The Labour government is preparing to incentivize businesses to hire benefits claimants in an effort to reduce the number of young people—aged under 25—who are not in education, employment, or training, commonly referred to as ‘Neets’.
Work and Pensions Secretary Pat McFadden is expected to announce a modern £3,000 subsidy scheme for employers who hire young people who have been on Universal Credit for more than six months. He will also outline new incentive policies for small and medium-sized businesses regarding apprenticeships, and extend Labour’s jobs guarantee programme for young people.
The youth job guarantee scheme will be expanded to include around 40,000 additional individuals, potentially offering 350,000 “training or workplace opportunities” overall. The growth and skills levy, previously criticized for inefficient fund allocation under the prior Conservative government, is also slated for overhaul, as promised in Labour’s manifesto.
These reforms are expected to be detailed in a speech by McFadden on Monday in London, responding to growing criticism regarding the rising number of Neets, which is nearing 1 million people. The unemployment rate has risen since Labour took office, reaching 5.2 per cent in the three months to December, due to increased redundancies and a slight rise in the activity rate. Youth unemployment has increased to 16.1 per cent.
Some recruiters have attributed the decline in the jobs market to Labour’s tax policies and the increase in the minimum wage, citing the £25 billion rise in employers’ National Insurance contributions as a factor squeezing hiring budgets. Shadow business secretary Andrew Griffith has linked the “broken jobs market” to decisions made by the current Labour government.
Labour pushes for welfare reform
Concerns exist that a growing number of Neets could strain public finances, prompting the Office for Budget Responsibility to revise its welfare spending forecasts upwards at the Spring Statement. Reforms stemming from the Alan Milburn review into Neets and the Sir Stephen Timms review on disability benefits are anticipated this year, though the issue has proven politically sensitive within Labour.
Ministers have been cautious about discussing potential savings from welfare reforms following a backbencher rebellion last year over plans to reduce spending on Personal Independence Payments by around £5 billion. Still, Sir Keir Starmer stated last year that welfare reform is central to the government’s growth strategy.
Frequently Asked Questions
What is the government doing to address the rise in Neets?
The Labour government is planning to introduce a £3,000 subsidy scheme for businesses that hire young people who have been on Universal Credit for more than six months, extend the youth job guarantee scheme, and overhaul the growth and skills levy.
What is the current unemployment rate?
The unemployment rate has risen since Labour came into office, reaching 5.2 per cent in the three months to December. The youth unemployment rate is currently 16.1 per cent.
What concerns exist regarding the rise in Neets?
There are fears that a growing number of Neets could add to strains on public finances, leading to revised welfare spending forecasts.
How might these new policies impact the current economic climate?
