Ministers divided by proposal to withhold benefit

A ministerial battle is being waged over a proposal to withdraw benefits from long-term unemployed people unless they join a work scheme.

Treasury ministers argue that the cost would be prohibitive, others contend that the Government has to be seen to be taking action. Some are worried about the political impact.

Aware that unemployment is likely to hit the psychologically important three million mark in February or March, the Prime Minister has set up a Cabinet working group to look at a range of proposals. Their concern will be enhanced this week when the unemployment figures are likely to show an increase on last month's 2,908,900.

While the Treasury is unhappy about the cost of the scheme - estimated expenditure could be as much as pounds 600m; from the other end of the political spectrum many in the labour movement will denounce it as similar to the 'workfare' system in the United States in which the jobless are forced to work for their benefits.

Under a programme drawn up by the charity Full Employment UK, people who had been out of work for 18 months would be offered a place on a work programme. They would be expected to turn up three days a week for nine months.

Individuals would receive an extra pounds 10 a week in travel expenses and help with childcare costs. Families would also receive a new weekly allowance of pounds 2.50 for each child. An estimated 390,000 people would be expected to take part in the first year.

If the unemployed person refuses a place, his or her individual income support would be taken away, although other family benefits would remain. Most would lose about pounds 40 a week.

Peter Ashby, principal consultant with the charity, points out that the 'Jobchart' scheme would need to be backed by legislation.

Although Mr Ashby believes attitudes to such programmes are softening among unions, he argues that there would also have to be a legal obligation for publicly- funded employers to offer places.

Opposition to other schemes from the white-collar union Nalgo has meant that local authorities have been reluctant to offer places.

Mr Ashby rejected the term 'workfare' which he says would be a 'barrier to rational debate'.

However, the scheme would mean that both the Government and the long-term unemployed would enter into new obligations. Mr Ashby says that Jobchart would be seen as fair by the unemployed provided they were given a real choice and the duties of both sides were spelt out clearly.

The charity's report, Long-term Unemployment: Time for a New Contract, said the programme would mean that 'never again in the UK will hundreds of thousands of adults be trapped into a state of passive long-term unemployment'.

One of the proposals' attractions to the Government is that Jobchart participants would not be included as part of the monthly unemployment count. The paper has been sent to both Gillian Shephard, Secretary of State for Employment, and the Prime Minister.