Andy Burnham will be urged to spend an additional £6billion on getting Britons back into the workplace as part of a major shake-up to the welfare system.
In his youth unemployment report, due to be published within weeks, Alan Milburn will advise the Prime Minister to spend more on job support measures, mirroring approaches in other European countries such as Denmark and Germany.
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.”
Introduction
The British government is facing growing pressure to reform its welfare system as the number of people claiming benefits and remaining outside the workforce continues to rise. Prime Minister Andy Burnham has been urged to consider spending an additional £6 billion on employment support as part of a major shake-up designed to help more people, particularly young adults, return to work.
The proposal is associated with Alan Milburn, a former Labour government minister who has been examining the causes of youth unemployment and economic inactivity in Britain. His recommendations are expected to encourage greater investment in job training, mental health services, workplace opportunities and financial assistance for people struggling to enter employment.
The proposal represents a different approach to traditional welfare reform. Rather than relying primarily on reducing benefit payments, it focuses on investing public money to help people become financially independent. However, the potential cost has raised questions about government spending, taxation and whether the proposed reforms can deliver long-term savings.
Britain’s growing youth unemployment crisis
One of the biggest challenges facing the British economy is the increasing number of young people who are not in education, employment or training. These individuals are commonly described as NEETs.
Recent figures cited in reports surrounding the Milburn review suggest that the youth unemployment rate in Britain stands at approximately 15.6 per cent.
This situation has become a serious concern for policymakers because young people who struggle to enter the workforce may experience long-term financial difficulties.
Unemployment at an early age can affect confidence, professional development and future earning potential. It can also make it more difficult for individuals to gain the qualifications and experience required by employers.
Mental health problems, disability, inadequate training opportunities and the rising cost of living are among the factors that can prevent young people from finding suitable employment.
The number of young people outside education, employment and training has approached one million, highlighting the scale of the challenge.
For the government, the consequences extend beyond individual unemployment. A large inactive population can reduce economic productivity, increase public spending and place additional pressure on the welfare system.
Alan Milburn’s £6 billion employment investment proposal
Alan Milburn is expected to recommend a significant expansion of employment support programmes as part of his review of youth unemployment.
His approach draws inspiration from countries such as Germany and Denmark, which spend a greater proportion of their national income helping people enter and remain in employment.
According to figures reported in the British press, the UK currently spends approximately 0.1 per cent of GDP, equivalent to around £3.7 billion annually, on helping people into work.
Germany spends approximately 0.3 per cent of GDP on employment support, while Denmark spends around 0.4 per cent.
If Britain increased its spending to match Germany’s proportion, the additional annual investment could exceed £6 billion, according to calculations reported by The Telegraph.
However, this figure should be understood carefully. It represents a comparison based on increasing overall employment-support spending, rather than a confirmed final price tag for Milburn’s recommendations.
The underlying proposal is based on the belief that investing in people before their circumstances deteriorate could reduce future welfare dependency and strengthen the economy.
Learning from Germany and Denmark
One of the central arguments behind the proposed reforms is that Britain could learn from successful employment policies in other European countries.
Germany has developed a system combining vocational education, apprenticeships and workplace training.
Young people can gain practical experience while studying for recognised qualifications. This allows them to develop skills that employers actually need.
The German approach also includes wage subsidies for younger workers, helping businesses recruit people who might otherwise struggle to secure their first jobs.
Denmark offers another interesting example through its flexible employment arrangements.
Its flexi-job system provides opportunities for people with reduced working capacity, including some individuals with disabilities, to undertake employment with appropriate adjustments and public support.
These arrangements recognise that not everyone can work full-time.
By providing flexible working conditions, governments can help more people participate in the economy without ignoring their health or personal circumstances.
Milburn believes Britain could benefit from adopting similar principles.
Andy Burnham’s response to the proposed reforms
Prime Minister Andy Burnham has indicated that he supports greater investment in helping young people find employment.
He has argued that reducing welfare spending cannot be achieved simply by cutting benefits without considering the consequences for individuals and public services.
Speaking to Times Radio on 6 November 2026, Burnham acknowledged that the reforms would require significant upfront investment.
He explained that savings could emerge over time as more people entered employment, earned wages and paid taxes.
His approach follows an investment-first model.
Rather than immediately reducing benefit payments, the government would spend more on education, training, career guidance and mental health support.
Burnham has also proposed giving young people a guarantee of a 45-day work placement between the ages of 16 and 18.
