If Andy Burnham really wants to help NEETs he should rule out tax rises
Andy Burnham’s announcements on technical education are welcome, but they will be meaningless if young people have no jobs to move into. The Budget will be the real test of how he plans to grow the economy, says Georgiana Bristol
Andy Burnham has descended from the North with an array of new pledges and spending commitments – VAT-free energy bills, cuts to business rates for your local boozer, and a £2 cap on bus fares (although City PM readers will be grateful that TfL’s hopper fare remains at £1.75…).
Whether you think that these are smart retail policies that will provide a downpayment on tackling the cost of living, or that they are evidence of a new Prime Minister who isn’t grappling with the big factors keeping the UK stuck in neutral, it’s undeniable that his focus today on tackling the NEETs crisis is perhaps the most significant since his entry into Downing Street.
This must be right at the top of the priority list for any Government. The arguments are well rehearsed: one million young people NEET, with the cost to the taxpayer potentially running into £1m per person over the course of their lifetime in welfare costs, and a personal cost to each of £1m in lost lifetime earnings. More than this, current inactivity levels are a shocking squandering of human potential; in the words of Alan Milburn, we are seeing a “wasted generation”.
Burnham’s announcements on boosting technical education across the country will be well received, and will no doubt help build the pipeline of ready-to-work young people. But this won’t help the current cohort of inactive young people, with new research showing that two thirds of 16 and 17-year-olds currently receiving the upper tier of PIP are claiming for mental health or neurodevelopmental conditions. It’s rightfully shocking that these individuals are being paid over double what someone the same age working the legal term-time weekly working limit would be earning. Whilst not for all, we know that for many young people suffering from anxiety or depression, a job is the best form of medicine possible.
Incentives matter
As any good economist would tell you, incentives matter. So Burnham’s remarks this week hinting at greater conditionality for welfare payments to young people, who could now face losing their sickness benefits unless they do voluntary work or training, is clearly a positive move to shift people into work.
But these incentives mean little if there aren’t actually the jobs for young people to move into, with statistics published by the ONS last week showing that since 2024, 75,000 fewer 16- to 18-year-olds are currently in payrolled employment. The sectors where employment has fallen most sharply are retail and hospitality – traditional bastions of youth employment – so it’s little surprise that so many fewer young people are being employed.
And why has employment in these sectors fallen? Again, readers of City PM will not be shocked to hear that if you raise the costs of employment – whether that be sharp hikes to the minimum wage, increased Employer NICs, or a massively higher regulatory burden due to the Employment Rights Act – you simply get less employment.
Then there is the underemployment of those already in work, which gets far less attention than young people locked out of the labour market entirely. Some of this speaks to wider questions about how well university prepares young people for work. But we’ve seen it at the Jobs Foundation directly, with talented interns possessing real ability in communications, policy or project management who apply for roles in those fields and can’t get them, and who end up taking whatever work they can find instead. Their skills go underused, and the economy loses what they could have contributed.
This isn’t because employers have decided a degree is worthless or stopped valuing the skills that come with one. It’s that general economic conditions, along with real uncertainty about how AI will change hiring, mean firms often can’t justify the hires.
Business leaders listening to Burnham today will be pleased to hear a Prime Minister talking about the national mission of moving young people into work. Most business leaders I know see helping tackle this crisis as one of the most important things that they can do for their local communities.
But they will also be terrified to see reports that Burnham has apparently already announced over £20bn of spending pledges, unaccounted for in official forecasts. After two successive Budgets of tax hikes, the business community and wealth creators across the UK simply don’t have the capacity to shoulder a third round.
Policy advisors in Downing Street and the Treasury might see businesses and ‘the rich’ as cows to be milked, but the truth is, the people that will suffer the most from any tax rises will be the young people who don’t have a job and are waiting on a business creating one for them.
So yes, thank you Andy for today’s downpayment on tackling the NEETs crisis. But if you truly want to make a dent in reducing the numbers of our young people being wasted, tax hikes must be ruled out for the upcoming Budget. Businesses must be supported to create more jobs. And let’s hear more about how you’re going to really get the British economy booming again.
Georgiana Bristol is chief executive of the Jobs Foundation