Bounty for private firms to find benefit claimants a job

Private companies will be paid a bonus for every person they get off benefit and into work as part of what is billed as the biggest overhaul of the welfare system in a generation.

The Government will promise to scrap two major benefits and introduce sweeping changes to how the social security system is financed.

But its hopes of an eye-catching launch on Monday were dashed when the full document was leaked to the Conservatives.

In a departure from normal Westminster politics, they welcomed the proposals, saying that many of them were their own ideas.

James Purnell, the Work and Pensions Secretary, will propose a raft of reforms that he claims will pay for themselves.

They will involve major changes in the approach to welfare, with what he believes will be an end to the 'something for nothing' culture.

A 'Work for Dole' scheme will require long-term claimants to sweep parks or clean graffiti in exchange for their weekly benefit.

Private companies and voluntary organisations will be given cash incentives to find work for those on benefit.

Incapacity Benefit and Income Support, two of the costliest benefits, will be junked and replaced with a new Employment and Support Allowance which will be used to weed out claimants who are fit to work.

Some 2.64million existing Incapacity Benefit claimants will be tested to see if they can work in an attempt to shift them off benefit and into work.

IB will be abolished by 2013 and be replaced by ESA. Those with severe disabilities will receive enhanced benefits and allowed to continue to claim.

But those able to work will be required to go to private firms which will be invited to find them employment.

Government sources say asking specialised companies and voluntary groups to take over the task of finding jobs will create a 'huge market'.

Companies will be paid a fee for each claimant they get into work, with the cash coming from savings from the welfare budget.

Winning Treasury agreement to have the payments funded out of savings is one of the major innovations.

Mr Purnell secured approval for his package by pledging that it would not cost extra cash from the Exchequer.

The reforms have been in part inspired by 'work for dole' schemes and private sector solutions introduced in the U.S.

The prospect of forcing more than two million who claim to have disabilities back to work is bound to enrage some Labour MPs who have fought pitched battles against welfare reform.

The package will trigger a wave of opposition on the Labour back benches which could force Mr Brown to rely on Tory votes to get it through the Commons.

It could also damage Labour's already-battered appeal at the impending by-election in Glasgow East, which boasts some of the highest rates of joblessness in Britain.

Under the proposals, those on unemployment for at least a year will have to do a month of community service in exchange for their benefit. After two years they will have to work full time.

The Government hopes that the prospect of working a 35-hour week to earn their £60.50 Job Seekers' Allowance payment - the equivalent of £1.70 an hour, less than a third of the minimum wage - will encourage them to find a proper job.