Good morning from New Economy Brief.
1 million. That's how many young people are currently not in education, employment or training (NEET), the highest level since 2013 and the aftermath of the financial crisis. A decade ago, the UK's percentage of NEETs was near the EU average. Last year, only Romania's was higher.
The last government tasked former Secretary of State for Health Alan Milburn with getting to the bottom of this trend. In May this year, he released the interim report of his review into the drivers behind the rise in NEETs, with a further report due later this year setting out recommendations for tackling it.
This is a highly emotive topic, and one of the biggest challenges facing the new government, with plenty of noise and opinion on all sides. At the heart of it are some of the most vulnerable young people in the country: those with Special Educational Needs and Disabilities (SEND), low educational attainment, experience of care, or a mental health condition are all disproportionately likely to be NEET. It's essential we get the reasons behind this rise straight, and ensure these young people get the support they need.
What's happening?
Not so NEET. Current NEET rates aren't unprecedented over the last 25 years. The periods before and after the financial crash both saw similar or higher rates. What has changed is why young people are out of work. Previously, unemployment was the main reason; now just 39% of NEETs are unemployed, with the remaining 61% "inactive." Poor health is a major factor, with the rate of young people out of work due to poor health more than doubling since 2010.
The kids will be alright? Being NEET comes at an enormous cost. It can harm both physical and mental health, and carries higher risk of unemployment, low wages, or low-quality work later in life. IPPR research with young people describes the toll on their self-worth, their fears of being left behind, and their delayed independence. On a fiscal level, the Milburn Report puts the cost of these scarring experiences at £125bn a year, from lost economic potential, lost tax revenue and higher welfare spending.
Why is this happening?
The Labour Market. As Milburn points out, "Saturday jobs" (flexible work in pubs, restaurants, warehouses, retail) have dried up due to wider changes in the economy and employer behaviour. Today, 60% of young NEETs have never had a job, up from 40% in 2005. The jobs that remain come with a brutal, dispiriting application process: vacancies are at a five-year low, leaving entry-level jobs oversubscribed. Many applicants describe never receiving feedback or human contact, with applications sifted by AI. Still, Resolution Foundation analysis suggests the tight job market explains only half the rise in NEETs.
Health and Welfare. The UK has the highest rates of anxiety and depressive disorders among young people in the OECD. But high rates of mental ill health doesn't automatically translate into high NEET rates. The Netherlands has similarly high anxiety rates among young people, but a lower NEET rate. One explanation is that our welfare system doesn't support sick young people into work. Half of those claiming a health or disability benefit aged 16–24, still aren’t in work or education a decade later. Many young people in the system fear that trying work, even temporarily, will lead to their support being permanently cut. Finally, an increasing share of incapacity claimants have also been placed in the "limited capability for work-related activity" group (40% in 2017 versus 81% in 2025), which means many now face no engagement requirements.
Quick fire myth-busting. This is a complex issue with many different factors playing a role. Local access to public transport, unaffordable housing, the long tail of austerity cuts to youth services, and lingering pandemic disruption all matter. However, there are plenty of misconceptions around this area. The rise in NEETs has nothing to do with benefit generosity. This generation gets less welfare support than previous ones. The IFS found no clear link between rising youth minimum wage and rising NEETs. Employers are exempt from NICs for under-21s, so contribution increases shouldn't affect this group (though a recent Select Committee paper calls for extending that exemption to under-25s). Nor is there evidence this generation lacks basic skills for work. As Milburn put it: "Young people are different from those who came before them. Not worse. Not lazier. Not less intelligent."
How we solve the NEET crisis
The youth guarantee. The government has invested over £1bn in "trailblazer areas", offering training, apprenticeships and other support. Anyone living in those areas, aged 18–21, unemployed or claiming benefits for 18 months or longer will get six months of paid work through the Jobs Guarantee, while a Youth Guarantee Gateway will give Universal Credit claimants aged 16–24 four weeks of intensive employment support. However, while the Work and Pensions Select Committee calls this "a good offer," it warns eligibility is too tight, and that an 18-month wait risks too much damage before support kicks in.
Greening young jobs. The New Economics Foundation recommends linking the Green Jobs Strategy to youth employment schemes. It also argues for boosting takeup by covering extra costs related to training, for offering more mentoring, and for reviewing how benefits interact with apprenticeships so young people keep more of what they earn.
Preventative state. The Resolution Foundation calls for more early intervention: better mental health provision in schools and colleges, and getting more young people into education, since lower-NEET countries tend to have higher educational participation. They recommend stronger enforcement to keep 16- and 17-year-olds in school or training, and better vocational pathways.
We're still waiting on Milburn's recommendations, due in Autumn 2026. He's already signalled a shift away from "supply-side" fixes and toward structural drivers like the labour market. The proposal announced on Tuesday to align school curriculums with local economic needs, firmly focused on equipping students with more employable skills, won’t address the wider issues. It does at least at least avoid the kind of fiscally-driven cuts that failed under the Starmer government, but will do little to help the current crop of NEETs, focusing instead on “the next generation”. If the government doesn’t show real ambition to tackle the challenges facing young people today, it risks presiding over a lost generation.
Lessons on devolution. Future Economy Scotland sets out what Scotland can teach Andy Burnham about devolution, performing an important public service debunking arguments from David Gauke and Jacob Rees-Mogg. Scotland's economy has actually outgrown England's since devolution. Despite that, Holyrood is still held back by a highly centralised economic settlement. Ultimately, to deliver prosperity we need fiscal devolution and a serious UK-wide economic strategy.
Runway to hell. The New Economics Foundation has set out the economic impact of a third runway at Heathrow. It cautions that although the government is pushing ahead with expansion, its own Green Book assessment shows a net present value of between -£23.4bn and -£62.5bn over 60 years. There is, NEF argues, no real economic case for the runway. It mostly just relocates jobs from the rest of the UK to the south-east (with a net loss of ~15,200 regional jobs by 2050), while harming the climate and dumping air quality, noise and congestion costs on west London.
Renters Rights. Generation Rent has crunched the numbers on the Renters Rights Act, and it's a mixed verdict. Rent inflation is down from its post-lockdown peak, but while the new bidding-war rules and Section 13 tribunal may spare tenants stress, they won't actually lower rents, which can still rise to "market rates". At the moment, low rent inflation is what’s protecting renters, not the Act, so the report calls for proper rent caps tied to CPI and/or wage rises.
Going without. JRF's cost of living tracker shows the crisis deepening. A record high of 7.4 million low-income families went without essentials in the last six months, with more skipping meals, falling into arrears, or borrowing from high-cost lenders. The one bright spot: nearly 550,000 fewer households can't keep warm, thanks to cheaper energy and and government intervention that cut average bills by £150. JRF is calling for an energy guarantee, rent controls, a essentials guarantee for UC, and a stronger in-work safety net.
Tax the banks. To tackle the ongoing cost-of-living crisis, Positive Money is calling in the Mirror for the new Prime Minister to hit UK banks with a windfall tax on profits of £55bn in profits this year, driven by higher interest rates and returns on Bank of England reserves. The TUC argues for reversing Tory cuts to the surcharge that banks pay on their profits, on top of corporation tax. It calculates that bringing it back from 3% to 8% could raise £9bn over four years.
