Local Fund to Replace Pip for Most Young Disabled People Under Milburn Plans in UK

A review by former health secretary Alan Milburn will recommend that young people with disabilities in the UK lose their personal independence payments (Pip) and instead apply to a local fund for short-term expenses and equipment.

Under-25s will be barred from claiming Pip and the health element of universal credit and will instead get a new youth allowance paid at the standard rate of universal credit.

Milburn said the current system of benefits must be entirely replaced for young people. In a statement to the Guardian announcing the plans, he said the old approach needs to be torn up and started again for under-25s, and that a tweak to the benefits system will not do. He said a new system must be built around a young person, with schools, the NHS and employers working together to make sure everyone has the chance to earn or learn.

The long-awaited report on youth unemployment will promise almost half a million job and education opportunities within a decade, but will also advise sweeping changes to the benefits system for under-25s.

There will be a local fund for young people with disabilities to apply to for money to pay for equipment or for help with short-term expenses such as travel to attend a training course or job interview. The fund will be managed by local advisers and the intention is that funds can be transferred quickly when needs arise.

For most young people apart from those with the most severe needs, the fund would replace long-term support such as Pip — a move that has been criticised by some charities and Labour MPs.

Milburn said the trajectory towards 1.25 million young people out of employment, education or training would not be stopped by crude benefit cuts, and a life on benefits had to be replaced with relentless support towards work. He called it a moral crisis and said a lost generation is a choice, and a different choice has to be made.

There will be a higher rate of youth allowance for young people living independently, including care leavers. There will also be an additional cost allowance for those who are most disabled, which young people can receive whether they are in work or not, and a new higher insurance provision for those with severe disabilities who will never be able to work.

Milburn, who will deliver his report next Tuesday, told the Guardian that the support outlined in his report would create 440,000 employment and education opportunities by 2036 and raise the net incomes of young people by more than 2 billion pounds. He said the main finding was not a lack of ambition from young people but a lack of opportunities, and that he had not met a single young person who wanted to be out of education, employment or training.

The Joseph Rowntree Foundation (JRF), an anti-poverty charity, said the changes risked taking away vital funds that young people used to keep themselves in work. Iain Porter, the charity's senior policy adviser, said cutting someone's income when they are already struggling to afford food or the bus to college makes it harder to stay in education or find work. The JRF said the proposals could significantly weaken the safety net for hundreds of thousands of young people with a disability or health condition, leaving many on universal credit on a basic rate of around just 80 pounds a week.

No 10 declined on Thursday to rule out the changes affecting existing claimants. A Downing Street spokesperson said the country faces a choice between investing earlier in young people's success or continuing to pay the cost of failure, and cannot afford to do both.

Labour MP Bell Ribeiro-Addy, who was part of the welfare rebellion last summer, told Radio 4's Today programme she felt uneasy about voting for cuts to disability benefits. But Treasury select committee chair Meg Hillier told the BBC she was open to the changes, saying Milburn has done some very good work and she is giving him a fair wind.