A damning new report has warned that the United Kingdom's 'lost generation' of jobless young people will cost the state a staggering £125 billion annually. Former Labour Cabinet minister Alan Milburn, who authored the review, noted that this figure surpasses the country's yearly expenditure on education.
NEET numbers exceed one million
The long-awaited review coincides with fresh figures indicating that the number of NEETs — young people not in education, employment, or training — has surpassed one million. Milburn described this as a 'moral crisis,' projecting that by the end of the decade, one in six youths aged 16 to 25 will be receiving out-of-work benefits.
Britain an outlier in Europe
The report highlights that Britain is an outlier within the European Union, with only Romania recording a higher youth NEET rate. Over the past decade, the proportion of NEETs suffering from a health condition preventing them from working has surged by 70 percent. Among disabled young people who are NEET, the proportion citing mental health as their primary condition has risen from a quarter in 2011 to nearly half in 2025.
'Health is no longer a background factor in youth disengagement — it is central,' Milburn wrote. 'Ill-health is now a primary driver of who becomes NEET and who stays NEET. For the first time in perhaps two centuries, changes in health, especially mental health, are impeding economic growth and causing a contraction in the supply of labour.'
He noted that the 'explosion' in mental health conditions has been primarily in anxiety and depression, rather than serious mental illness. This shift has altered the profile of NEETs, who are now more likely to be economically inactive (57 percent) than unemployed (43 percent) — a reversal from a decade ago.
Call for reform of 'fit note' system
Milburn called for reform of the 'fit note' system, arguing that it should focus on what young people can do rather than simply signing them off work. He emphasised that most young people want jobs and rejected the 'snowflake' stereotype, but acknowledged that employers need to offer more support. He cited the case of a large employer that hired a full-time social worker to support younger staff.
'Young people are different from those who came before them. Not worse. Not lazier. Not less intelligent,' Milburn said. 'But they present with higher levels of anxiety and depression. They are more likely to disclose health conditions. They expect flexibility. They value purpose. They are less willing to tolerate poor treatment.'
The report found that employers repeatedly raised concerns about the above-inflation increase in the minimum wage, which they said disincentivises hiring young workers. The Conservatives have warned that Labour policies — including the National Insurance increase for employers and new workers' rights laws — are making it too expensive to hire young people. However, Milburn noted that these issues pre-date tax changes and are unlikely to have significantly affected youth employment.
Educational attainment not enough
Despite stereotypes, many young people have good grades — nearly 30 percent hold good GCSEs and 15 percent have a degree — yet still struggle to find jobs. The report also found that the number of jobs for young people in the labour market has declined, even as overall employment has increased. Young people once made up one in seven workers but now account for approximately one in nine. The traditional Saturday job is no longer a common route into work, and entry-level roles have become scarcer and more demanding.
Outside education, young people are now less likely to be employed than at any point in the past decade, the report warned. It criticised the welfare system, noting that less than half of the total £8.1 billion currently spent on key benefits for young people comes with any requirement to seek work. Last year, for every £1 the Department for Work and Pensions spent on employment support for young people, approximately £25 was spent on benefits.
The report predicts that the number of benefit claimants will continue to rise. If current trends persist, one in 20 of today's five-year-olds will be on incapacity benefit at age 22 — more than one child in every classroom. This could push the NEET rate above 16 percent, or over 1.25 million young people not fully participating in society within five years.
Among the report's most shocking statistics: of those who first claimed a health and disability benefit between ages 16 and 24, almost half are not in work or education fifteen years later. 'I heard young people describe applying for dozens, sometimes hundreds, of jobs and hearing nothing back,' Milburn wrote. 'I heard about interviews followed by silence, automated rejections months later, and entry-level jobs that somehow required previous experience. That is not a failure of young people, but a failure of a system stuck in the past.'
Milburn's initial report examines the causes of youth unemployment. A subsequent report later this autumn will propose remedies.