He believes practical experience could help teenagers understand the workplace, develop professional confidence and identify suitable career opportunities.
The Prime Minister has emphasised that the objective is not simply to reduce the number of people receiving benefits but to help individuals move towards more secure and productive lives.
A major transformation of the welfare system
The proposed reforms could represent one of the most significant changes to Britain’s welfare system in recent years.
The current system provides financial assistance to people who are unemployed, disabled or experiencing health-related difficulties.
However, critics argue that existing arrangements do not always provide sufficient support to help people overcome the barriers preventing them from working.
The Milburn review is expected to examine how employment assistance, disability support and training opportunities could be reorganised.
Proposals reported in November include changes to support for people aged 18 to 24, with greater emphasis on individual employment assistance and mental health services.
One suggested approach involves replacing some existing benefit arrangements for younger claimants with a more integrated youth allowance.
Under such proposals, young people would receive structured support to move into education, training or employment.
Those who are capable of working may be expected to participate in appropriate support programmes.
However, additional protection would be necessary for people with serious disabilities or long-term health conditions who cannot reasonably undertake employment.
The challenge for policymakers will be ensuring that welfare reform encourages participation without leaving vulnerable people without adequate financial support.
The financial burden on taxpayers
Although the proposed investment could offer long-term economic benefits, the immediate financial implications remain significant.
The government already faces considerable pressure to control public expenditure.
The Office for Budget Responsibility has projected that annual welfare spending could increase from approximately £353 billion to £431 billion by the 2031–32 financial year.
An additional employment-support programme costing several billion pounds annually would therefore require careful financial planning.
The government has indicated that it would prefer to fund new initiatives by reprioritising existing departmental budgets rather than immediately increasing taxes.
However, this could create difficult choices for other public services.
Health and education departments may face pressure because they would play important roles in delivering employment and training programmes.
There is also a question about whether the government can guarantee that the investment will produce the expected savings.
Previous employment initiatives have sometimes failed to deliver their original targets.
The Office for Budget Responsibility has warned that it applies strict standards before recognising projected employment benefits in its financial forecasts.
This means that ministers will need to demonstrate that new programmes are realistic, properly funded and capable of producing measurable results.
Political disagreements over welfare reform
The proposed reforms have also created political disagreements between Labour and the Conservative opposition.
Conservative politicians have repeatedly argued that Britain must reduce its welfare bill and ensure that public money is not spent unnecessarily.
The party has advocated substantial reductions in welfare spending and stricter eligibility rules for certain benefits.
Labour, by contrast, argues that cutting financial support without addressing the reasons people cannot work could create greater problems.
Burnham has warned that removing benefits without providing appropriate assistance could push vulnerable individuals into poverty, homelessness and greater dependence on emergency public services.
Both sides have presented their policies as attempts to make the welfare system more sustainable.
However, their approaches differ significantly.
The Conservatives emphasise reducing expenditure and strengthening eligibility requirements, while Labour places greater emphasis on employment support and investment.
The debate reflects a wider disagreement about the responsibilities of government towards unemployed people and those experiencing long-term health problems.
The importance of mental health and workplace opportunities
An important aspect of the proposed reforms is the relationship between mental health and employment.
Mental health difficulties have become a significant reason why many young people struggle to enter or remain in the workforce.
Anxiety, depression and other health conditions can affect concentration, confidence and the ability to manage workplace responsibilities.
Without appropriate support, individuals may become increasingly disconnected from education and employment.
The government therefore needs to consider cooperation between employers, schools, universities, healthcare providers and employment services.
Workplace adjustments can also make a considerable difference.
Flexible working hours, appropriate training and supportive management can help people with disabilities or health conditions remain economically active.
Employers should be encouraged to recognise individual abilities rather than automatically excluding applicants who have experienced health difficulties.
The objective should be to create a labour market in which more people have a realistic opportunity to participate.
What the reforms could mean for Britain’s future
If implemented successfully, the proposed reforms could have significant consequences for the British economy.
More young people entering employment would increase the number of workers contributing to national productivity and taxation.
Businesses could benefit from a larger pool of trained employees, while individuals would gain opportunities to develop skills and achieve greater financial independence.
In the longer term, successful employment programmes could reduce the number of people relying on welfare payments.
However, these benefits are not guaranteed.
The government must ensure that training programmes match actual labour market demand and that employers have sufficient incentives