Benefits overhaul for Neets will take 10 years to complete under ‘Labour way’

Plans to cut benefits for young people by helping them back to work will take 10 years to complete, The i Paper understands. It comes after the Chancellor, John Healey, faced a day of criticism over the lack of measures to cut the burgeoning welfare bill in the Budget, and was forced into as series of clarifications over whether or not there would be cuts to the ballooning benefits bill in this Parliament Andy Burnham was drawn into the row after Healey appeared to tell the BBC’s Today programme there would be cuts by 2029 only for the Treasury to backtrack. In the evening, on Channel Four News, Healey said there would not be cuts. Shorts “It’s not correct to say that we’re going to bring this welfare bill down in this Parliament because we’ve not set a timetable for that.” Earlier, the Prime Minister had said he wanted to cut the benefits bill “as soon as we possibly can” while No 10 said: “We’ve never set an arbitrary target or timetable on that.” Burnham wants to cut the welfare bill in a “Labour way”, which means by bringing people back into work rather than by “crude cuts”. But the latest row comes a year after his predecessor, Sir Keir Starmer, was forced to abandon welfare cuts and risks several more years dominated by the issue but with little or no inroad into the problem. The Milburn review Labour grandee Alan Milburn’s review into 16- to 24-year-olds not in employment, education or training – so-called Neets – is understood to set out plans for 10 years of change to bring down the high cost of unemployment in young people, The i Paper understands. The former cabinet minister’s review is expected to find savings but insiders say for Millburn’s reforms to be successful, benefit claimants will need wholesale support. It comes as the Institute for Fiscal Studies (IFS) told The i Paper that a boost to work support will not make savings for five to 10 years and would be expensive in the short term. This is despite warnings from the Office for Budget Responsibility (OBR) – the UK’s financial watchdog – that the benefits bill is on course to exceed the Government’s welfare spending cap and its permitted margin by £2.8bn in 2029-30. Eduin Latimer, senior research economist at the IFS specialising in welfare, said breaching the cap “doesn’t have any forcing effect on Government policy” and that the bigger issue driving policy is rising spending. “One area where the Government might want to try and find some extra savings – which they might be able to use elsewhere – would be cutting benefit spending,” he told The i Paper. The OBR points to rising numbers claiming health-related and in-work benefits as key pressures on spending. The number of people on incapacity benefits has risen from 2.5 million in 2019-20 to 3.7 million in 2025-26, while the disability benefits caseload in England and Wales has increased from 4.7 million to 6.9 million. Labour ‘addicted to welfare’ The welfare bill is projected to hit £353bn this year, a rise of £19bn, and forecast to rise to £431bn in 2031-32 according to the OBR, with just under half of this spent on pensions. The Conservatives accused Labour of being “addicted to welfare”, while Reform UK said the Budget did not address the “ballooning” benefits bill. The Milburn review is expected to be published next month, along with Sir Stephen Timms’s report on the “failures” of the disability benefits system. Healey said he would respond with a White Paper early next year with legislation to follow. This means any effective action may not happen until 2028. The Chancellor said the Government will bring the benefits bill down in a “Labour way”. “We will make changes and we’ll make the changes before the next parliament that will help us in the longer term get these million youngsters a chance in life and off benefits,” he told Channel 4. The reforms to universal credit (UC), first proposed by former coalition-era Tory work and pensions secretary Iain Duncan Smith in 2010, ended up taking 15 years to complete with the final claimant moving from older benefits earlier this year. Insiders expect Milburn’s reforms to take a decade to fully implement, but savings are expected to be made in the interim. ‘Two types’ of possible savings Latimer, of the IFS, said if the Government was to make savings immediately, it would have to restrict disability benefits known as personal independence payments (PIP) and UC for under-25s. He said there are “two types of savings” the Milburn package could include. The first would be cutting eligibility for benefits, such as restricting the health element of UC for young people, which has seen a huge rise in claimants since 2019. “If they did that, they could in theory make savings basically immediately,” Latimer said. The second mechanism is long-term intervention to boost employment support for young people. Latimer said this would probably require “upfront spending” and it is “more uncertain” how it would affect finances in the long run – but it is likely to take “five to 10 years” to make savings. Latimer said Milburn’s employment support package “could pay off in the long run if it does succeed in getting more young people into work”, but noted this is “not guaranteed” as the results of previous schemes have been “mixed”. The i Paper understands there is last-minute wrangling across government departments over the Milburn review to ensure the report can be accepted in full when it is published. The report is expected to cut across multiple departments, including the Department for Work and Pensions, Education and the Business brief. Ministers are understood to be dovetailing Millburn’s requests against their departmental priorities and existing programmes that tackle youth joblessness. The new youth participation service will be designed to help youngsters plan their futures and prevent them from becoming “Neets”. A DWP spokesperson said: “We are already reforming the welfare system across the country by narrowing the gap between universal credit standard and health rates, restoring face-to-face assessments, and investing £3.5bn in employment support to end the culture of people being signed off and written off. “This comes alongside our £2.5bn investment in youth employment over the next three years to support almost one million young people and help deliver up to 500,000 opportunities to earn and learn.”