Five tests for the Milburn review — and the government’s response to it

Next week the widely anticipated Milburn review will set out its recommendations on how to help the more than one million young people aged 18 – 24 in the UK who are not in employment, education or training (NEET). The report’s deep research and engagement is welcome. We know from previous periods of heightened youth unemployment that systemic change across a range of policy areas is needed, to help young people make a start in their careers. But the road from next week’s publication to positive change in young people’s lives is a long one. Here’s what we’ll be looking for to see if the government is setting off on the right route. 

What Milburn will say

We already know the outline of some of Milburn’s likely recommendations. Many of them reflect policy proposals which we at NEF have long argued for, based on our close engagement with young people, our work trialling more voluntary employment support schemes with councils and our analysis of the job quality of people on universal credit. These policies include:

• Policies to tackle the wider barriers younger people face in accessing employment, such as better and more immediate mental health support. This is something the prime minister has consistently called for.
• A wider ​“menu of opportunities” for young people, from apprenticeships and college places, to supported internships and job subsidies, including a personal adviser to coach young people from education into employment. We hope this includes a mix of opportunities, living up to the government’s promise of a ​“high-quality technical pathway, work placements, apprenticeships and the skills and experience … to secure a ​‘good job’”.
• A step-change in state investment in education and training, particularly in technical education and apprenticeships, to provide considerably more opportunities for young people. The UK is at the bottom of the pack among advanced economies, and we support the ambition to reverse this.
• Improvements to the welfare system to smooth transitions into work, such as allowing young people to keep more of what they earn before their universal credit is tapered away.
• An unashamedly place-based approach to supporting young people, focussed on community-based employment support by trusted local organisations – something that has been shown to help support the most disadvantaged jobseekers. 

Risks in the government’s response

While we welcome the likely proposals summarised above, we are concerned about some of the elements Milburn confirmed in a recent interview in the Times. Milburn will recommend that 18 – 24-year-olds can no longer claim PIP or the health element of universal credit, receiving instead a new youth allowance paid at the standard universal credit rate. Some current PIP claimants would move onto a new, non-means-tested ​“additional cost allowance” for disability-related costs, but this would go to a smaller group of young people than those currently claiming PIP. A separate, higher-rate benefit would be reserved for those with the most severe, lifelong conditions. Milburn has confirmed that these changes would apply to existing claimants as well as new ones and acknowledged that ​“some people will get less financial support at the beginning of their benefit claim”. 

Much will depend on how the government responds to this through its White Paper and subsequent legislation. We hope the government firmly rejects any reductive mis-framing of ​“work vs. welfare dependency”, which ignores the real challenges young people face in navigating the modern labour market. Milburn said he wants to shift priorities from support for immediate short-term finances to longer-term life chances – but young people won’t be able to build their long-term prospects if they cannot cover the cost of basics today.

We set out five key tests the government should consider when reviewing the recommendations, to ensure new policy leads to successful change in people’s lives, and gets more young people into good jobs. 

The first test is whether the government avoids presenting a false dichotomy, in which investment in employment support must be traded off against spending on working-age benefits. Milburn’s recommendation of a big uplift in employment support spending will provide much-needed help to young people. Yet as Milburn himself acknowledges, it will take time for the returns on this investment to materialise – so cutting benefits before we know how much employment support will achieve, and how quickly, would be reckless. We hope the employment support will be accompanied with efforts to broaden the (limited) evidence base on employment policy, to identify which interventions best deliver high-quality jobs and positive long-term employment outcomes. Better-quality data on young people in the labour market would also help. But these reforms will be ineffective, and risk deepening poverty, if they are accompanied by cuts to welfare spending. The UK already has by far the most meagre out-of-work benefits in the OECD, as a share of prior income. The prime minister has indicated he is aware of this risk in warning against ​“crude cuts” and making an argument for getting people into ​“sustainable employment”.

If the government is serious about delivering a genuine step-change in investment in employment and training, it should fund additional spending through normal revenue-raisers at a fiscal event, as is routine for most spending policy. The merits of this spending policy do not depend on the merits of a revenue-raiser notionally linked to it. For example, equalising capital gains tax rates with those of income tax (alongside base reforms) could raise £19.7bn by the end of the parliament, some of which could be used to fund generous employment support. The chancellor’s welcome announcement of a new ​‘Preventative DEL’ spending category also offers an opportunity to deliver further investment as early as possible.

Even more fundamental to the debate is that cuts to benefits for young people wouldn’t be enough to deliver the funding needed to increase investment in education and training. Our analysis (Figure 1) has found that young people only make up a minority of claimants nationally. This is also true locally: contrary to claims about welfare spending in some local economies, there is hardly any difference in the proportion of benefit caseloads accounted for by young people in areas with high and low NEETs, with what small differences there are artificially driven by lower numbers of pensioners in high NEET areas. 

