Andy Burnham could face a bill of more than £6bn to get young people back into work if he backs new recommendations in a landmark youth unemployment report.
The amount could be needed to set up youth job schemes replicating those which have been successful in countries like Germany and Denmark.
Former Labour Health Minister Alan Milburn has been studying the European models as part of his investigation into the scandal of escalating levels of youth unemployment in the UK where 15.6 per cent of young people are jobless.
And he is set to point to their success when he recommends what the UK could do to get young people back into work later this month, backing investment support rather than benefit cuts.
It all means the PM could face a hefty upfront bill to tackle the problem even if the measures ultimately reduce the welfare bill.
The UK only spends around 0.1 per cent of GDP – £3.7bn a year – on helping people into work while Germany and Denmark spend much more.
In Germany – where 7.5 per cent of young people are unemployed – the government spends 0.3 per cent of GDP on job support. This includes subsidising wages for workers up to the age of 29.
If the UK increased its spending to Germany’s rate, it would cost the Government more than £6bn.
Alan Milburn has warned Andy Burnham could face a bill of more than £6bn to get young people back into work if he backs new measures tackling youth unemployment
Meanwhile Denmark spends even more, investing 0.4 per cent. It also runs a scheme where young disabled people can take on state subsidised ‘flexi jobs’ with lower working hours.
Andy Burnham said yesterday that the cost of measures recommended by Mr Milburn would not directly add to the welfare bill.
But he did not rule out extra spending on ‘investment in the support that teenagers need and the guarantees that I want to put in place for them’.
He told Times Radio they would require ‘investment up front’ and that ‘in time, the savings will come’.
The UK has the third-highest rate of young people not in work, education or training – so-called NEETs – among Europe’s richest countries because of rising ill-health and a failing system of benefits and job support, according to The Resolution Foundation.
The thinktank recently said the UK was facing a ‘crisis’ in youth jobs amid a dramatic rise in the number of 16- to 24-year-olds NEETs – to almost 1 million – the highest level in more than a decade.
Meanwhile the country’s bloated welfare bill is set to rise further – from £353bn this year to £431bn in 2032, according to estimates from fiscal watchdog – the Office for Budget Responsibility (OBR).
The PM is not likely to officially respond to recommendations in Mr Milburn’s high profile report until the next King’s Speech next April with any implementations funded later in his Spending Review.
Health and education budgets could be cut back to fund Mr Milburn’s reforms, because both departments will be involved in delivering the policies, according to today’s Telegraph.
Ministers are also said to be concerned that the impact of any new job support measures could be effectively scored by the OBR, which said this week it would ‘apply quite a high bar’ to them.
In its latest forecasts it highlights two previous government schemes which did not succeed in their stated aims.
One, an extension of NHS Talking Therapies, never delivered on its promise to boost employment by 10,000 while the other, the Connect to Work programme, looks set to fail to increase employment by the promised 25,000, falling short by at least a third by 2028-9.
OBR official Tom Josephs said: ‘What we found in these cases is that big changes to delivery and funding after the initial announcement meant that the programmes looked very different from the ones we originally scored.
‘So we have to have quite a high bar in the future for including impacts from these sorts of programmes in the forecast.’
A spokesman for the Department for Work and Pensions said that, ‘The Milburn and Timms Reviews, due to report in November, will lay the foundation for sustainable reform, and we will not pre-empt their findings’.
They added: ‘We are already changing the system through the Youth Guarantee, which includes £2.5bn investment in youth employment over the next three years to support almost one million young people and help deliver up to 500,000 opportunities to earn and learn.’
