. Employment costs hit every part of the workforce, but particularly young people. A student working 14 hours at the weekend would mean £1,140 more in employment costs. Last year saw a 25% year-on-year drop in summer jobs, evidencing the loss of job opportunities for young people. High employment costs have had a knock-on effect in limiting job opportunities for young people and reduced footfall in the high streets. High-cost employment is high-risk employment; hospitality offers many people their first job and is a vital first step on the career ladder for many young people. The Government must de-risk businesses employing the least trained and least experienced in the economy, by reducing employment costs and ensuring that part-time and temporary work is affordable for businesses to offer.
Job losses in the hospitality and tourism sector are collateral damage to the Government’s NEET mission. The industry is leading the way, providing 25% of all entry-level jobs. Will the Government rethink any fiscal measures that threaten further job losses in hospitality and elsewhere to provide accessible jobs for everyone, everywhere? Why was hospitality not included in the Government’s industrial strategy? Again, that would have helped young people gain good-quality apprenticeships.
Finally, we are still awaiting the Government’s response to the 2025 Lords report on social mobility, which was completed in December last year. The Government should have reported back by February this year. With exceptional delays, if a response is likely to take longer than two months, the responsible government department must write to the specific committee, explaining the delay and providing a revised timetable. With this in mind, can the Minister take this opportunity to ask her departmental officials to update your Lordships’ House on the Government’s response to this important Lords report on social mobility, which is highly relevant to all those NEETs who are no longer or have not started in the workplace? I beg to move.
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My Lords, it is a pleasure to follow the noble Lord, Lord Evans, and I congratulate him on securing this debate. I must declare an interest as the executive chairman of Iceland Foods.
Hanging on the wall in our boardroom is a framed version of the company’s guiding values. It proclaims just four things: Simplification, Focus, Urgency and Accept Reality. There is also a framed picture of a cartoon, in which half a dozen people are sitting round a board table and the chairman is saying:
“Instead of risking anything new, let’s continue our slow decline into obsolescence”.
Business success is not about being ruthless; we are always in the Sunday Times list of best companies to work for. It is about being a business that can thrive, grow, adapt, change to circumstances and move quickly to outfox the competition. In doing so, wealth and jobs are created, taxes are paid and society benefits.
As I said in my maiden speech, I support the Labour Party, not the “Benefits Party”: a party that promised to be pro-growth, pro-business and on the side of the builders, not the blockers. Yet hard truths must be spoken, because we cannot keep kicking the can down the road.
We must urgently reform the welfare system so that the safety net catches those who truly need it, not those who choose it as a lifestyle. But let us jettison the worn-out stereotype of who constitutes the biggest drain on our benefits system. We should have the courage to challenge the pensions triple lock. It is mathematically unsustainable, politically untouchable and profoundly unfair: we all know it. As for the epidemic of youth unemployment, it is a tragedy that will be made worse by the challenges of AI but also because the reality is that incentives to work are diminishing.
The bottom line is this: we will cure the problem only by growing the economy. It really is that simple. I was happy to support Labour in 2024 precisely because it promised a growth-first mission. Yet I have to confess that progress has been slower than I imagined, and in my short time working within No. 10 as the cost of living champion, I have been disappointed to find out how hard it actually is to get stuff done, a frustration that I know the Prime Minister shares. I recently presented a comprehensive report to No. 10, setting out practical steps that could be taken immediately to ease the pressures facing many households, including young people. The report focuses on energy debt relief, winter energy affordability, faster support payments, action on consumer rip-offs and reform of punitive debt collection. These recommendations need to be translated into urgent action; let us see what No. 10 does with it.
On the broader stage of the national economy, we need to break out of the endless cycle of consultations and procrastination and actually get stuff done. To grow the economy, the Government need to be more business friendly. It is only business that creates wealth and jobs and pays tax. I repeat: it is only business that can grow the economy. If time permitted, I could list 100 things the Government could do today to help businesses prosper, thereby driving down youth unemployment and reducing the need for welfare. But in brief, my recommendation is: put those two framed pictures we have at Iceland’s HQ in every single office within government. Simplicity, focus, urgency and accepting reality are the proven keys to success, and that really would be trying something new. The hour is late, the stakes are high and it is time to choose. Adapt and thrive, or drift and die.
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My Lords, it is a pleasure to follow the noble Lord, Lord Walker of Broxton. He has a huge amount of practical advice but, as he said, we cannot keep kicking the can down the road. Youth unemployment, he said, was a tragedy, and I agree with him. We have seen it rise in recent times. I thank the noble Lord, Lord Evans of Rainow, for enabling us to hold this debate, which is timely in the context of the Milburn review.
