Alan Milburn, the former Labour health secretary and chairman of the Social Mobility Commission, has delivered a blistering assessment of the government’s welfare spending, describing it as “shameful” in its failure to address youth unemployment. His remarks land like a cold front on a summer afternoon, sending a shiver through Downing Street’s economic strategy. Milburn’s critique is not merely political; it is an indictment of a fiscal policy that has allowed the dole queue to become a permanent fixture for too many young Britons.
The figures, as ever, speak for themselves. Since the pandemic, the number of 18 to 24-year-olds claiming unemployment benefits has surged by nearly 50 per cent. This is not a blip.
It is a structural flaw in the labour market, one that the Treasury’s scattergun approach has failed to remedy. Milburn’s charge is that the government has defaulted to spending on welfare rather than investing in the infrastructure of opportunity: apprenticeships, skills training, and transport links to job centres. The result is a generation priced out of the economy, their potential locked in a warehouse of state dependency.
Downing Street’s response, as ever, will be to wave the magic wand of ‘levelling up’, a slogan that has become as hollow as a drumbeat at an empty theatre. But the markets are watching. They always are.
Capital flight does not discriminate between a labour government and a Tory one. If the UK’s youth remain excluded from productive employment, the drag on growth will become a permanent fixture in the GDP accounts. The Bank of England’s monetary policy committee has already flagged wage inflation as a worry; but what of the deflation of human capital?
Milburn’s words, though couched in the language of social justice, are ultimately a financial argument. Every unemployed youth is a gilt yield waiting to happen: a cost to the Exchequer that compounds over time. The Prime Minister, meanwhile, offers platitudes about ‘opportunity’.
But the bond market is not so easily charmed. If the government cannot demonstrate a credible path to labour market efficiency, investors will price in the risk. And that risk, as seen in the Truss mini-budget debacle of 2022, can move markets with terrifying speed.
Milburn is not alone. His comments echo a growing unease across the City. The old consensus that welfare is a safety net has been replaced by a recognition that it can become a quagmire.
The irony is that the government’s own fiscal rules demand restraint. Yet here we are, spending billions on benefits that do nothing to build the skills base. That is not prudence.
That is waste. The Chancellor would do well to listen. Youth unemployment is not just a social problem.
It is a balance sheet liability.
