Labour tries to outflank Tories on welfare

The unemployed would be guaranteed the offer of a job but could lose their benefits for six months if they turned it down, under a tough new policy on welfare planned by Labour.

Ed Miliband is preparing to fight the next general election on the ambitious goal to create "full employment" even though the lengthening dole queues now stand at 2.7 million. Labour's "job guarantee" would be coupled with a "duty to work" – backed up with tougher penalties for the workshy than those introduced by the Coalition.

Jobless people could be offered a stark choice – six months in a job or six months without benefit. Tougher sanctions are bound to be opposed by some Labour MPs, who are reluctant to penalise the unemployed and would see the move as an attempt to outflank the Conservatives from the right.

Next week Mr Miliband will spell out his thinking on how a new model welfare state can be afforded in an age of austerity. He wants Labour's policy to be "tough but fair" and is ready to risk internal party criticism by attaching more conditions to benefit payments.

Labour's new offer will be revealed today by Liam Byrne, the shadow Work and Pensions Secretary, who is in charge of the party's wholesale policy review. He will propose a welfare system based on greater rights to a job and greater responsibilities for the jobless to take one.

In the first of a series of speeches to mark the anniversary of the Beveridge Report, which created the post-war welfare state, he will say: "Seventy years on from Beveridge, jobs and a duty to work must be the starting place for renewing the welfare state for the 21st century."

He will add: "Labour built a welfare state for working people by getting people back to work. That's the lesson for today. In 21st century Britain, working people need new things for their social insurance: reskilling; childcare; social care, social housing; help with saving for the long term. But the lesson of history is clear: a better welfare state demands a bigger workforce to pay for it... If we want new services from our social insurance we need to stop wasting talent and taxpayers' money on the bills of unemployment."

Speaking in Birmingham, Mr Byrne will reveal new figures showing that youth unemployment will cost £28bn over the next decade. In just 10 local authorities, the cost will total £5bn.

"Unemployment is not a one-off misfortune. It can scar you for life," he will say. "Areas that get hit, get hit time and time again. The places with high youth unemployment in 1985 were by and large the same areas hit badly in 1992. And they are the same areas hit hard today: Birmingham, Glasgow, Essex, Kent and Lancashire."

Labour is determined to fight back after being wrongfooted by the Welfare Reform Act passed by Parliament last week, which will bring in a £26,000 annual cap on benefit payments for a family. Labour supported a ceiling in principle but opposed the Coalition's one.

The Act says that the unemployed can lose their jobseeker's allowance for three months the first time they turn down an offer of work or training; six months for a second "offence" and three years for a third one.

Although it is not yet official party policy, Labour plans to double the penalty for a first "offence" to six months on the grounds that more opportunities would be available.

The proposal is made in a Smith Institute pamphlet published today by Stephen Timms, the party's employment spokesman. He says: "We need to instil a culture of work in every community in the country. Our view is that people in receipt of benefits have a responsibility to work hard to find a job, and to take the opportunity of work when it is offered."

The previous government brought in a "job guarantee" for the young unemployed but its "future jobs fund" fell victim to the Coalition's cuts. Labour's proposed guarantee could be phased in, starting with the young and long-term unemployed. Labour is convinced that its state-subsidised posts made the jobless more employable by keeping them in the routine of going to work. Many of those given temporary six-month posts landed permanent jobs with the same company because they were known to it.