Andy Burnham urged to spend extra £6bn on getting Brits back into work in major welfare shake-up

The Government currently spends £3.7billion annually – 0.1 per cent of GDP – helping people join the workforce, with Britain’s current youth unemployment rate standing at 15.6 per cent.

Meanwhile, Germany, which has a youth unemployment rate of just 7.5 per cent, spends 0.3 per cent of GDP on job support, including schemes such as wage subsidies for workers under 29.

Denmark, which spends 0.4 per cent of GDP on employment support, offers “flexi jobs” for its disabled youth, enabling them to work state-subsidised jobs with fewer working hours.

Boosting spending on job support to 0.3 per cent of GDP would cost the Treasury over £6billion per year, which would push the Government to raise taxes or slash spending elsewhere.

Mr Milburn’s long-awaited review will argue that Britain should roll out a major expansion of workplace schemes under an “invest to save” model.

The former Labour minister will suggest the best way to address Britain’s growing youth worklessness crisis and lower welfare spending is to invest significantly in employment support measures.

The Prime Minister faces growing pressure to bring Britain’s ballooning benefits bill down after John Healey’s first Budget.

Britain’s fiscal watchdog, the Office for Budget Responsibility, has estimated that annual welfare spending will rise to £431billion in 2032, up from £353billion this year.

Mr Burnham admitted on Friday that welfare spending will still rise despite his planned employment reforms.

He told Times Radio his plans would need “investment up front”, but insisted that “in time, the savings will come”.

The Prime Minister said Mr Milburn’s recommendations would not directly cause an increase in welfare spending, vowing that any rise in Government spending will be “investment in the support that teenagers need and the guarantees that I want to put in place for them”.

Once the youth unemployment review is published later this month, ministers will react with fresh policy and legislation to change benefit entitlements in the next King’s Speech.

Rather than raise taxes, Mr Burnham will use next year’s Spending Review to “re-prioritise” current Government budgets to fund Mr Milburn’s recommended measures.

The health and education budgets have been initially targeted for spending cuts as both departments will play a role in delivering the proposed reforms, The Telegraph reports.

No10 is hoping to avoid another backbench rebellion over welfare reforms that forced Sir Keir Starmer into a humiliating U-turn on plans to slash £5billion from the benefits bill by the end of the decade.

The Treasury has warned that any fresh proposals must be funded through existing departmental budgets to reassure bond markets and prevent a rise in Government borrowing costs.

A spokesman for the Department for Work and Pensions said: “The Milburn and Timms Reviews, due to report in November, will lay the foundation for sustainable reform, and we will not pre-empt their findings.

“We are already changing the system through the Youth Guarantee, which includes £2.5billion 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.”

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