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The Progressive Policy Think Tank

An end to NEETs through reform, not cuts

Think tank plan would ensure all young people were earning or learning

More than a million young people not in education, employment or training (NEET), could be rescued by radical reforms that would not cost the taxpayer a penny more, according to a new report from the think tank IPPR. The report is published ahead of the latest quarterly NEET stats, released later tomorrow (Thurs).
 
The report shows that just 4 per cent of 15-24 year olds in the Netherlands and just 7 per cent in Denmark are NEET, compared to 14 per cent in the UK.
 
Last year, the UK spent £2.5 billion on out-of-work benefits for the under-25s:
?         £1.2 billion on Job Seekers Allowance
?         £439 million on Employment Support Allowance (and incapacity benefit)
?         £848 million on income support
 
IPPR's report shows that over half (52 per cent) of young people claiming ESA (and incapacity benefit) have been doing so for over a year, as have 61 per cent of under-25s on income support. Almost half (45 per cent) do not hold GCSE-level qualifications and almost a quarter (24 per cent) have never had a job.
 
Consistent evidence shows that having a decent qualifications and practical work experience are what makes a different to young people's job prospects. However the current systems of benefits and support do not promote or ensure either. Young people on JSA cannot engage in full-time learning, while those on ESA or Income Support can lose connection from education and employment entirely. Our reforms would provide financial support for young people to complete their initial education and actual paid work experience or a traineeship after six months, while preventing all but a small minority from claiming inactive benefits.
 
The Cabinet Secretary, Jeremy Heywood, is currently leading a review on NEETs. In his party conference speech, Prime Minister David Cameron, said: "We should give young people a clear, positive choice: Go to school. Go to college. Do an apprenticeship. Get a job. But just choose the dole? We've got to offer them something better than that." The previous week, Labour Leader Ed Miliband, said: "If the school system fails our young people they shouldn't be ending up on benefits. They should be ending up in education or training so they can get back on the road to a proper career. That requires them to accept responsibility but it requires government too to accept our responsibilities for the next generation in Britain, and that's what we'll do."
 
IPPR's new report is the first serious and credible attempt to work out how to make this political aspiration idea work in policy practice.
 
The report recommends:
?         A new 'youth allowance' should replace existing out of work benefits for 18-24 year olds and provide financial support for young people who need it, conditional on participation in purposeful training or intensive job search. Access to inactive benefits should be closed off for all but a very small minority.
?         A new 'youth guarantee' should be established that offers young people access to further education or vocational training plus intensive support to find work. For those not learning or earning after six months, paid work experience and traineeships should be provided, with no option to refuse and continue receiving the youth allowance.
?         Large firms should either offer apprenticeships to young people, in proportion to their size, or pay a 'youth levy' towards the costs of training young people. Resources raised should be controlled by employers, via LEPs, and used to fund vocational training and apprenticeships, potentially focused on supporting smaller firms.
?         London and the eight 'core cities' in England should take on resources and responsibility for their young people, with the government in Westminster setting national objectives and priorities but with decentralisation and leadership in local to organise and deliver it.
 
Graeme Cooke, IPPR Research Director, said:
 
"Young people who fail to attain a good education or make early connections to the labour market face a far greater risk of future periods of unemployment and low earnings. The number of NEETs in the UK is a scar on our nation and represents our generations' failure in its responsibility to the next. Our goal should be to effectively abolish NEETs, as they have successfully done in the Netherlands and Denmark.

"In contrast to previous initiatives and attempts at reform in this area - Connexions, the New Deals, the Work Programme and the Youth Contract - this strategy aims to solve the fundamental failures of the school-to-work transition system, rather than making up for them.

"It creates the potential to drive improvements in further education and vocational training provision, alongside increasing employer engagement in the educational system. It includes those on inactive benefits and is built around practical activities not merely advice and guidance. And it seeks to restructure the opportunities and obligations facing young people through deep institutional reform."

To pay for a substantial expansion of financial support for young people who are currently NEET or in further education, the report says the 'youth allowance' should be paid at a standard rate and be means tested on the basis of parental income for those under 22. This would mirror the rules for access to the higher education maintenance grant. There should also be a presumption that, until the age of 22, young people should be housed - or supported to be housed - by their parents, unless this is impossible or inappropriate.

Based on the current cohort, an estimated 700,000 young people could be newly entitled to the youth allowance, before the parental means test is applied. This would comprise those who are NEET but not claiming an out-of-work benefit (440,000) and those who are studying (outside higher education) but not in employment or already receiving an out of work benefit (260,000). This is in addition to the 750,000 18-24-year-olds currently in receipt of JSA, ESA/incapacity benefit or income support, who in future would receive the youth allowance.

To pay for a substantial expansion of provision for young people through a new 'youth guarantee', expenditure on 18-24 year olds in the Work Programme should be re-directed, along with adult skills and apprenticeship funding for the over 24s. In addition, parents' entitlement to Child Benefit and Child Tax Credit should cease at the end of the school year after their child has turned 18, when entitled to youth allowance begins.

On this basis, it would cost £2.3 billion to offer youth guarantee provision to the 770,000 of the current cohort potentially entitled. In time, the goal would be to reduce expenditure on transfer payments to people who are persistently unemployed or inactive. But in the short-term at least, funding the youth guarantee will require refocusing existing spending alongside steps to control the costs of provision:

  • Based on current caseloads and expenditure on young people, it would be reasonable to allocate £250 million of the Work Programme budget to contribute to funding the youth guarantee.
  • Concentrating adult skills spending on 18-24 year olds could release up to £1 billion, based on expenditure in 2011/12, while protecting over £400 million in spending on basic skills for over 25s (albeit in the context of substantial on-going reductions in the budget for post-19 education).
  • Shifting apprenticeships funding away from over 25s would mean an extra £487 million for 18-24 year olds, based on spending in 2011/12, or 378,000 extra apprenticeship places (at current rates of funding by age).
  • Ceasing parental entitlement to Child Benefit and Child Tax Credit at the end of the academic year after their child turns 18 (rather than, as now, continuing until their child is 20) would save an estimated £727 million, while aligning with the start of entitlement to the youth allowance.


The report argues that decentralisation should start with London and the eight 'core cities' in England taking on resources and responsibility for their young people. These cities should establish strong governance arrangements, including a central role for employers, along with plans for commissioning a diverse network of local providers. In other parts of England the youth guarantee should be commissioned nationally and delivered through existing agencies and providers, with local input wherever possible. In every area, the personal adviser model should be paramount and data on performance against headline national objectives should be regularly published. To increase opportunity and drive employer engagement, large firms that do not offer apprenticeships for young people should pay a 'youth levy' to train and prepare the future workforce.

Notes to Editors

IPPR's report - No more NEETs - will be available here: http://ippr.org/publication/55/11516/no-more-neets-a-plan-for-all-young-people-to-be-learning-or-earning

IPPR's recent report, The Condition of Britain: Growing up and becoming an adult, is available here: http://ippr.org/publication/55/11487/condition-of-britain-briefing-2-growing-up-and-becoming-an-adult

IPPR's recent report - 'States of uncertainty: Youth unemployment in Europe' - is available here: http://www.ippr.org/publication/55/11453/states-of-uncertainty-youth-unemployment-in-europe