Downing Street Weighs Expanding Youth Benefits Overhaul to Older Age Groups

Ministers are examining whether a planned shake-up of disability benefits for young people should be broadened to older working-age adults, the Guardian has learned, a step that risks reopening deep divisions within Labour over welfare. Andy Burnham and other cabinet ministers are looking at applying the idea of participation first to everyone of working age, which would mean spending billions more on helping people into jobs while cutting or removing some disability benefits.

The political risks are significant. Keir Starmer faced stiff resistance from the Labour parliamentary party last year over changes to health and disability benefits, and a backbench rebellion forced the government into 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. Milburn's report will propose that under-25s receive training and support instead of the universal credit health element. Young people with disabilities would also lose their personal independence payment, known as Pip, though they could apply to a local fund for specific short-term expenses and equipment rather than receiving an ongoing payment. Those with the most extreme needs who cannot work would have their entitlements protected.

This week, cabinet ministers considered whether the arguments could be applied more broadly to over-25s and weighed 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. That could happen within weeks of both the Milburn review and the Stephen Timms review into disability benefits being published.

Some government sources believe the expansion would ultimately not survive the probable backlash from parts of Labour, while others think Milburn has successfully argued that the system needs to change and that the public is behind him. Burnham has repeatedly said the changes would not be "crude cuts", but some backbenchers are sceptical and worried about the impact on young disabled people.

Widening the changes to over-25s could deliver greater savings, since that cohort is much larger and the level of support needed to get people back into employment would probably be lower. Ministers accept that any system for older people would need to reflect different circumstances, including families, caring responsibilities and more complex health needs, though they believe core problems such as detachment from the workplace are the same across age groups. 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 help young people into work. Some estimates have put the cost of his proposed support at about £6bn, though the government is understood to be unwilling to commit spending at that level. There has been consternation in some departments, including the Department of Health and the Department for Education, that the upfront funding would come from within their budgets. Milburn told the Guardian this week that his plans would create 440,000 employment and education opportunities by 2036 and raise young people's net incomes by more than £2bn, saying the review's main finding was not a lack of ambition 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," he said.

Charities are nervous about the proposals. The Joseph Rowntree Foundation said they could significantly weaken the safety net for hundreds of thousands of young people with a disability or health condition, leaving many on universal credit living on a basic rate 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 in a joint letter to Milburn and McFadden that cutting support or imposing tougher sanctions risks pushing vulnerable young people deeper into poverty and further from employment.

Polling suggests that while the public favours cutting the welfare bill overall, tackling the root causes of joblessness is seen as the best way to do it rather than cutting benefits. 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 the government will respond in full, adding: "We will always ensure there is a safety net for the most vulnerable and those who are unable to work."