More than a million 16- to 24-year-olds in the UK are now not in employment, education or training – a crisis that has left Britain with the second-highest Neet rate in the EU, behind only Romania. From Tuesday, employers in England, Scotland and Wales will be eligible for a £3,000 grant for every long-term unemployed young person they take on, part of a government scheme aimed at helping 60,000 18- to 24-year-olds into work over the next three years.
The move comes as a leading thinktank warns that reversing employment tax rises – a demand from business groups – would do little to improve youth job prospects. The Resolution Foundation, in its report Take a chance on me, says a cut in employers’ national insurance contributions and a reduction in the minimum wage for under-21s “would be wasteful and ineffective”. Instead, it calls for extra funding for apprenticeships, an increase in youth support grants, and targeted workplace subsidies as “the most cost-effective way of supporting them to get young people into work”.
“1m young people in UK are Neet as government launches £3,000 hiring grants, while thinktank says reversing tax rises won't help.”
The thinktank’s analysis is expected to influence the final recommendations of Alan Milburn, the former health secretary who recently presented the first part of a government-commissioned report on the Neet crisis. Business lobby groups, including the Confederation of British Industry, have complained that tax rises introduced by the chancellor, Rachel Reeves, since Labour returned to power have driven up employment costs. Cressida Hogg, the CBI’s chair, said the minimum wage was fuelling youth unemployment by making it too expensive to hire people at the start of their careers. The former prime minister Tony Blair also argued that rises in the minimum wage for under-25s would deter businesses from hiring younger workers.
But the Resolution Foundation’s report, which studied spending on a range of young-worker support, concluded that reversing the 2024 NIC changes “would have an underwhelming effect on youth employment”. It added: “It has been argued that the 2024 changes to employer NICs put firms off hiring young people. But repealing them would have an underwhelming effect on youth employment.”
Downing Street is pushing ahead with the grant scheme regardless. On Monday, Keir Starmer and the work and pensions secretary, Pat McFadden, will host a roundtable with hospitality businesses backing the plan. The first employer to sign up, Merlin Entertainments – which owns Legoland Windsor, Chessington World of Adventures, Alton Towers and London’s Sea Life Aquarium – will create 300 jobs for young people over the next three years.
Starmer said: “We often say in this country that every child or young person should go as far as their talents will take them. But too often they are held back by a status quo that doesn’t work for them. We are turning the page on that, putting in place the building blocks of real reform to expand opportunity for young people and helping them into work. This is the foundation for a new contract with the next generation.”
Whether the grants can reverse a trend that has seen the Neet rate soar past 1 million – and whether they are a smarter use of money than repealing tax rises – will be tested in the months ahead. Andy Burnham, the newly elected Makerfield MP who is likely to become the next prime minister, has previously welcomed the Milburn report and now faces the challenge of reducing welfare spending without making cuts that could prove unpopular with the parliamentary Labour party.