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Ian Brinkley
Economic Advisor
Ian Brinkley

Tough Love? Young people and training allowances

Authors: Ian Brinkley

20 June 2014

The Labour Party last week ( 19 June) endorsed a proposal from the IPPR to introduce a training allowance for some young people with less than level 3 qualifications (roughly the equivalent of A-levels). It has been widely reported as an example of “tough love” – yet the proposal deserves more serious consideration than the superficial headlines of Labour cracking down on young people’s benefits.

It is not clear if the Labour Party has adopted all of the detail set out in the original IPPR report, The Condition of Britain, but clearly the broad approach is now likely to feature in the Labour Party’s Manifesto for the next election.

The general principle that unemployed young people without sufficient qualifications should be offered training and work experience is hardly contentious, and many of the existing programmes already make claiming benefits conditional on undertaking some work related activity.   So extending benefit conditionality with additional support for some young people is a welcome evolution of the existing system rather than a radical departure.

The proposal as set out in the original IPPR report is a little complicated, but basically it comes in two parts. Those who claim JSA, ESA , or income support between the ages of 18 and 21 will in the future receive a training allowance equal to the current under 25 JSA rate. This will create some losers, as on average ESA and income support claimants get slightly higher awards, according to the IPPR. However, the allowance will be subject to a means test based on household income – so young people from households above the income threshold will also lose out.

Nonetheless, the reform creates a lot of gainers among young people undertaking some form of non HE learning who at present get no benefit.  If I have read it correctly, the reform also removes the absurd 16 hour rule that has survived successive governments and limits benefit claimants from undertaking more than 16 hours study a week. These are important and welcome extensions that have been rather underplayed in the coverage to date.

So far so good. Although, difficulties start to arise because of the need to keep the cost under control. The means test is likely to increase complexity and administrative cost and may make payments less timely than under the current system. Many might say that this is just recognition of the unavoidable impact of austerity on social welfare systems and that to do more for some you must do less for others. Others might say that this is a similar approach taken to student grants where public support is concentrated on less well-off households.

There is also the difficulty of what to do with young people who no longer live in the parental home and may have become estranged from their families. The original proposal says they will still get the training allowance. But there is then an incentive for some young people to declare themselves estranged. So presumably the degree of estrangement will have to be defined and assessed – and as we know governments do not have a good track record of implementing assessment based welfare reforms.

Overall, these reforms should be welcomed in that they emphasise the importance of qualifications and provide more support for some young people. Nonetheless, I still feel uneasy about what might happen to young people with low qualifications simply because they happen to be in households above a certain income threshold.  And as things stand, some households in the squeezed middle might become a bit more squeezed.

I’d like to see some figures for losers and winners and more detail on how the means test system will work. There is time to refine these proposals over the next few months. But the tests that really matter will be whether the proposals will increase the share of young people with better qualifications - and that means qualifications that employers value -thereby improving future employment prospects. Some estimate of their likely net impact on labour market outcomes for the young would help us make a better judgement of the merits of these proposals compared with the current system and the proposals from other political parties.