Figure 1: 16 – 24 year olds make up a small share of the welfare caseload

Our second test is whether policy confronts the severe place-based barriers young people face in accessing employment, which are no fault of young people themselves. As Shadow Chancellor Andrew Griffith said last month: ​“You can’t get people into work if there are no jobs for them to go to”. Our analysis (Figure 2) shows that areas with the highest share of young people out of work are also those with the fewest job opportunities. The gaps are especially stark at the extremes: in Cambridge, the area with the lowest youth NEET rate, there were over 60 online job ads in May for every 100 universal credit claimants not in work. In Blackpool, which has the highest NEETs rate, there were just 5 job ads. In some local authority areas, young people may be able to travel to jobs further away, but this is very often not an option, as we explore further below. 

Figure 2: Areas with higher youth NEET rates have fewer job adverts per universal credit claimant not in work

Our analysis of job density data (Figure 3) shows that areas with the highest NEET rates have had fewer jobs per resident for decades. These disparities illustrate the need for a demand-focussed approach to tackling the crisis: a place-based industrial strategy, bold local economic planning and high-quality job creation schemes to create job opportunities for young people – something NEF has called for in the run-up to the review. 

Figure 3: Areas with the highest youth NEET rates have had fewer jobs per working-age resident for over a decade

Our third test is whether support for young people adequately helps with the costs of accessing work and training opportunities. For example recent NEF research showed that the high cost of transport often hampers younger workers’ ability to travel between local authorities to access jobs. We identified long and expensive journeys to reach training or internships as one of the challenges standing in the way of many of the 84% of NEETs who would like to be in work, according to Milburn’s interim report. Other barriers included low apprenticeship pay, and the way the benefits system adjusts when young people enter work – creating an unfair opportunity cost to accessing the jobs they want, and forcing many to stay in undesired jobs and careers purely to make ends meet.

Our fourth test is whether the review leads to a credible and attractive employment services offer to all young people, whether they are on benefits or not. This involves recognising that a sizeable minority of NEETs (around 1/​3) are not in the benefits system. Given these young people are not routinely interacting with local or national government, it is difficult for public services to know who they are, or where they live. It is unclear whether the support outlined by Milburn will reach these young people at all. Engagement with them would be very welcome but must be carefully designed. 

Milburn will recommend that employment support is provided with engagement requirements that could impact benefit receipt. We believe that making the support dependent on people engaging with the benefits system (and the strict conditionality that would entail) risks being counter-productive, undermining the very aims of the policy. More broadly, previous NEF research shows that it is ineffective to immediately apply benefits conditionality when the government contacts people far removed from the labour market. 

Our fifth test is whether Milburn and the government successfully recognise the need to raise the quality of employment opportunities, rather than just the quantity. Indeed, with the right policies, efforts to raise both may be mutually reinforcing. Previous governments have already tried the flawed approach of pushing people hastily into ​“any job”, neglecting person-centred conversations about their suitability for their skills, health or family circumstances – a mantra that Ministers rightly rejected upon taking office. Little would be gained from trying the same approach again: there is evidence that ​“quick fix” temporary jobs, delivered without proper person-centred engagement about peoples’ desired careers, may have worse long-term employment outcomes by hampering peoples’ employment sustainability. 

Recent NEF research suggests job quality and job quantity needn’t be in tension with each other, as high-quality work could help support long-term employment sustainability. It would make people more likely to stay in employment, and less likely to exit the labour market prematurely. The government should therefore stand firm against voices in the public debate that blame the lack of hiring – which is a global phenomenon – on the Employment Rights Act or hiring costs. These voices distract from the need for more systemic thinking about how to secure the high-quality employment opportunities of the future which young people want. Research from the Institute for Fiscal Studies does not find compelling evidence that changes to youth minimum wages have been a driving force behind decreased hiring, concluding that other structural factors are likely at play. Milburn’s proposed job subsidies and work placements should come with clear job-quality standards, so that they lead to lasting work rather than short-term churn.

Conclusion

The publication of the Milburn review will be the next step in a sequence leading to legislation. It will be a significant moment in this parliament, and offers the government the chance to set out new arguments and objectives in their approach to young people’s employment. For too long, politicians and the media have mischaracterised complex, systemic labour market challenges as individual failures by young people, and propagated a simple dichotomy of ​“work vs. welfare dependency”, mis-framing that is not only inaccurate, but counter-productive to the ambition needed for positive change. We hope senior ministers and others across Westminster embrace the opportunity that the Milburn review will offer them, to move the debate on from tired tropes about ​“welfare dependency” or ​“unsustainability”, and to lift the conversation towards the ambition of getting people into safe and decent work that sets them up for a career. 

Image: iStock