Ministers are considering topping up low-income household benefits to close a loophole that penalises families when a young person starts an apprenticeship. Work and pensions secretary Pat McFadden has asked officials to scope out a targeted bursary for a “small number” of universal credit-claiming households who can end up worse off under the current benefits rules. It follows warnings that some disadvantaged families can lose between £17 and £339 a week in child benefit, the universal credit child element and work allowance if a 16-year-old household member becomes an apprentice instead of remaining in full-time education. An April report by the Social Security Advisory Committee (SSAC) found that the financial impact is discouraging some parents from supporting their children to take up apprenticeships. When questioned on the SSAC report in the House of Commons earlier this year, McFadden rejected MPs’ requests for the government to step in because “a young person taking up an apprenticeship will be earning money that contributes to the family income”. Speaking at a Good Growth Foundation event today, McFadden said the government was now exploring targeted bursaries for the families who are financially worse off after a young person starts an apprenticeship. He said: “I want to make sure that no young person is disincentivised for taking up an apprenticeship. When you start one at a young age, the wages you earn almost always mean that your family is better off, but for a small number of universal credit, they can be financially worse off, even after apprenticeship wages are taken into account. “So, I want to look at what we can do to support that group of young people, for example, through a targeted bursary.” McFadden added that he had asked officials to examine what such a scheme would cost. “What I’m trying to do, I can’t completely promise this today, but I’ve asked the department to look up and work up is: what would it cost us to give in those defined and targeted circumstances a bursary to help make that more of a positive decision to get into work? “What I’m trying to do on these cliff edges and disincentives is to go through them and try to make them pay at every stage of the process.” The work and pensions secretary described what has become known as the “apprenticeship penalty” as one of the welfare system’s “quirks and cliff edges” that can influence family decision-making. However, he argued that in most cases families are still financially better off when a young person becomes an apprentice because apprenticeships are paid. According to the independent advisory body, households that include disabled family members are among those hit hardest by the current rules. The SSAC found some young people are choosing to remain in full-time education so they continue to be treated as dependants and their families retain access to benefits. Researchers also heard multiple examples of single-parent households discouraging children from starting apprenticeships because of concerns about losing child maintenance payments. In one case, a parent asked their child to quit their apprenticeship or leave the family home. McFadden said universal credit should be a bridge into work rather than “a trap that people cannot escape”. It follows the recent publication of former Labour health secretary Alan Milburn’s interim report from his review of Britain’s youth unemployment and inactivity crisis. Milburn estimates the annual economic cost of around one million young people being not in education, employment or training (NEET) to be about £125 billion. A full report that includes recommendations is expected to be published later this year. In the last year, the government has announced incentives to get more young NEET people into work, including an employer bonus of £3,000 for hiring a young person who has been on universal credit for six months or more.