Page last updated at 19:36 GMT, Wednesday, 25 March 2009

Tories look at welfare loan idea

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Radical reforms are even more necessary during the recession, Mrs May said.

The Conservatives could guarantee loans to private and voluntary groups to help them fund welfare-to-work programmes.

Theresa May said such support could encourage groups to get involved and would be more than recouped by a long-term decline in the benefits bill.

The shadow work and pensions secretary said the recession meant "radical" welfare reform was even more essential.

Labour is proposing its own shake-up of the system to require most people to look for work in return for benefits.

'Too timid'

The Conservatives are backing the government's welfare reform bill - which has faced opposition from some Labour MPs - although Mrs May said many of the measures were too "timid".

In her first major speech since taking up the post in January, Mrs May said a future Tory administration would be "100% committed" to welfare reform.

It doesn't take long for someone who has become unemployed to fall out of the habit of work
Theresa May, shadow work and pension secretary

Her party were "natural supporters" of the welfare state but, under Labour, the system had become unworkable and too many people had become "stranded" on benefits with damaging social and economic consequences.

She said the Conservatives would not "attack" single mothers and other long-term benefit claimants but nor would the party "dole out money left, right and centre".

Unveiling her reform plans, she said the involvement of private and voluntary groups in helping people off benefits and into work - for which they would be paid by results - was a bold and necessary move.

She acknowledged that potential providers may face funding constraints but said the problems were not "insurmountable" and confirmed the Tories would look at guaranteeing loans to participants to stimulate investment.

Savings claim

Financial incentives for groups working with the unemployed were a vital component of a "fair and flexible" welfare system, she said:

"I can confirm that we are 100% committed to delivering our radical welfare reform programme.

"So to help build capacity in the system and to sustain longer-term involvement with clients we are considering proposals for the government to underwrite the initial investment needed.

"The long-term savings to the public purse in benefit payments will be more than worth an initial underwriting."

Until the Tories can outline how they would fund this expensive pledge, we will assume that it is not a commitment
Work and Pensions Secretary James Purnell

Without radical changes, thousands of people now losing their jobs risked joining the ranks of the long-term unemployed with devastating consequences for their families and the economy, she said.

Unemployment has risen above the two million mark for the first time since 1997.

"It doesn't take long for someone who has become unemployed to fall out of the habit of work, to get into a downward spiral which often results in depression, illness and ultimately not being able to work when the upturn does come," Mrs May added.

"We owe it to those individuals to make sure they do not get left behind."

Work and Pensions Secretary James Purnell said: "Until the Tories can outline how they would deliver the £3bn in welfare savings necessary to fund this expensive pledge, we will assume that it is not a commitment."

Sanctions threat

Labour have said the Conservatives would leave the newly unemployed without adequate support, repeating the mistakes of past recessions.

Its own proposals are designed to get a million people off incapacity benefit by 2015 and to reduce the £20bn annual cost of welfare.

Most of those on incapacity benefit and income support will be expected to look for work while those on jobseekers allowance for two years will be required to take part in some full-time activity, to boost their skills, or risking lose their benefits.

Claimants will also be expected to take up "reasonable" offers of work or face sanctions.

The BBC's political correspondent Gary O'Donoghue said Mrs May also made it clear that savings from lower welfare bills would be used to reduce tax for married couples - tackling what is known as the "couples penalty" - but that this would happen "over time".

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