Labour is not working: Starmer and Reeves warned a ‘misplaced era’ faces a ‘lifetime on advantages’ as youth unemployment soars

Labour has been accused of ‘creating a jobless generation’ and pushing youngsters into ‘a lifetime on benefits’ as unemployment soars.

In a bleak report, the Office for National Statistics revealed the jobless rate hit a five-year high of 5.2 per cent at the end of last year, up from 4.1 per cent at the time of the general election.

And in a damning indictment of Labour’s handling of the economy, youth unemployment stands at 16.1 per cent as tax hikes and inflation-busting increases to the minimum wage deter firms from taking on young workers.

Unemployment among 16 to 24-year-olds is now at the highest level since late 2014 and above the average level in the European Union for the first time this century.

The figures, which make grim reading for Keir Starmer and Rachel Reeves, sparked a stinging rebuke from across the political divide with Labour grandee Alan Milburn warning a ‘lost generation’ of young people face ‘a lifetime on benefits’.

The former Labour minister, who is leading a review into young people and work for the Government, said: ‘We risk a generation on the scrapheap.’

Tory leader Kemi Badenoch said: ‘While Keir Starmer is distracted by scandals and endless U-turns, families are being punished. Labour are killing jobs, killing growth and killing hope for the next generation.’

Shadow business secretary Andrew Griffith said tax hikes and new rights for workers are ‘holding back hiring, creating a jobless generation’. 

Experts warned of worse to come – particularly for the young – as companies are battered by higher taxes, rising costs and red tape.

Mr Milburn said almost half of 24-year-olds currently out of work and education have never had a job.

‘We face the risk of a lost generation,’ he said, adding that one million youngsters are so-called NEETs – not in education, employment or training.

‘That’s one in eight of all young people,’ he said. ‘If they formed a city, it would be the third biggest in the country.’

Warning that many have become ‘detached’ from the jobs market, Mr Milburn told the BBC: ‘The most horrifying statistic of many that I come across is that 45 per cent of 24-year-olds who are not in education, employment and training have never had a job. 

‘And therefore, if you haven’t had a job, that’s by 24, that entails a long term scarring effect, and you’re probably then stuck on a lifetime of benefits.’

Peter Dixon, senior economist at the National Institute of Economic and Social Research, said a 33 per cent rise in the minimum wage in the past two years for those aged 18 to 20 – from £7.49 an hour to £10 an hour – was behind the surge in youth unemployment.

‘Younger workers in particular are being priced out of the market,’ he said, adding that another hike in the minimum wage for 18 to 20-year-olds in April to £10.85 means they ‘will continue to struggle to gain a foothold in the labour market in the near-term’.

The minimum wage for those aged 21 and over has also risen – but not as sharply – making it relatively more expensive to hire young workers.

Business leaders accused ministers of ignoring their warnings over the impact of the pay rises as well as the National Insurance tax raid and employment rights act.

Many firms are now turning to automation and artificial intelligence (AI) to reduce employment costs.

The Resolution Foundation – dubbed Labour’s favourite think-tank due to its strong links to the party – said youth unemployment in the UK is now above the average EU level of 14.9 per cent for the first time since record began in 2000.

And it warned of further rises in unemployment this year.

Louise Murphy, senior economist at the think-tank, said: ‘We must urgently turn our attention to the UK’s unemployment problems.

‘At the end of last year almost one-in-six young people who wanted to work couldn’t find a job. Unemployment risks climbing even further in 2026.

‘Getting youth unemployment down in this country – along with the share of young people who aren’t in education or training either – must be a top priority for 2026.’

The ONS figures showed the total number of unemployed people in the UK has swelled by 443,000 under Labour to nearly 1.9million.

There have been more than 700,000 redundancies since the election, including 145,000 in the final three months of 2025, while the number of vacancies has fallen by 73,000 to 726,000 in the past year as firms rein in hiring.

The report came after official figures last week showed the economy has slowed to a crawl, growing by just 0.1 per cent in the final three months of last year, leaving Britain facing its ‘most dismal decade’ in a century.

Ms Reeves has been accused of derailing the economy after announcing £75billion of tax hikes since taking office – more than any Chancellor in at least six decades.

Shadow Chancellor Mel Stride said: ‘Labour is failing. Higher taxes – including a tax on jobs, soaring business rates, and anti-business red tape that piles on risk is making it harder to employ people. Labour’s front bench has no real-world business experience and it’s showing.’

Lord Frost, the former chief Brexit negotiator who is now director general of the Institute of Economic Affairs, said the surge in unemployment was ‘the predictable result of a government that seems determined to make it more expensive and more risky to create jobs’.

He said: ‘Higher business taxes and the Employment Rights Act send a clear signal to employers to think twice before hiring. You cannot regulate your way to stronger employment.’

Alex Hall-Chen, principal policy advisor for employment, said: ‘The best way to boost employment is to make it less risky and less costly for businesses to hire staff. Every major employment reform over the past year and a half – the employment rights act, above-inflation increases to the national living wage, and the employer’s national insurance hike – has had the opposite effect.

‘The business community has consistently highlighted the negative impact which these reforms will have on hiring, but the Government has so far not shown that it is committed to addressing the majority of employers’ concerns.’