Youth unemployment surges ahead of Reeves's National Insurance raid

Youth unemployment has surged to its highest level in more than a decade amid warnings that Rachel Reeves's tax raid will worsen the crisis.
Almost 1m 16 to 24-year-olds are neither employed, looking for a job nor studying, according new figures from the Office for National Statistics. There are 987,000 Neets – people not in education, employment or training – in this age group, the highest level since the end of 2013 when the economy was still recovering from the financial crisis.
Worryingly, most are economically inactive, meaning they are not working nor seeking employment. That is in stark contrast to 2013, when most Neets were at least looking for a job but were unable to find one.
Some 595,000 young people are classed as inactive, while 392,000 are unemployed but looking for work, an increase of more than a quarter over the year.
Experts said the rise in inactivity was being fuelled by a mental health crisis among young people, many of whom are struggling with the after effects of pandemic lockdowns.
The figures will alarm ministers, given the growing burden benefits payments are placing on public finances. Health and disability benefits for working-age adults cost the Exchequer almost £50bn last year, an annual bill which is forecast to rise to more than £75bn by the end of the decade.
Barry Fletcher, the chief executive of Youth Futures Foundation, said he expected youth unemployment to rise further.
He said: 'We have some challenges around hiring intentions from employers. Our worry is this problem is likely to get worse before it gets better, because we have got a general softening of the labour market.'
The Chancellor's £25bn National Insurance raid comes into force in April, increasing the tax paid by employers on their workers' pay packets from 13.8pc to 15pc and reducing the earnings threshold at which it kicks in from £9,100 per year to £5,000. Minimum wage will also rise by 6.7pc in April.
The changes disproportionately affect young and low-paid workers. Business groups have warned the changes will make employers less likely to hire young people and those looking for their first job.
Mr Fletcher said: 'We are seeing vacancies drop – they are still higher than they have been in historical periods, but definitely dropping – and hiring intentions are dropping. Young people tend to get hit first by that.'
Job vacancies have fallen by 100,000 since the Budget to 759,000 in January.
Stephen Evans, the chief executive of Learning & Work Institute, blamed the pandemic for the rise in the number of Neets.
He said: 'We've had the impact of the pandemic and lockdowns and disrupted education, so it seems likely we have got more young people disconnected from the jobs market altogether.'
Mr Evans added: 'There has also been a growth in the number of young people saying they are too ill to work, with mental health conditions.'
Jonathan Townsend, the chief executive of the King's Trust, a charity that helps disadvantaged youths, said the career prospects for those out of work would worsen the longer they were out of the jobs market.
Mr Townsend said: 'Unemployment can have a profoundly negative impact on a young person's life and the longer they are unemployed, the harder it is to re-engage and get back into work. Around a third of unemployed young people are long-term unemployed and recently we have seen mental health being a key factor in this.
'Our youth index finds that almost one in three out of work young people have experienced a mental health issue due to being unemployed and that their mental health has even stopped them from attending interviews or applying for jobs.'
Alison McGovern, the employment minister, said: 'I am determined that no one will be left on the scrapheap, regardless of where they live: that is my message to the almost 1m young people not in education, employment or training.
'Our Get Britain Working reforms will deliver genuine opportunity by transforming Jobcentres, ensuring every young person has the chance to earn or learn and joining up fragmented work, health and skills support.
'This is how we will unlock the potential of our future generations and make everyone better off.'
Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Bloomberg

a day ago

• Bloomberg

Plunging UK Retail Sales Deepen Concern About Broader Slowdown

A dramatic drop in UK retail sales is raising fresh questions about the sustainability of Britain's recent growth spurt and Prime Minister Keir Starmer's plans to use it to restore controversial benefit cuts. The volume of goods sold online and in shops dropped 2.7% in May, the Office for National Statistics said on Friday. Not only was that the sharpest decline since December 2023, it was enough to wipe out the combined gains over the previous four months of the year. Economists had expected retail sales to fall only 0.5% last month.

