Colleges should be funded based on whether students move into jobs or further training rather than simply how many enrol, Alan Milburn has suggested in a landmark review of Britain’s growing NEET crisis. The former Labour health secretary said the post-16 system rewards “headcounts not outcomes”, incentivising colleges to prioritise recruitment and retention over sustained progression into work. His interim review, commissioned by ministers to investigate why one million young people are not in education, employment or training (NEET), argued the institutions designed to support young people into adulthood are “no longer fit for that purpose” and called for a “whole system reset”. The report estimated the annual economic cost of around one million NEET young people at £125 billion, which is more than Britain spends on education each year. Around one in eight 16 to 24 year olds are now classed as NEET. Only Romania records a worse youth NEET rate in Europe. Today’s publication from Milburn is an interim diagnostic report, with final recommendations expected later this year. Qualifications no longer enough Milburn said the evidence does not point to a single cause of the NEET crisis, but to a wider failure of the state to support young people into work. He argued that schools, colleges, the NHS, welfare agencies and employers operate in silos with no shared accountability for whether young people successfully make the transition into work. Four in ten NEET young people now hold qualifications at A Level standard or above, while 15 per cent have degrees. More than one in five hold a level 3 qualification. But employers are still “not absorbing them” into the labour market. “The first rungs on the old career ladder have weakened,” Milburn wrote, describing a jobs market in which entry-level work has become scarcer, recruitment less human and more automated, and employers increasingly reluctant to take risks on inexperienced applicants. He said the apprenticeship system, which “ought to be one of the main routes” to bring young people into work, has drifted away from young people “who need them most” – with starts for dropping by over 40 per cent after the apprenticeship levy was “captured” by employers upskilling existing workers rather than bringing in new ones. Six in ten NEET young people have never had a job, up from four in ten in 2005. The report also found that almost 60 per cent are now economically inactive, meaning they are not actively seeking work. Milburn rejected suggestions that younger generations are unwilling to work. Survey work conducted for the review found that 84 per cent of NEET young people wanted a job, education or training opportunity. ‘Post-16 cliff edge’ The review paints a bleak picture of an education system that “produces qualifications but does not guarantee transitions”. It described the post-16 skills landscape as not just “underfunded”, but “confused, fragmented and designed around institutional convenience rather than the needs of the young people navigating it”. Milburn identified a sharp “post-16 cliff edge” after the age of 18, when local authority tracking responsibilities through the raising the participation age policy largely fall away and no institution has responsibility for young people who disappear from education and work. “The system loses young people not because they vanish but because no one is looking,” the report said. The review also warned that further education has been “hollowed out” by a decade of real-terms cuts, while employer investment in training has declined and repeated policy changes have fragmented the skills system. Careers guidance, meanwhile, is described as “a statutory duty without enforcement”, while work experience remains “haphazard”. Make colleges accountable for outcomes Milburn said colleges are operating within a funding system that actively discourages growth. College funding for 16 to 19 education is largely based on the previous year’s recruitment, meaning providers must often fund growth themselves before allocations catch up in later years. Funding is also reduced when students fail to complete courses, making learners at higher risk of dropping out “financially risky” for colleges seeking to expand provision. The report said these rules limit colleges’ ability to offer flexible, roll-on provision for young people who become NEET during the year. Milburn contrasted this with higher education, where student numbers are uncapped and funding follows demand. Labour market participation must be a “core objective” in both the school and college system, he argued. “Schools are measured by exam results, not by whether young people end up in work. Colleges are funded for enrolment, not for sustained destinations,” he wrote. “The education system knows who will struggle. It knows at age five. It knows again at age 11 and then at age 16 too. It has the data, the evidence and the research. It has had them for decades. “What it does not have is the architecture, the funding or the accountability to act on what it knows.” The report concluded that the education and skills system is “designed to produce qualifications rather than working adults”. “Until colleges are funded for outcomes not headcounts, until the post-16 cliff edge is bridged and the young people the system loses are the young people it works hardest to hold, the tail of failure will persist,” Milburn wrote. David Hughes, chief executive of the Association of Colleges, said colleges already help “thousands of young people into jobs” despite not being measured on employment outcomes. He added that colleges could do “even more” if funding allowed them to continue supporting students after they entered work. However, Hughes warned that using job outcomes as a funding metric was “fraught with difficulties” because labour markets vary significantly across the country. A spokesperson for the Sixth Form Colleges Association said the priority should instead be “getting the fundamentals right”. “That means raising the rate, providing more certainty on funding, slashing bureaucracy and providing colleges and schools with the autonomy they need to ensure that students receive the right level of support,” they said.