The youth unemployment tsar Alan Milburn has called for people under 25 to be blocked from sickness and disability benefits although potential savings on the welfare bill could take a decade before they are realised. 

Ahead of his report’s publication, Milburn said young people should no longer claim benefits as he argued that the welfare system should focus on employment investment, mental health support and helping people build a “good life”. 

The review into youth joblessness is expected to lead Andy Burnham into introducing major welfare reforms aimed at helping people get into work and reducing a bill of about £146bn when child benefits and pensioner spending are excluded. 

The Prime Minister has previously said he did not want to “see anybody in their 20s on benefits in this country”. 

Milburn’s welfare proposals

Under Milburn’s plan, young people would instead be moved onto a “youth allowance”, paid at the same rate as Universal Credit, under his proposals. Those who receive disability payments would get additional cover relating to their condition and it would not be means tested. 

A new benefit would also be introduced for those who are not capable of working. 

He said nearly 1m people aged between 18 and 24 who are not in education, employment or training, who are referred to as ‘Neets’, would be presented with a “menu of options” to enter the national workforce. 

Investments in the near term would be “significant” under the former health secretary’s proposals, which could put additional pressures on public finances. 

“Obviously this costs money,” he told The Times in an interview. 

“And frankly it’s a better use of money — both from the point of view of the young person and the taxpayer — to spend that money getting them into work rather than … keeping them on benefits. This is the sort of fatuous thing about this debate. You’ve got to invest upfront in order to get savings out of the back end. ‘Cost-free’ is fatuous. So we’ve got to be candid about that. It will need significant investment.

Even with further spending on employment support and health, Milburn warned that proposed reforms in next week’s report could lead to a pinch on young people’s budgets. 

‘This will not be easy’

“I’m not saying that any of this will be easy, or that it will be pain-free, because it won’t,” he said.

“Candidly, it could mean that some people will get less financial support at the beginning of their benefit claim than under the current system. But actually, for young people, there’s a different debate that we’ve got to resolve, which is whether the priority is their longer-term life chances or just their immediate shorter-term finances.

“I think what the current system does [is] it prioritises the latter over the former. I believe that’s the wrong choice and it needs to be the other way around.”

Pat McFadden, the work and pensions secretary, will respond to the Milburn review after it is published in full next week. 

A government plan on welfare, however, may not come until February at the earliest, according to Chancellor John Healey. The government is also set to consider recommendations in the Sir Stephen Timms review on disability payments, which is not expected to consider the financial implications of welfare spending. 

An interim report of the Milburn review suggested that the ‘Neets’ crisis cost the UK economy up to £125bn a year from lost output and higher welfare spending. 

Initial findings by the Neets tsar also found that for every £1 the Department of Works and Pensions spent on employment support for young people, around £25 was spent on benefits for young people.