Yahoo

2 days ago

• Yahoo

Starmer Faces Brewing Rebellion Over £5 Billion Benefit Cut

(Bloomberg) -- UK Prime Minister Keir Starmer is less than 10 days away from the biggest parliamentary challenge to his authority in his not-yet year-long tenure. Security Concerns Hit Some of the World's 'Most Livable Cities' One Architect's Quest to Save Mumbai's Heritage From Disappearing JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown Unpopular cuts to disability benefits unveiled earlier this year as part of Chancellor of the Exchequer Rachel Reeves' efforts to balance the country's books are due before the House of Commons for their first vote on July 1, with a large-scale rebellion brewing on the Labour back benches. So far, at least 150 of the governing party's Members of Parliament have indicated concerns about the cuts in two letters to the government. Other non-signatories have told Bloomberg they also intend to vote against the bill. While Starmer's attention this week was centered on the escalating tensions in the Middle East, the domestic threat was laid bare on Thursday when Vicky Foxcroft, a government whip who would have been tasked with helping quell the revolt, quit, citing her own objections. The rebellion threatens to bruise Starmer's and Reeves' credibility and further damage their stock with the left of their party. In order to avoid falling to what would be an unprecedented defeat for a government enjoying such a large majority so early in its tenure, ministers could at worst be forced into major concessions that reduce the bill's expected cost savings, forcing the Treasury to conjure up money from other cuts or tax rises at the budget in the fall. 'It's a test of Starmer's authority and the way he and Rachel Reeves are running the economy,' Tim Bale, professor of politics at Queen Mary University London, said in a phone interview. 'If the rebellion is too big, you start to run into questions about the loyalty of your backbenchers and even perhaps the future of your leadership.' The welfare reforms allowed Reeves to save about £5 billion ($6.5 billion) a year by 2030 by making it harder for disabled people to claim a benefit called the personal independence payment, or PIP. The chancellor factored them into a spring statement as part of spending cuts designed to help meet her self-imposed fiscal rules. Reeves says the changes are necessary because an extra thousand people a day have been signing on for PIP, creating an 'unsustainable' impact on the public finances. PIP payments had been projected to almost double to £41 billion by the end of the decade, within overall spending on disability and incapacity benefits that the Office for Budget Responsibility — the government's fiscal watchdog — sees rising to £100 billion from £65 billion last year. The government has also says there is a moral case for supporting people back into work. But Labour lawmakers are concerned the government announced changes in a rush to deliver savings, without thinking through the impact on vulnerable people. 'There are alternative and more compassionate ways to balance the books, rather than on the backs of disabled people,' one Labour backbencher, Debbie Abrahams, told the House of Commons. There are particular concerns about a new requirement for claimants to score four or above in one of the daily living components of the PIP assessment, meaning people who can't wash half their body or cook a meal will be denied the payments if they have no other impairments. One Labour MP describing the process as letting the OBR tail wag the government dog. Some 45 Labour MPs signed a public letter objecting to the measures, while another letter — arranged in secrecy so that even signatories couldn't see who they were joining — garnered 105 signatures and was sent to the chief whip. While some of the would-be rebels have indicated they could be swayed by the government whips, one of them told Bloomberg they are confident that more than 80 MPs will commit to voting against the government. Given Starmer's working majority is 165, if all opposition parties vote against the bill, it would take 83 Labour rebels to defeat the government. The main opposition Conservative Party is planning to vote against the changes, Danny Kruger, one of the party's work and pensions spokespeople, told parliament in May. Its reasons are different: the Tories argue the measures don't go far enough. One Labour MP told Bloomberg that concerned lawmakers plan to put forward a procedural challenge to the bill. While they don't expect the speaker to select that amendment for debate, the aim is to force further changes from the government, and organize would-be Labour rebels into a coherent group which could eventually vote down the bill. Many in Labour had been waiting to see the bill before making up their minds. When the text was published on Wednesday, the concessions to their concerns were minimal, largely amounting to a 13-week transition period for those losing their PIP. Foxcroft — the whip who had previously served for four years as Starmer's shadow disability minister in opposition — quit within hours of the publication, saying she didn't believe cutting the disability benefits should be part of the solution to tackling ballooning welfare costs. Culture Secretary Lisa Nandy said Friday that Foxcroft's resignation wasn't a sign of a major rebellion, while conceding that 'of course' there are dissenting voices on such a big reform. 'Vicky is the only front-bencher that I've had a conversation with about resigning,' she said. Nevertheless, many so-called 'red wall' Labour MPs in northern and central England face a tough decision. Health Equity North, a public health institute, found that all the places most affected financially by the PIP reforms are Labour constituencies in northern England. In several areas, the number of people affected by the welfare changes exceeds the Labour majority, meaning those MPs could see a crucial drop in support. The government is gearing up for a fight, indicating it will make no further concessions. On Wednesday, Deputy Prime Minister Angela Rayner failed to rule out stripping the whip from Labour rebels, while government enforcers are warning MPs that their political career prospects will be ruined if they oppose the bill. Whips and wannabe rebels alike expect the potential revolt to be whittled down as July 1 approaches. Some opponents are weighing whether to abstain at the second reading and wait until the third reading to take a more decisive vote, as whips are encouraging them to do. 'I'd be amazed if he were defeated here,' Anand Menon, director of the UK in a Changing Europe think-tank, said. 'If the whips got a whiff they were going to get defeated, they'd give some concessions. The worst of all outcomes is to lose this.' Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? The US Has More Copper Than China But No Way to Refine All of It Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

Bloomberg

2 days ago

• Bloomberg

Surging UK Grocery Bills Threaten to Rekindle Inflation Fears

Surging grocery bills are threatening to slow the pace of the Bank of England's interest-rate cuts by raising the risk that inflation will stay elevated even as the UK economy shows signs of sputtering. The prices of staples including butter, beef and chocolate in May were up nearly 20% from a year earlier, contributing to the biggest annual jump in overall food prices since February 2024. It was spurred in part by increases in national insurance contributions, the minimum wage and packaging costs that retailers passed along to consumers.