Flagship £1bn youth unemployment scheme branded a failure

The Government’s flagship scheme to tackle youth unemployment has been branded a failure by its own advisers, who have urged ministers to offer a “work guarantee” to jobless under 25-year-olds.

Their call gives the Coalition a dilemma because Labour has proposed a similar “real jobs guarantee” to 18-24 year-olds who have been out of work for a year, with benefits being withdrawn for those who refuse to take up the offer.

The Social Mobility and Child Poverty Commission has questioned the value of the £1bn Youth Contract, which has been championed by Nick Clegg. It provides temporary wage subsidies to employers worth up to £2,275 if they provide a six-month “job start” for under 25s.

Funding was provided by the Coalition for 160,000 of these subsidies for three years from April 2012. But the commission discovered that only 21,000 applications were made by May this year, and only 2,070 payments made for young people completing 26 weeks on the scheme. This means that, a quarter of the way through the programme, only one eighth of the places, and one-eightieth of the subsidies, have been used.

Alan Milburn, the former Labour Cabinet minister who chairs the commission, told The Independent yesterday: “Aspects of the Youth Contract are working but not enough to make a meaningful dent in appallingly high levels of youth unemployment. Long term joblessness has a scarring effect for life. Government should work with employers to offer young people a guarantee of a job if they are in danger of becoming long-term unemployed.”

Although the commission has praised the work experience placements offered under the Youth Contract, it has told ministers it is worried that “little progress” has been made on tackling youth unemployment. One third of jobless 18-24-year-olds (250,000 people) have been out of work for more than 12 months, and 15 per cent (115,000) for more than 24 months, the highest level since 1994.

The Commission is urging ministers to set a goal of eliminating long term youth unemployment (12 months and longer) and reduce the proportion of NEETS (those not in education, employment or training) to below the European average. It is proposing a “youth credit” payment for those who take up “high quality” work or training. It wants the Government to cap the amount of time that jobless 18-24 year-olds can spend on benefits by introducing a “job guarantee”, perhaps as part of its Work Programme.

A spokesman for Mr Clegg said: “Everyone deserves the chance to do well and get on in life, but too many young people find that opportunities are out of reach. The Deputy Prime Minister has ordered a review, chaired by the Cabinet Secretary into what we offer to young people to make the transition from school to work better.

"Tens of thousands of young people have already benefited from the Youth Contract, which offers work experience, apprenticeships and help for employers to offer young people jobs that last. Since the Youth Contract was launched in 2012, youth unemployment has fallen by 58,000.”

David Cameron has asked his Downing Street Policy Unit to look into the NEETS issue. He told the Tory conference last month that under-25s could lose their right to housing benefit and Jobseeker’s Allowance if they were not in work or training. But the Liberal Democrats are cautious about benefit sanctions and so the plans may be included in the Tory manifesto at the 2015 election. The Heywood review could lead to some changes to the Youth Contract before the election.

The commission told ministers that there are “substantial gaps” in the provision for 18-24 year-olds, saying: “The risks must be addressed with greater urgency if progress on life chances is not to be threatened. Our judgement is that here the UK Government was too late to the party and what it is doing is so far having too limited an impact.”