The disability benefits system faces being overhauled to support young claimants into work, the Government’s joblessness tsar has indicated.
Alan Milburn, who is conducting a review of young people not in education, employment or training (Neet), indicated that personal independent payments (PIP) should be reformed so it is not purely based around cash help, but provides targeted support to help jobless claimants into work.
Milburn signalled the coming shake-up with the publication on Thursday of a damning report which concludes there has been a “whole system failure” across welfare, education and health which is leaving a growing number of young people permanently “detached” from the world of work.
He published his interim report on the crisis on the day that official figures revealed that in the first quarter of 2026, the number of people aged 16 and 24 who were Neet had risen above one million for the first time in more than 12 years.
Milburn, who was a New Labour minister under Tony Blair, has said that without urgent action, the figure could rise to 1.25 million.
The Prime Minister Sir Keir Starmer said his report was “sobering” and that he would “not allow a lost generation”.
Published on Thursday, the report was billed as a “diagnostic” of the problem, with a detailed set of recommendations due in the autumn.
However, Milburn has strongly hinted that he will call for an overhaul of benefits such as PIP.
PIP is paid to people with a long-term physical or mental health condition to help with extra living costs. While people can get it if they are working, Milburn found that by age 24, only one in four young claimants have a job.
His report states: “The way PIP works means that the considerable and growing resources devoted to it are not targeted on helping improve the functional capacity of disabled young people, and thereby enhancing their labour market or wider participation prospects.
“There is no consistent provision of practical support with daily living, occupational therapy, vocational rehabilitation, mental health social work, specialised coaching, workplace assistance or links to the networks that would enable participation.”
Milburn says: “At no point in a young person’s application or journey on PIP are they asked about, or supported to, work. This is not an accident of delivery. It is how PIP is designed.”
“The system measures functioning. It does not plan for improving it. It asks what a young person cannot do,” he adds.
‘Peverse’ incentives for young people not to work
At a press conference in north London, Milburn told The i Paper that the welfare system was leaving young people “stuck” out of work.
He said: “We don’t intervene early enough. We don’t take the opportunities that the relationship between the benefits system and young people has, to have a conversation with young people about what would you like to do? Some of the incentives, frankly, are perverse.”
In his report he is scathing about the Work Capability Assessment process, which judges whether someone is eligible for incapacity benefits, pointing out that many young people wait up to three months for an assessment during which they “receive the equivalent of only 1 to 2 minutes of work coach time a week”.
With the Government previously pledging to scrap the WCA process by 2028, the reports suggests a full overhaul of the system is now near certain.
Milburn told The i Paper that a backlog of two million people waiting for a work capability reassessment was “two million people who could be helped into being in a job”.
He criticised a lack of face-to-face assessments and Jobcentre Plus staff having such high caseloads that they can only spend about two to 10 minutes with each young person.
His report also takes aim at the Limited Capability for Work Related Activity (LCWRA) category of Universal Credit benefits, which imposes no expectation for a claimant to look for a job. “It is little surprise that only 1 in 100 young people in the LCWRA group move into a job each month,” it notes.
Health benefits for under-22s could be cut
The report also says that a health top-up within UC which provides an additional payment to people who cannot work due to disability or ill health provides a “perverse incentive” that means “inactivity can offer higher income, less hassle and lower risk” than work.
It suggests that the Government may press ahead with plans to remove the top-up for under-22s and ask them to pursue work, education or training instead.
Other measures hinted at in the report include widening the scope of the Government’s “jobs guarantee” scheme – a six-month government-subsidised job with firms such as KFC, McDonald’s and John Lewis – to include young people with a health condition, and offering a trial period for those who want to try work without immediately losing their benefits.
Beyond welfare, Milburn said that smart phones had damaged young people’s mental health by creating a “bedroom generation” hooked to social media. He strongly suggested that he would call for a ban for social media for under-16s in his final report if the Government did not announce one before then.
When Starmer and Rachel Reeves attempted to cut sickness benefits last year, they were forced into a humiliating U-turn when Labour backbenchers revolted against the plans.
However, Milburn said the Government had made a mistake by framing reform as primarily about cutting costs rather than improving people’s lives, and that he believed ministers wanted to return to the original purpose of welfare – helping people into work and improving their lives.
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