First, welfare support should not be removed from young people if there is no work for them to do. Young people do want to work; they do not prefer to live on benefits. I have been a member of two Select Committees reporting in recent years on youth unemployment. I chaired the Youth Unemployment Committee that reported Skills for Every Young Person in November 2021. It had been the proposal of the noble Lord, Lord Baker, from whom we shall hear shortly; I look forward to that. We identified a huge skills mismatch between the needs of employers and the qualifications of young people leaving school. We identified deficiencies in the digital skills of young people. We were concerned by the narrowness of the national curriculum. We saw the need for more technical and vocational education and more apprenticeships for school leavers. We understood the importance of work experience and the capacity of employers to meet demand.
I was then a member of the committee chaired by the noble Baroness, Lady Morris of Yardley, which late in 2024 produced a report, Think Work First, on the transition from education to work for young disabled people. We know from Mencap that 86% of young people with a learning disability want a job. The noble Baroness, Lady Morris of Yardley, said that the report provided a blueprint for the new Government to implement their manifesto commitment to getting more young disabled people into work, and to bridge the gap between education and work for them. Two key proposals were supported internships and better career support in schools, to which I think we should add more face-to-face assessments for those being interviewed for personal independence payments and the decisions around that.
What has happened? We heard from the noble Lord, Lord Evans, that more than 1 million are not in education, employment and training and the number is growing. Youth unemployment today stands at 16.2%. The long-term impact of Covid, the rise of AI and the lack of entry-level jobs all add together to make the picture worryingly bleak. Crucially, half of those not in education, employment and training have never worked. Yet the cost of youth unemployment is £125 billion in benefit payments and lost tax revenues taken together. DWP statistics show that for every £25 spent on benefits, only £1 is spent on helping young people into work; I find those to be astonishing figures. I have concluded that the DWP is too centralised: we need to devolve now to combined authorities and mayors and to give them a clear responsibility to deliver a reduction in NEETs and a real increase in youth employment in their areas.
We can compare ourselves with the Netherlands, where there is stronger vocational education and better, more targeted financial support for business. There is a work experience system and a welfare system that promotes engagement by young people. Municipal authorities, not central government, run welfare programmes.
The noble Lord, Lord Walker of Broxton, was very helpful about the need to support employers. The Government’s youth guarantee is good but it needs to be part of a package of tax incentives, and the truth is that the national insurance rise has been a significant disincentive. To conclude, too many young people are leaving school without the skills that they need to succeed or that employers need. Support through coaching is insufficient. I remember our taking evidence from young people who said that the jobcentre saw them as statistics. The jobcentre’s objective was to get the young person into a job, whether or not that job was suitable for them or might lead them to a career. We have to get coaching of individual young people so much better.
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My Lords, it is a pleasure to follow the noble Lord, Lord Shipley, and a particular pleasure to hear the speech of the noble Lord, Lord Walker. I could not agree more with almost everything he said. I declare my interest as a retired member of a farming family in Somerset, and I will talk about rural youth unemployment.
Our rural youth has special problems, mostly to do with transport and the distances involved. The great question for the rural young is: how do I get to a job without a set of wheels? There is no other way to get to a job at 7.30 am in a place that is 10 miles away without your own set of wheels. But how do I get a set of wheels without the money from my first job? It is a Catch-22. The simple answer is that you lend the youngster a moped. There used to be hundreds of these Wheels to Work schemes around England doing just that. After a short training session, the youngster was lent a moped free of charge; after six months in work, they had to give it back and get their own set of wheels. The scheme was funded by local authorities and the DWP, but then local authorities ran out of money, as we all know, and the urban-based DWP simply did not get it. It did not get the fact that these schemes cost less per head than the social security benefits otherwise payable to these youngsters, who if they had been helped into work would probably never trouble the welfare state again for the rest of their lives. Sadly, nearly all these Wheels to Work schemes have died.
These schemes help youngsters get to training courses, and that is a problem in itself. Technical colleges can be 15 to 20 miles away, so now most aspiring youngsters have to cadge beds from their fellow pupils living in the town, sofa-hopping until their welcome runs out. Sometimes, it is easier just to launch yourself into some sort of self-employment. Rural England has twice as many self-employed people as a percentage than urban England, and some counties—my own county of Cornwall, for instance—have five or six times as many. We are an enterprising crowd, but we could really benefit from help, training and advice.
I came across a scheme at Loch Lomond, which I think should be replicated all around the country. Youngsters applied to the national park authority, which organised tuition classes, paid for by the youngsters themselves. It was simple stuff, such as budgets, cash flows and marketing, but important if you want to earn your own money by mending bikes or computers, fitting IT routers or cleaning windows. Helping a percentage of the rural workforce to earn their own money rather than draw the dole must make a difference, both to them and to the Treasury.
