Some families on benefits are to be paid hundreds of pounds a month to encourage their children to take up apprenticeships.
Currently, parents can lose a portion of their child benefit when their 16 or 17-year-old children leave full-time education under a peverse incentive that stops teenagers entering work.
In part of a drive to encourage more youngsters into jobs, ministers will press ahead with plans to offer grants to families to stop them discouraging their teenage children from becoming apprentices.
The plans were first mooted by Work and Pensions Secretary Pat McFadden, who has remained in the role under Andy Burnham’s Government.
A “targeted” approach to persuading apprenticeship take-up is to go ahead, Government sources told The i Paper.
McFadden has previously said the benefits rules disincentivise a “small number” of families. There is no public record of how many exactly are affected.
Families who claim universal credit can lose between £17 and £339 a week in child benefit if a 16 or 17-year-old in the household becomes an apprentice, instead of remaining in full-time education, a report by the Social Security Advisory Committee previously found.
The report said: “For too many households, choosing a vocational pathway – one that the Government promotes as an equally valid route into adulthood – can trigger substantial losses in financial support.
“These losses can reach levels that no realistic apprenticeship wage can offset. In the starkest cases, this creates pressures so acute that young people are discouraged from taking up apprenticeships or, in some instances, are forced to abandon them.”
Welfore reform a key test of Burnham’s premiership
It comes as Burnham faces one of his first major challenges as prime minister this week, as he seeks to set the tone for his Government on a totemic issue with voters: the benefits bill.
After Labour’s failed attempt to slash welfare spending last year, Burnham’s political enemies view his approach to reform as a measure of his political authority. Meanwhile, Britain’s international investors view it as a key test of his fiscal credibility.
The PM is keen to show he is not baulking at tricky issues, saying: “We’ve got to get really serious as a country at getting the welfare bill down.”
Burnham arrives in No 10 as the rate of jobless 16 to 24-year-olds is the highest in more than a decade, with some one million young people left out of work and education. The welfare bill is set to exceed £330 bn this year, about £50 bn more than before the pandemic. An attempt to slash £5 bn last year ended with Sir Keir Starmer’s authority in tatters.
There are already signs Burnham will not face the same level of rebellion.
Keeping McFadden in place as Work and Pensions Secretary at last week’s reshuffle is a recognition of the success he has already achieved in convincing Labour MPs that welfare changes are not being made from the wrong end of the telescope. One of the major criticisms of Starmer and his Chancellor Rachel Reeves was that they came up with a plan to save money and retrofitted welfare changes into it.
Offering benefits top-ups to families, who would otherwise lose out if their child were to leave full-time education to become an appentice, align with Burnham’s plan to do things differently. He has spoken at length about giving young people the support they need to find jobs.
Nevertheless, central to his reform is that certain benefits, including mental health support, will become “conditional” on people taking work opportunities rather than staying at home.
The cost of Personal Independence Payments (PIP) to young people has risen sharply in recent years, alongside a surge in claims linked to mental health and neurodevelopmental conditions, such as anxiety, depression, ADHD and autism.
PIP is available regardless of whether someone is working or studying. Someyoungsters can receive significantly more through sickness benefits than they would earn from a part-time minimum wage job.
Helen Whately, the Conservative shadow work and pensions secretary, said the “incentives are topsy-turvy” and were pushing young people towards a lifetime on welfare.
The concern is not limited to the opposition. While some Labour MPs have also come around to changing welfare payments, some maintain reservations.
Labour MP: We have got to fix welfare
“If I had my way, I’d remove PIP for young people with mild anxiety. I say to parents: why are your kids on full PIP? Not only is it important for them to get off it, it’s an important symbol to the electorate,” a Labour MP told The i Paper.
The MP said the 2025 rebellion by Labour MPs over welfare reforms had lodged in the minds of voters.
“Last year’s attempt to change welfare was a strategic error. Because it went badly people noticed it. If we had never tried to touch it people might not have noticed, but since they did, we now have got to fix it,” the MP told The i Paper.
Burnham believes a push for further education is essential to bringing down the number of young Neets [not in education, employment or training], which has passed a million for the first time despite 84 per cent of them saying they want to work.
In an interview with the BBC on Monday, he said he might “increase the conditions required to receive benefits”. However, he said: “It’s about changing the nature of the support and making some of the support conditional upon people taking opportunities that are presented in front of them.”
He said he believed “there are people out there who, with the right support, can go into work”, pointing to guarantees of opportunities for young people. He said: “Where mental health support is needed, for instance, it’s provided in work to support people in an opportunity.”
But he stopped short of criticising claimants. “I wouldn’t necessarily go straight to blaming those people,” he said. “There are people in the benefits system, young people in their 20s, who have been, I would say, quite seriously let down because the support wasn’t there for them when it should have been there.”
“Young people are being told they have disabilities and pointed towards welfare. Worse still, those teenagers will be better off than their classmates who manage to get a part-time job.”
Accelerating incentives for businesses to employ young people
Incentives to encourage businesses to invest in youth apprenticeships, through Government grants and support, were already being rolled out under the previous chancellor, but ministers are also looking into whether those can be accelerated.
Parliament’s cross-party Work and Pensions Committee argued employers should be incentivised to hire younger workers through cuts to national insurance contributions, with a particular focus on retail and hospitality. A Government source said the suggestion would cost billions of pounds and is not currently being actively considered.
Youth unemployment tsar Alan Milburn is set to propose overhauling the system to get young people into work and drive down the benefits bill in a report to be published this autumn.
Separately Sir Stephen Timms, the disability minister also retained in post by Burnham, will deliver a report on rationalising PIP payments around the same time. Ministers are considering separating out the two issues when fresh legislation comes to Parliament next year to minimise the chances of another rebellion.
So far Burnham has been careful to use friendly language, avoiding blame. Making the stickier case for cutting payments has been left to his outriders, such as Lord Blunkett.
In an interview with The i Paper last week David Blunkett, the prime minister’s political mentor, said the new administration favours practical support for benefits claimants over cash payments. “Simply saying, because we’ve not been getting this right, we’ll give you money, and then you go away and you languish for years on benefit is doing nobody a favour,” he said.
“If you’ve got a milder form of a particular challenge, we will help you in another way. Instead of giving you the money and say please go away, we’ll say we’ll provide you with a mental health solution, or we will provide you with a mentor, or we will provide you with practical equipment or physical help to enable you to take opportunities.”
Burnham has argued for reducing welfare costs through the improvement of vocational education and work placements as well as wider support through better transport and improved housing.
One of his first announcements was a cap to bus fares, seen as the carrot approach to helping people search for jobs. How far his MPs will let him use the stick alongside the carrot is an open question.
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