3rd Report - Youth employment, education and training

The current level of young people not in employment, education or training (NEET) is a travesty. These false starts to people’s working lives have deep and long-term consequences for them, for society and for the economy. Young people deserve better. (Conclusion, Paragraph 13)

We are pleased that this issue is getting the attention it demands, including through the Milburn review. A million young people are currently NEET, and there is a risk that many of them will be in their 30s before the benefits of any policy changes are felt. As the government brings forward more initiatives, we expect to see a level of ambition and urgency to match. (Conclusion, Paragraph 14)

We recommend that the government responds to the recommendations from the Milburn review within two months of it reporting. (Recommendation, Paragraph 15) Risk factors

While there are many factors that increase the risk of a young person becoming NEET, none of them are or should be considered inevitable causes. Furthermore, these risk factors can either be mitigated with effective support, or amplified by absent or inadequate support. Unfortunately, various systems of support, from schools to children’s health services, have failed young people in recent years. (Conclusion, Paragraph 25) Coherence across government

Young people have been let down multiple times and by multiple systems. Single-department policies and one-off programmes will not be sufficient. Addressing the UK’s NEET crisis is going to require a concerted and long- term effort from the whole of government. (Conclusion, Paragraph 33) 43

The government should bring forward a youth employment strategy. A cross-departmental strategy would demonstrate its seriousness about this issue, set a long-term path and ensure cross-government efforts. This should include ambitious targets for increasing the rate of youth employment, education and training, and reducing the inequalities in youth unemployment for different groups and areas. (Recommendation, Paragraph 34)

There is overwhelming evidence from businesses about the rising cost of employing people, in part due to changes to employer National Insurance contributions. This has had a knock-on impact on young people. They have been disproportionately affected by slower recruitment, which can then inhibit their future career progression as they struggle to secure their first job. (Conclusion, Paragraph 41)

We recommend HM Treasury extend the National Insurance Upper Secondary Threshold so that all employees under 25 attract no employer Class 1 National Insurance contributions until they earn more than £967 a week. We request HM Treasury provide modelling of the long-term costs and benefits of this recommendation. (Recommendation, Paragraph 42)

The Secretary of State told us that increasing youth employment, education and training is his top priority, yet certain benefit rules disincentivise young people from pursuing opportunities. It is particularly concerning that 16 to 18-year-olds who take on an apprenticeship risk reducing the benefits paid to the rest of their family, and that young adult carers who study for more than 21 hours a week risk having to choose between education and their carer’s allowance payments. Further, the Government is considering removing the health element of Universal Credit for under-22s having not provided evidence on the employment impact. This lack of coherence within DWP-specific policy areas is inexcusable. We are concerned that there are likely to be other instances where benefit rules do not align with wider policy objectives. (Conclusion, Paragraph 54)

16 to 18-year-old apprentices should be treated as part of the family unit when assessing benefit eligibility, and the 21-hour limit of weekly study for carers should be removed. DWP should also drop its plans to remove the health element of Universal Credit for under-22s. It has not produced evidence to justify a different approach for young people or that such a change would have a positive employment effect. (Recommendation, Paragraph 55)

We also recommend that DWP undertake a comprehensive review of all its benefit rules to ensure they are all coherent with the priority of supporting youth employment, education and training. (Recommendation, Paragraph 56) 44 The Youth Guarantee

The Jobs Guarantee is a good offer, but its eligibility is too tight and will limit its impact. We are concerned about the long-term impact on a young person of being unemployed for 18 months and that waiting a year and a half before offering a work placement risks undermining the benefits of the scheme. DWP should undertake and publish a cost-benefit analysis for the Jobs Guarantee. This analysis should test different options for how long someone is unemployed before the scheme kicks in and show how DWP arrived at an 18-month period. We are also concerned that the scheme excludes the 44% of NEETs who are not claiming benefits. DWP should develop options for NEETs outside the benefits system to take part in the Jobs Guarantee. (Recommendation, Paragraph 63)

