Eight million people 'risk falling into an employment twilight zone'

Two in five young people are currently unemployed or underemployed

The millions of people with no jobs – or in work which fails to use their talents – will cause productivity to plunge by a quarter by 2022 (Getty)

A “lost generation” of more than eight million people could within a decade be unemployed or stuck in jobs for which they are overqualified, according to the Local Government Association.

The millions of people with no jobs – or in work which fails to use their talents – will cause productivity to plunge by a quarter by 2022, economists working for the LGA predict. The wasted potential would result in the loss of hundreds of billions of pounds to the economy.

The stark predictions are the result of an employment and skills system that is “not fit for purpose”, the new leader of local government in England and Wales, Councillor David Sparks, will say today.

Mr Sparks will call for a major overhaul of unemployment and skills training at a meeting of all council leaders in England and Wales this afternoon.

Speaking ahead of the meeting, he said: “The current system for getting the unemployed into work needs radical reform. Hundreds of thousands of people – a lost generation – are being let down and sucked into an unemployment twilight zone, through no fault of their own. This staggering situation is only going to worsen without swift and decisive action.

“Councils are doing everything they can but the current system is a maze of fragmented and overlapping schemes. This has to change for the future economic prosperity of this country.”

If nothing is done to tackle the issue, the Government could lose £164 billion in potential tax returns from England alone, research for the LGA by the Centre for Economic and Social Inclusion (CESI) shows.

Rachel Reeves, the shadow work and pensions minister, said: “The Government’s own figures show there are 1.4 million people in part-time jobs who want to work longer hours but cannot find a full-time jobs. This is costing taxpayers a staggering £1.7 billion in housing benefit.”

Two in five young people are currently unemployed or underemployed, but in the worst affected areas, this can rise to half.

Unemployment in the UK fell by 161,000 to 2.16 million in the three months to April, bringing the rate of those out of work to 6.6 per cent.

However, the true scale of unemployment and underemployment is being hidden, according to the LGA, which says that government figures are too focused on the jobless rather than those who are only working part-time hours or are overqualified.