RUTH SUNDERLAND: UK counting excessive value of our wasted youth

Rachel Reeves is desperately seeking growth. For that simple reason, she knows she must confront the national scandal of nearly 1m young people thrown on the scrapheap before their careers have begun.

PwC is the latest to weigh in on the hot topic of the moment: NEETs, or young people not in education, employment or training.

The Big Four accountancy firms estimate that economic growth could be boosted by up to £26billion if the NEET problem was tackled. Billions added to gross domestic product (GDP) seems abstract. In human terms, it means giving young people the chance of a fulfilling career and the means to raise a family instead of being condemned to struggle at the margins of society.

Tackling this tragedy-in-the-making is not all about do-goodery or social justice. PwC, as an audit and tax giant, is at the heart of commerce. It is concerned for sound financial reasons. The firm relies on a steady intake of the brightest young brains to keep its own machine running. And if PwC’s clients do not have a reliable future workforce, then these businesses may not have much of a future at all.

Around 3m young people are economically inactive – a third higher than 20 years ago – if students are counted.

One might argue that students will join the workforce once they graduate, but opportunities are not keeping pace with the rising numbers being awarded degrees. PwC found the share of recent graduates in ‘graduate jobs’ is at its lowest for more than a decade. The UK is faring worse than comparable nations. 

Best foot forward: Youth unemployment in the UK is almost three percentage points higher than the average across the OECD

Youth unemployment is almost three percentage points higher than the average across the OECD, and Britain has suffered the sharpest increase in the G7 – up from 11 per cent three years ago to 15 per cent now. AI is a convenient suspect, but PwC found no evidence it is stealing young people’s jobs yet.

What is well documented is the rise in long-term sickness, particularly mental health conditions, among the young.

The Government is stepping up efforts to reduce NEET levels, but it is questionable whether its measures will be effective. The flagship Youth Guarantee is aimed at 18- to 21-year-olds who have been out of the labour market for 18 months. But by then, much damage is already done. 

Intervention must come before young people drift into NEET status. Other reforms risk being outweighed by higher hiring costs due to increases in National Insurance and the minimum wage.

Labour’s elder statesman Alan Milburn is leading an independent review. He should examine a proposal from the Jobs Foundation and the Christopher Nieper Foundation, of which I am director, backed by 125 business leaders including JCB’s Lord Bamford and hotelier Rocco Forte.

The idea is a Skills Tax Relief, allowing employers who hire an apprentice to offset the equivalent of two days’ pay per week against their tax bill. It would quickly pay for itself through lower welfare spending and higher tax revenues. The Centre for Social Justice estimates the Treasury could gain £23billion over five years.

This should sit alongside action in schools to instil employability skills and the attitudes young people need for work. The JCB Academy in Staffordshire and the David Nieper Academy in Derbyshire are already leading the way.

Wasting young talent on this scale is causing intolerable economic self-harm. Government needs to listen to business-led solutions.