As DWP rolls out the Youth Guarantee to more local areas, it must balance the benefits of local flexibility against the risk of a postcode lottery of outcomes. In its response, the government should set out how it will monitor the performance of local areas and the steps it will take if any areas are not delivering the desired outcomes. (Recommendation, Paragraph 68)

To have an impact with young people, the Youth Guarantee must not become another here-today-gone-tomorrow scheme. Having started down this path, DWP should make the guarantee the long-term basis for youth policy. To demonstrate its commitment, DWP should announce a minimum funding level for the next 10-years. This should include equally long- term funding settlements with local government so that local areas and stakeholders can make long-term planning decisions. (Recommendation, Paragraph 76)

There is a seed of a good policy in the Youth Guarantee. We welcome many of the policies announced under the umbrella of the Youth Guarantee, including the localised funding of the Trailblazers and the expansion of the youth hubs. However, the government must go further to make a success of it. Other countries have shown that Youth Guarantees require a long-term commitment and to be part of wider support systems. In particular, they have shown the value of intervening as early as possible to support young people at risk of becoming NEET, and of long-term policy commitments. This requires a framework for the early identification of those at risk. The UK has a long history of short-term youth programmes, which can discourage young people, employers and other stakeholders from getting involved. It must do better this time. (Conclusion, Paragraph 81) 45 Apprenticeships

Apprenticeships are a fantastic opportunity. Other countries demonstrate that a well-designed and well-respected apprenticeship system is effective at reducing youth unemployment and creating invaluable opportunities for young people. (Conclusion, Paragraph 91)

Many people would be surprised to learn that last year more than 50% of apprenticeship starts were by over 25s. The government is right to look to rebalance apprenticeships towards young people. However, its approach of defunding a handful of apprenticeships pursued by a high proportion of over 25s has been too blunt. Defunding these apprenticeships will have an immediate impact on many workers looking to retrain, reduce opportunities for people from disadvantaged backgrounds and risk inadvertently harming the prospects of young people looking to enter the labour market. It is deeply regrettable that DWP only sought evidence from Skills England and employers after making its defunding decisions. (Conclusion, Paragraph 105)

In recent years, England’s apprenticeship system has not delivered as well as it could or should have done. 55% of levy funds go unused, with employers choosing to lose these funds rather than take on more apprentices. Constant tinkering with apprenticeship formats and funding rules has undermined confidence in the system for employers, training providers and potential apprentices. These changes have also created unnecessary complexity, increasing costs for employers and disincentivising them from taking on apprentices. Employers and training providers require policy stability to commit to investing in an apprenticeship, and candidates need to know the apprenticeship will still be running in the future. The government should ensure that any further changes are evidence-based. (Conclusion, Paragraph 118)

Having launched the growth and skills levy, the government must now closely monitor the impact of this change. It needs to build a greater understanding of when to intervene and how to mitigate unintended consequences. In its response to this report, the government should set out how it will monitor and evaluate the apprenticeship system, and the impact of its recent changes. It should avoid further changes until it has assessed the effectiveness of the current framework. (Recommendation, Paragraph 119)

England’s apprenticeship system is complex and difficult for employers to understand. The government must do more to communicate how it works and help employers understand the opportunities available. In its response, 46 DWP should explain what steps it will take to improve awareness and understanding of apprenticeships, including how the growth and skills levy operates. (Recommendation, Paragraph 120)

We recommend that the government, through the Department for Education (DfE), ensure that schools, colleges and educators are aware of and actively promote apprenticeships and other non-academic ‘earn and learn’ pathways alongside academic routes. The government must show clear cross-departmental commitment to this objective; as a starting point, we suggest DfE and DWP set out in a joint statement to the House what steps it has taken to date to promote ‘earn and learn’ pathways and what further steps it intends to take. (Recommendation, Paragraph 121) 47