Downing Street is considering whether plans to replace key disability benefits with work and training for people under-25 should be expanded to older age groups, the Guardian has learned, in a move that risks reigniting Labour tensions over welfare changes.
Andy Burnham and other cabinet ministers are looking at applying the idea of “participation first” to all people of working age, meaning spending billions more on support to enter the workplace while cutting or removing some disability benefits.
The move would be politically risky given the difficulties that Keir Starmer faced in getting changes to health and disability benefits past the Labour parliamentary party last year, with a rebellion leading to a major U-turn.
The government is preparing to accept recommendations from its adviser, Alan Milburn, next week on overhauling the benefits system for young people.
In his report, Milburn will propose that under-25s should get training and support instead of the universal credit health element. Under the plans, young people with disabilities will also lose their personal independence payment (Pip) but will be able to apply to a local fund for specific short-term expenses and equipment, rather than an ongoing payment. Those with the most extreme needs who cannot work will have their entitlements protected.
This week, cabinet ministers looked at whether the arguments could be applied more broadly to over-25s, and were considering an intervention from the prime minister or Pat McFadden, the work and pensions secretary, to make the case that the principles should apply to all. This could happen within weeks of both the Milburn review and the Stephen Timms review into disability benefits being published.
Some government sources said they believed the idea of expanding the welfare changes to over-25s would ultimately not survive given the probable backlash from some parts of Labour. Others said they believed Milburn had successfully made the case that the system needed to change and that the public were behind his efforts.
Burnham has repeatedly said the changes would not be “crude cuts”, but some backbenchers have said they are sceptical and worried about the impact on young disabled people.
If the changes were expanded to the over-25s, it could yield more savings as the cohort is much larger than the under-25s and the level of support needed to get people back into employment would probably be lower.
Ministers have said they believe any system for the over-25s would need to reflect the different circumstances of older people, many of whom had families or caring responsibilities, and more complex health needs. However, there was a belief that many of the core problems, including detachment from the workplace and a need to encourage greater participation, were the same for under- and over-25s.
A government source said: “The support offer and benefit changes Alan has set out were devised for young people and the specific circumstances they face. But the Timms review has set out that Pip is no longer fit for purpose, and the government will respond to that review when it reports.”
Milburn, a cabinet minister under Tony Blair, has promised his report is about giving billions more in support to young people to help them into work. The Guardian has learned there has been consternation within some government departments – including the Department of Health and the Department for Education – that the upfront funding for Milburn’s extra support will come from within their budgets.
Some estimates have put the cost of Milburn’s proposals at around £6bn. However, it is understood the report will not commit to a level of spending that high, even though it will provide some costings for the upfront funding needed and a trajectory for projected savings.
Milburn told the Guardian this week that the support for young people outlined in his report would create 440,000 employment and education opportunities by 2036 and raise the net incomes of young people by more than £2bn.
He said the main finding of the review was not a lack of ambition from young people but a lack of opportunities. “I have not met a single young person who wanted to be Neet [not in education, employment or training]. Not one. They want independence, they want to earn their own money and they want someone to give them a chance,” he said.
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The Guardian revealed last month that ministers were working up sweeping plans for welfare changes, including scrapping key disability benefits for under-25s and replacing it with a multibillion-pound package of support to get into work.
Charities are nervous about how the proposals will affect young people. The Joseph Rowntree Foundation said the proposals could significantly weaken the safety net for hundreds of thousands of young people with a disability or health condition, leaving many of those on universal credit living on a basic rate of support of about £80 a week.
“Cutting someone’s income when they’re already struggling to afford food or the bus to college makes it harder for them to stay in education or find work,” said Iain Porter, the charity’s senior policy adviser.
More than 40 of the UK’s leading charities have warned ministers against imposing tougher benefit sanctions or cuts on disabled young people.
In their joint letter to Milburn and McFadden, they said cutting support or bringing in sanctions risked pushing thousands of vulnerable youngsters deeper into poverty and further away from employment.
Polling suggests that while the public favours cutting the welfare bill overall, they believe that tackling the root causes of joblessness instead of cutting benefits is the best way to do it. Welfare spending has reached £333bn this year, with pensioners receiving roughly 55% of the budget, and young people, including Neets but not children, about 2.5%.
A government spokesperson said: “The Milburn and Timms reviews are due to be published shortly, and we will respond to their recommendations in full.
“We will always ensure there is a safety net for the most vulnerable and those who are unable to work. But the prime minister has been clear that we need a wholesale change in the way we support young people to grow up in this country, where we invest in their success rather than paying for failure.”
