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Long-term unemployed ‘could have benefits cut’

Unemployment benefits could be cut for people who fail to get work over long periods of time, under Conservative plans to change the welfare system.

People receiving payments could also be expected to learn to read, write and count, to make them more employable.

Prime Minister David Cameron said the system had gone "truly awry" and a "culture of entitlement" had to be addressed to boost the economy.

But Labour accused him of using the "wrong approach" to joblessness.

In a speech in Kent, Mr Cameron said he wanted to debate ideas for welfare reform before the Conservatives produced their manifesto for the next general election.

It had been widely reported that he would propose varying the rates at which benefits are paid according to the cost of living in different regions. This was dropped from the final text of his speech, but Downing Street insisted it was still among ideas to be discussed.

Proposals outlined by Mr Cameron included:

  • Out-of-work benefits linked to wages rather than inflation, if wages are lower
  • A cap on the amount people can earn and still live in a council house
  • Reduce the current £20,000 housing benefit limit
  • Stopping the out-of-work being better off by having children
  • Consider paying some benefits "in kind" rather than in cash
  • Expecting parents on income support to prepare for work while children have free nursery care
  • Getting the physically able to do full-time community work after a period out of work
  • Sickness benefit claimants should take steps to improve their health

Mr Cameron's speech is being seen as an attempt to reconnect with disgruntled Tory backbenchers who have accused him of allowing the Liberal Democrats to water down traditional party values.

The prime minister said he hoped the Lib Dems might agree with some of the ideas so they could even be brought in before the next election, which is due in 2015.

His deputy, the Lib Dem leader Nick Clegg, told the BBC: "David Cameron was speaking as a leader of the Conservative Party about his own personal ideas, about the kind of things he would like to see happen after 2015. He's entirely free to do so, as is any leader of any political party."

Regional rates of benefits – which would presumably see people in more affluent regions getting higher payments than in poorer regions – would be likely to prove controversial.

No 10 stressed, an hour before Mr Cameron's speech, that no decision had been taken but the PM wanted to look at whether "it makes sense if you set all benefits at the national level or whether there should be some local or regional element".

The prime minister defended benefits for the elderly and disabled but said the system of working-age benefits had gone "truly awry" and created a "welfare gap between those living long-term in the welfare system and those outside it".