A stark new report from the Resolution Foundation has issued a chilling forecast: without immediate intervention, one in six young Britons will be outside the workforce or education within five years. For a government that has staked its reputation on fiscal responsibility and economic growth, this is a flashing red light on the dashboard of the nation's finances.
The numbers are grim. At present, roughly 870,000 18 to 24-year-olds are classified as NEET (Not in Education, Employment, or Training). That is 12.4% of that age cohort, a figure that has barely budged despite the post-pandemic recovery. The report projects this could surge to 16% by 2029, a development that would add further strain to an already creaking welfare system and shrink the tax base at a time when the government is desperate for revenue.
Alastair Thorne, Chief Financial Editor: This is a textbook example of an intergenerational Ponzi scheme gone wrong. The Treasury is borrowing to fund today's spending, but the future workers who will repay that debt are being left on the sidelines. The yield on long-term gilts may be elevated by inflation fears, but the real risk premium should be on our human capital. If we don't get these young people into productive roles, the nation's balance sheet will never recover.
The root causes are a toxic mix of mental health crises, a housing market that prices young people out of mobility, and an education system that fails to align skills with market demands. Employers complain of a 'skills gap' while millions of young people are stuck in a cycle of low-paid gigs or complete disengagement. The market is failing to clear, and government intervention has been piecemeal at best.
The report calls for a 'youth guarantee' of training or employment for all under 25, a policy that would cost billions. But here's the rub: the Treasury's fiscal headroom is vanishing faster than a day trader's profit in a bear market. With inflation still above target and the Bank of England tiptoeing around rate cuts, the cost of borrowing remains high. Spending now might be the cheaper option if it prevents a permanent loss of productivity.
The private sector cannot solve this alone. Capital flight from the UK has been a persistent theme, with overseas investors wary of our stagnant growth and political uncertainty. A workforce that is less skilled and less attached to the labour market is a further disincentive to investment. The circular logic is damning.
So what is to be done? We need a targeted approach: tax incentives for firms that hire and train young workers, a radical overhaul of apprenticeships, and a mental health support system that actually works. But more fundamentally, we need to stop treating young people as a cost to be managed and start seeing them as an asset to be developed. The bottom line is that the cost of inaction will be far greater than the cost of action. The only question is whether the government has the nerve to spend now for a gain that will appear on the books a decade hence. I am not holding my breath.
