Rachel Reeves, the shadow work and pensions secretary, has denied that Labour is planning to strip young unemployed people of unemployment benefits.

Reeves intervened after the Daily Telegraph reported that Labour was planning to scrap benefits for the under 25s. The shadow work and pensions secretary tweeted: "This is not and will not be our policy."

The Daily Telegraph reported that Reeves was interested in proposals in a report by the Institute for Public Policy Research that young people under the age of 25 should be denied unemployment benefits unless they are involved in "purposeful" training or embarking on an "intensive" search for a job.

Labour sources said the party would examine the report, which says that more than a million young people not in education, employment or training (Neets), could be rescued by its plans. Sources pointed out that the party already has a tough compulsory jobs guarantee – a job for all young people out of work for 12 months and adults out of work for two years or more.

They would lose their benefits if they refused the job under the guarantee that would be funded through a tax on bankers' bonuses.

But Reeves insisted she would not adopt the IPPR proposal. She tweeted: "It is totally not my position!"

The report calls for:

• A new youth allowance, worth £56.80 a week, that would replace existing out-of-work benefits for 18–24-year-olds. It would be "conditional on participation in purposeful training or intensive job search". The allowance would be means-tested, based on parental income, for those under the age of 22 in the same way as the higher education maintenance grant.

• A new youth guarantee to offer young people access to further education or vocational training plus intensive support to find work. Anyone not learning or earning after six months would be offered paid work experience and traineeships. The youth allowance would be withdrawn if these were refused.

• Large firms to offer apprenticeships to young people, according to the size of their business, or pay a youth levy towards the costs of training young people.

The new shadow works and pensions secretary is keen to outflank the Tories on welfare amid growing fears in the government that Iain Duncan Smith's flagship universal credit reform is failing. Sir Jeremy Heywood, the cabinet secretary, will soon publish a report into the school leavers, more than half the total, who do not go on to higher education.

Alan Milburn, the former Labour health secretary, focused on the challenge of the Neet generation in his recent speech on social mobility. Milburn, who is now the coalition's social mobility tsar, has not had a chance to discuss his ideas with the prime minister according to an authoritative account in the Daily Telegraph.

Graeme Cooke, the IPPR research director, said the proposal for a new youth allowance was designed to help reduce the numbers of young Neets. They account for 14% of 15-24-year-olds in the UK compared with 4% in the Netherlands and 7% in Denmark.

Cooke said: "Young people who fail to attain a good education or make early connections to the labour market face a far greater risk of future periods of unemployment and low earnings. The number of Neets in the UK is a scar on our nation and represents our generation's failure in its responsibility to the next. Our goal should be to effectively abolish Neets, as they have successfully done in the Netherlands and Denmark.

"In contrast to previous initiatives and attempts at reform in this area – Connexions, the new deals, the Work Programme and the youth contract – this strategy aims to solve the fundamental failures of the school-to-work transition system, rather than making up for them.

"It creates the potential to drive improvements in further education and vocational training provision, alongside increasing employer engagement in the educational system.

"It includes those on inactive benefits and is built around practical activities, not merely advice and guidance. And it seeks to restructure the opportunities and obligations facing young people through deep institutional reform."

The proposals by the IPPR follow the prime minister's pledge to deny jobseeker's allowance and housing benefit to people under the age of 25 in one of the greatest changes to the welfare system. If the Tories win the next election a Conservative government would strip school leavers of the right to sign on to the dole and would tell those under the age of 25 they need to be "earning or learning".

The prime minister told the Tory conference in Manchester: "In place of the broken education system, one that gives every child the chance to rise up and succeed. Our economy, our society, welfare, schools all reformed, all rebuilt – with one aim, one mission in mind: to make this country, at long last and for the first time ever, a land of opportunity for all."