“But actually, for young people, there’s a different debate that we’ve got to resolve, which is whether the priority is their longer-term life chances or just their immediate shorter-term finances.
“I think what the current system does [is] it prioritises the latter over the former. I believe that’s the wrong choice and it needs to be the other way around.”
Just under one million young people in the UK are Neets, data from the Office for National Statistics (ONS) from April to June suggests. This was a rise of 3% on the same period last year.
Milburn’s recommendations are likely to be backed by Prime Minister Andy Burnham but could prove controversial among Labour MPs, who opposed welfare changes last year under his predecessor Sir Keir Starmer.
Labour backbencher Bell Ribeiro-Addy said she was “not sure” she could vote to cut the benefit entitlement of existing claimants, adding that opposition to this idea had been a factor in last year’s welfare rebellion.
Speaking to Radio 4’s Today programme, she also argued that Pip often helped disabled people who were already in work to live independently.
“I don’t think you get a disabled young person into work by taking away the money that helps them get into work,” she added.
The reforms would represent a radical overhaul of Britain’s welfare system, at a time when there is heavy political pressure for the UK to find the money to spend more on defence.
If Milburn’s recommendations were approved, it could take almost a decade for the British state to see monetary savings.
The new system “will need significant investment” and would involve “rebuilding the system from scratch”, Milburn said.
He added that currently “you’ve got hundreds of thousands of young people stuck in a benefit system that is trapping them in poverty, giving them no prospect of prosperity or a job”.
His new proposed system would involve an element of carrot and stick, wherein young people could lose some of their benefits if they did not engage with the extra work support options.
“A deal isn’t a deal unless there are potential consequences,” Milburn said. “Entitlements and responsibilities are two sides of the same coin.”
Housing Minister Matthew Pennycook told Breakfast he could not confirm what was in report, but he backed the “principle” of providing more intensive employment support to those out of work.
“The prime minister has been very clear the status quo isn’t working – we need a new settlement for young people… tinkering will not do it,” he added.
A government spokesperson said: “We will always ensure there is a safety net for the most vulnerable and those who are unable to work.”