Small rural family businesses have always tried hard to give local youngsters a start in life. These businesses have always been and felt part of their community, so it is ingrained in their ethos. But whereas in 2020 employing a 21 year-old cost £17,000 per annum, now, in 2026, it costs £29,600, and no small business can afford to employ an untrained 21 year-old at that price. Who loses? The 21 year-olds, of course. Just when they are on the springboard of a working life, it collapses beneath them. The other loser is the Treasury, because it has to pay benefits to these now unemployed 21 year-olds, as opposed to receiving probably their lifelong payments of tax.
I will stop there. We are an enterprising lot in rural Britain. We have many more businesses per head than the towns. Our youngsters would love to join this world of work, but they need that extra help to enable them to do so.
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My Lords, I am grateful to the noble Lord, Lord Evans of Rainow, for securing this debate and to all taking part. Noble Lords may differ on the diagnosis but I think the whole House shares the same concern for the young people behind these figures.
I begin by noting that none of us likes to be labelled, and the use of acronyms to refer to people is even more disconcerting. Each young person is unique and precious, whatever their circumstances, and their dignity must be at the heart of our concerns. I also want to push back on the narrative which we often see in the media—that the rise in young people who are not in education, employment or training reflects a generation that has no appetite for work. The evidence simply does not bear that out.
Research by the Learning and Work Institute shows that the vast majority of young people who are not in education or training—84%—had clear career or educational aspirations. Only 6% said they did not want to find work. Nor is it a case of unrealistic aspirations. Only 4% said they were waiting for an opportunity in a specific sector, whereas 17% said they planned to find any job they could. Similarly, research by the King’s Trust showed that one in five young people who are not in education, employment or training are applying for jobs every single day. Almost one-third have applied for jobs they did not even want, out of sheer desperation to get a foothold on the labour market. One in six had been rejected from more than 50 positions, and more than half said they feel embarrassed about not having a job. That is not a picture of idleness. It speaks of a generation knocking on doors that are just not opening for them, because more than half of so-called entry-level vacancies now demand prior experience—on average, nearly three years of it.
We should be especially wary of stigmatising young people and suggesting they have a poor work ethic or a lack of realistic ambition, because the more that narrative takes hold, the more reluctant employers will be to take a chance on them. We will, in other words, perpetuate the problem which we want to solve.
If the problem is not a lack of work ethic then the solution is not necessarily tough love. It is, at least in part, confidence, coaching and a community that believes in them. I want to recommend a model that does precisely this: the Spear programme, run by the charity Resurgo and delivered through local churches. Spear began in 2003, at St Paul’s Church in Hammersmith, as a response to the unemployed young people on its own doorstep. It has since grown to some 18 centres across the country and works with over 1,000 young people each year, all of whom face multiple significant barriers to work—from mental health issues to criminal history and adverse childhood trauma. The programme involves six weeks of group work and one-to-one coaching that tackles the psychological barriers as much as the practical ones—confidence, mindset and resilience—alongside CV writing, interview practice and job search skills. It is followed by up to a year of ongoing support, as each young person moves into work or education and, crucially, stays there. Around three-quarters of those who complete the programme are in work or training a year later—a figure I am sure noble Lords will agree is remarkable.
What I want to draw out for the House from this model is the importance of a supportive community in helping marginalised young people into work and the importance of a trusted adult to journey with each young person. As Ministers build out the youth guarantee, I urge them to recognise that the availability of placements on its own is not enough for young people who face multiple barriers to work. Many young people need the intensive personalised confidence-building support of organisations such as Spear to provide for and help them as they seek to find placements. The positive ripple effects of these will be generational, passed down to their children, as well as being important for wider society as a whole.
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My Lords, I congratulate my noble friend Lord Evans of Rainow on introducing this important and timely debate.
Successive Governments have had to deal with rising levels of youth unemployment for a range of reasons, including economic shocks, deindustrialisation and changing patterns of demand. I recall from earlier years, as no doubt other noble Lords do, initiatives such as youth training schemes, training and enterprise councils, and new qualifications such as NVQs—not perfect solutions, but constructive and collaborative. They involved close working between government, both national and local, along with employers, further and higher education, and training providers.
Today, we have the aftermath of Covid, the world economic situation, war, the influence of social media and the implications of AI—uncertainty on all fronts. The Government need all possible co-operation from business and employers, but that is not what they have provided, which is higher national insurance costs, increased national minimum wage and business rates, new workers’ rights legislation and more regulation. These are disincentives for business stability and expansion. Employers are reluctant, even unable, to take on more staff to provide those vital first job openings for any staff they may not be able to retain. There is, as has already been pointed out, a chronic shortage of part-time job opportunities for young people, such as paper rounds or part-time work in cafés and shops, making progression to full-time work even harder for the young. These issues are difficult enough, but other government policies are exacerbating the grievous situation, especially for NEETs, as exposed by Alan Milburn’s recently published report.