UK welfare review proposes less cash, more job support for under-25 claimants

Traders Union
All News
Economic Data
UK welfare review for under-25s

Highlights

Alan Milburn's upcoming review proposes replacing cash benefits for under-25 claimants who have never worked with a mix of reduced payments and mandatory health and employment support.
The current system offers under-25s with incapacity up to £429.80 monthly on top of the £338.58 universal credit payment, and personal independence payments up to £843 per month.
Milburn's proposed youth welfare model is expected to cost more initially due to increased employment support, with ministers planning broader benefit system reforms amid a £12 billion public finance gap.

Milburn review sets out youth welfare shift

As first reported by the Financial Times, Alan Milburn is due next month to recommend that under-25s who have never worked should receive benefits through a different system with different principles from older claimants.

People familiar with the matter say the proposals give younger claimants less cash in exchange for stronger health and employment support, which they would be required to take up as a condition of receiving benefits. The report argues that cash payments are not helping many young people into work and in some cases are discouraging them from entering the labour market.

Under the most ambitious version of the plans, a new assessment process for under-25s would replace incapacity benefits paid through the universal credit health element with a mix of cash and support. It is not yet clear whether the changes would also extend to personal independence payment, while ministers are expected to use Milburn’s findings to develop detailed proposals, including payment levels.

Current support for claimants deemed unfit for work can reach as much as £429.80 a month on top of the standard £338.58 universal credit payment for under-25s. Separate personal independence payments, which are not tied to work, can be as high as £843 a month.

Budget pressure and wider reform implications

Although cutting cash payments for young people is likely to be politically contentious, the youth-focused model is also expected to cost more initially because Milburn is calling for significant extra spending on helping young people into employment.

The final report has been delayed until after the Budget, avoiding a direct clash with Chancellor John Healey’s effort to project fiscal discipline after the Iran war leaves a £12 billion gap in the public finances. Healey is still likely to face pressure at next year’s spending review if ministers decide to fund the additional support while trying to avoid another Labour backbench revolt over welfare reform.

Ministers are already signaling that Milburn’s work feeds into a broader reshaping of the benefits system. Andy Burnham says the review will bring a “huge change” and backs a “new social contract for young people”, while Pat McFadden says there is a “strong case” for a separate youth welfare system because younger claimants tend to remain on benefits.

Sir Stephen Timms, the disability minister, is separately reviewing personal independence payment and says support, equipment and therapy could replace some cash payments for claimants of all ages. The Department for Work and Pensions says the Milburn and Timms reviews will lay the foundation for sustainable reform and that it will not pre-empt their findings.

Tom Pollard, head of policy at mental health charity Mind, supports earlier and more proactive employment help for young people out of work. But he warns that reforms that leave young people struggling financially could damage mental health and make it harder for them to engage with support.

In our earlier report on Chancellor John Healey’s Budget stance, we explained that he intends to stick with deficit-reduction plans ahead of the October 28 fiscal package, even as the UK enters a tighter phase for public finances. We also noted that August GDP unexpectedly rose 0.1%, while political debate intensified over how to balance fiscal discipline with growth support and wider structural reforms, including concerns about benefits and work incentives.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.