Labour peer suggests cabinet must accept budget cuts to pay for welfare reform

Lord David Blunkett says government departments may need to accept budget cuts to fund a welfare overhaul aimed at helping young people who are not in education, employment or training. His comments come ahead of Alan Milburn’s review, as the number of people in this group has topped one million and the proposals have prompted concern about future benefit support.

A Times report says Milburn’s proposals would replace the health element of Universal Credit and Personal Independence Payment for young people with a youth allowance at the standard Universal Credit rate. Blunkett cited a windfall levy on utility company profits as a key source of funding for his earlier welfare-to-work programme, but said no equivalent funding is currently identified. Milburn estimates the crisis costs the UK about £125 billion a year and has warned the number could reach 1.25 million by 2031; ministers have not ruled out changes affecting existing claimants.