National Insurance (NI) paid by businesses on workers aged under 25 should be gradually lowered to encourage companies to create jobs for young people, a major review of youth unemployment will say.
A report by former Labour minister Alan Milburn will suggest the government should reduce NI costs over five years for people aged between 21 and 24 years old, starting in retail and hospitality.
Under Sir Keir Starmer, the government raised NI for firms. Milburn will say the number of young people not in employment, education or training – known as Neets – was not started by the NI rise.
But shadow work and pensions secretary, Helen Whately, said the government should “just stop doing the taxing”.
The independent report, which has been in the works for a year and will be published on Tuesday, will also make recommendations on reducing the UK’s benefits bill.
Milburn has said the government spends £22bn a year supporting young people who are economically inactive. There are nearly one million so-called Neets aged between 16 and 24 in the UK, according to data from the Office for National Statistics.
He will recommend that under-25s should no longer be able to claim the health element of UK-wide Universal Credit or personal independence payment (Pip), which is the main disability benefit in England and Wales.
Milburn wants the government to provide a legal guarantee of a job, training or employment support. Those who refuse to take up help could lose their benefits.
Milburn is also expected to say that helping young people develop skills is pointless if there are no jobs available for them.
The former health secretary will recommend doubling the threshold at which businesses start paying NI for 21 to 24-year-olds from £5,000 to £10,000.
But he will say this should only be done “when fiscal conditions allow”.
Immediately axing NI for 21 to 24-year-olds would cost £5.1bn, according to research by the Resolution Foundation, a left-leaning think tank.
Milburn is set to say that given the UK’s fiscal position, an immediate across-the-board cut in employer NI is not the best use of several billions of pounds of public money.
