“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 reform under his predecessor Sir Keir Starmer.
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 added.
He said 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, where 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.”
A government spokesperson said: “We will always ensure there is a safety net for the most vulnerable and those who are unable to work.
“But the prime minister has been clear that we need a wholesale change in the way we support young people to grow up in this country, where we invest in their success rather than paying for failure.”