The government is preparing for another attempt at welfare reform after a review warned rising youth unemployment is costing the UK more than £125bn annually.
Labour is once again preparing to revisit welfare reform after a government-backed review revealed the number of young people not in work, education or training surpassed one million for the first time in more than a decade. But, to quote Taylor Swift, ‘I think I’ve seen this film before’.
In June 2025, Keir Starmer attempted to introduce welfare changes, including stricter eligibility assessments for benefits such as PIP and Universal Credit. More than 130 MPs rebelled against the plans, warning they would force vulnerable people further into relative poverty.
However, Alan Milburn, former Labour cabinet minister who led the review into Britain’s youth employment crisis, said the government owed it to younger generations to confront the issue directly.
He said: ‘As I’ve spoken to cabinet ministers about it, my sense is that there is an appetite to go back into this, and to go back into it in the right way.’
The report shows overall unemployment is now at its highest level since the Covid pandemic and young workers have been hit particularly hard as businesses struggle with tax rises and wider economic impacts as a result of the Iran war.
- Our sister title Newstart recently reported that Ofgem will raise the energy price cap by 13%
Starmer described the report’s findings as ‘sobering’ and said the government was already investing in programmes to support younger people into employment. These include the ‘Youth Guarantee‘ scheme and expanded work placements.
During a visit to an apprenticeship training centre in West London on Thursday, the prime minister admitted more needs to be done.
‘Clearly we need to do more,’ he said. ‘We will now work with Alan on what more needs to be done. I’m pleased that some of the measures we’ve already out in place are coming on train next month.’
Diving deeper into the report
In the opening stage of his review, ahead of final recommendations due in autumn, Milburn warned Britain’s growing youth unemployment crisis is draining more than £125bn from the economy each year – a statistic that outstripped almost any other country in Europe.
According to the findings, a young person aged between 18 and 24 who is not in education, employment or training (Neet) costs the state an average of £29,000 annually over their lifetime.
The long-term financial consequences for individuals are also severe. The review found people who spend their early adult years outside work or education could lose an average of £52,000 a year across their working lives.
Speaking at the launch of the report, Milburn explained the number of Neets could rise by a further 25% over the next five years, reaching 1.25 million unless urgent action is taken to prevent what he described as a ‘lost generation’.
He said six in 10 young people were not looking for work, while a similar number had never had a job. Milburn also pointed to rising levels of poor mental health among what he called a ‘bedroom generation’ spending large amounts of time on smartphones.
Industry reactions
Since the reports publication, charity’s and campaigners have urged ministers to not weaponise the benefits system to bully young people into finding work.
Mark Rowland, chief executive of the Mental Health Foundation, said: ‘Pushing young people who are too unwell to work into financial hardship will worsen their mental health, while failing to adequately support a return to work can be equally damaging.’
Additionally, James Watson-O’Neill, chief executive of the national disability charity Sense, advised that ‘disabled people should not be forced to fit around systems that were never built for them.’
‘It is the responsibility of government, employers and public services to create environments where disabled people can thrive, contribute and live with dignity,’ he continued.
‘But we must also be clear that not all disabled people can work, and their value cannot be measured by employment alone. A fair society is one that supports disabled people to live independently and free from poverty, whether or not paid work is possible.’
Andy Hulme, chief executive officer of the Hyde Group, reminded ministers that environmental factors also have an impact on young people’s ability to work or attend education – particularly their living standards.
‘[The] figures are a sobering look at the scale of the problem facing a generation of young people out of education, employment and training,’ he said. ‘More than 172,000 children are growing up in temporary accommodation, where school absence is endemic and the risk of becoming Neet rises sharply.
‘The government has a role, but the answers to this challenge will not come from employment policy alone. A young person leaving care into a stable home, or a family lifted out of temporary accommodation, has a much higher chance of engaging with school and work.’
Image: Samuel Yongbo Kwon/UnSplash
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