Britain is paying the price for failing to invest in its young people

Most people think Britain is not working as it should. For young people, the situation is at its most acute: only one in four believe that everyone in society has a fair crack. Most think the game is rigged.

It is clear why the generation who grew up during the post-2008 crash austerity years and in the shadow of the Covid pandemic are downbeat: the level of public service provision their parents enjoyed is gone, living costs are rising, the AI revolution is changing everything, and the planet is on fire.

That is why Alan Milburn’s review into youth unemployment is vital. Britain missing out on the talents of 1 million young people not in education, employment or training (Neet) is a problem that extends well beyond the jobs market. It is about how the building blocks of a just and prosperous economy have been whittled away, and is a call to action to put things right.

As with so many of the country’s problems right now, some of the big drivers of youth inactivity stem from the austerity years. That is not to say that other contributing factors – not least Labour’s management of the economy, AI upending youth jobs, and the cost of living crisis – are not playing a role. But there is mounting evidence that the consequences of the Tory spending cuts are maturing with disastrous consequences.

Milburn says the risk of a child becoming Neet can be traced to their earliest years in preschool. To look back, therefore, at the past 16 years of change in education policy, youth services and the public sector more broadly – the lifespan of the generation just entering the workforce – is instructive.

Across the board, funding has been cut. Within youth services in England, spending is down by 76%, a loss of £1.3bn. Thousands of youth clubs have been closed and social workers lost. Meanwhile the per-pupil level of spending for schools in England was frozen for 14 years. Investment in school buildings, many of which have been affected by the Raac – or crumbling concrete – crisis, also collapsed by a quarter.

The tragedy is that, rather than spending on the prevention of bad societal outcomes, Britain has instead ended up allocating vast sums to the consequences of the failure.

The situation is stark in the Neet crisis. For every £1 the state spends on employment support for young people, it shells out £25 on benefits. With the rise in inactivity for a generation cut adrift, the cost is only set to climb without intervention.

Sure Start is another cautionary tale. The Conservatives effectively scrapping the network of family hubs opened by Labour was supposed to save money. But research shows that as the funding dried up, spending on looked-after children and safeguarding rose by more than half. The cost of helping disadvantaged families did not vanish; the support simply shifted from prevention to crisis management.

It is a pattern repeated across government. Rather than investing in public services early to stop problems from developing, the state is in firefighting mode. For Andy Burnham, the task will be to end this shortsighted approach by rebuilding what the thinktank Demos calls a preventive state – a model involving investment to support the foundations of society.

The size of the economic, fiscal and social prize would be substantial.

The NHS provides a clear example. As much as 40% of the NHS budget goes towards treating preventable conditions. Preventable illness accounts for half of GP appointments and 70% of inpatient hospital bed days. After years of underinvestment the service is also highly inefficient.

Recent research by the Health Foundation, however, shows that restoring the deteriorating health of the UK’s population to the level of 2014 would boost GDP by 2% and generate a £72bn dividend for the public finances.

In similar analysis, the Office for Budget Responsibility has said the spiralling health budget could be kept in check by investing in prevention. In a “better health” scenario, the Treasury watchdog estimates the national debt would be about 45% of GDP lower by the 2070s as a result.

The challenge for ministers is that the costs to the economy and to government finances of the Neet crisis is £125bn a year and rising. Getting more young people into work would, though, revitalise the life chances of millions and drive up labour participation – boosting the economy and public finances.

Ahead of the autumn budget, there is a compelling argument for Burnham’s government to take action. However, building a preventive state will come with challenges for a prime minister hemmed in by the UK’s current tight fiscal predicament, and who is in a hurry to show progress.

Moving money upstream is difficult because the savings from preventive spending take time to materialise, and spending on acute need and welfare cannot be simply turned off. Nowhere is this clearer than in early-years services, where reforms can take a lifetime to show up in the numbers.

That timing problem is why the Treasury has often been sceptical. The costs appear immediately, while the savings arrive years later – often benefiting a different government. The incentives favour firefighting over fixing.

However, refusing to make the transition is a bad choice. Britain is already paying the price of a crumbling NHS, rising welfare bill, jobs market inactivity, and consequent weak economic growth.

Milburn’s review is therefore a critical test of whether Britain will grasp the nettle to rebuild a preventive state from the ashes of the austerity years. The alternative is to settle for a country hamstrung by the costs of failure, where young people feel lost.

Reporting from The Guardian contributed to this story.