Private firms 'save benefit cash'

The report suggests private firms could help get people off benefits

The government is right to use private firms to move people off benefits, according to a report by the think tank Policy Exchange.

It claims the move could save the taxpayer more than £1bn a year.

But it is warning that caution is needed, as contracting out welfare services could also cause problems.

Private firms and voluntary organisations are competing to be paid to find work for incapacity benefit claimants and the long-term unemployed.

According to BBC political correspondent Laura Kuennsberg, the report says "political courage and skill" will be required for the controversial scheme to be a success.

After looking at the experiences of other countries, the research says that companies might concentrate on finding work for those who would find it easiest to secure a job on their own.

It also says that claimants could actually lose out financially when they move off benefit and into work to begin with.

But, the report concludes, once an individual is established in a job, then their income should soon rise.