Ministers study 'carrot and stick' plan for jobless: Some may be allowed to earn more without losing benefit - Single men aged 18-25 face tougher rules

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MINISTERS are considering a 'carrot and stick' approach to the unemployed which would introduce more penalties for people who refuse to join government schemes and allow others to become 'more active' without losing their benefit.

The ministerial debate is taking place in the week before official unemployment figures are likely to show that 3 million people are out of work.

A Cabinet group led by Lord Wakeham, Leader of the House of Lords, has been investigating the possibility of allowing unemployed people to earn more money without having their benefits deducted. Most of the unemployed cannot work more than eight hours a week or earn more than pounds 2 a day without incurring a pro rata benefits penalty.

The Government is further considering the abolition of the rule which dictates that no unemployed person can undertake educational courses which take up more than 21 hours a week.

Also under review is the regulation which means that no one can be committed to a voluntary or charitable project if it stops that person from taking a job within 24 hours. All these rules were introduced to ensure that those claiming unemployment benefit were 'actively seeking work'.

The 'stick' element of the strategy would be the withdrawal of benefits from certain categories of the unemployed. Ministers are believed to be considering taking action against single people who are out of work and refuse all offers of government help such as Job Clubs, especially those who are 'educated'. The other target group would be 18 to 25-year-olds, particularly single males.

Negotiations between departments are still continuing and it is not clear whether the new measures will be ready for announcement next Thursday when the Government announces its latest unemployment figures.

Ministers have ruled out a wholesale 'workfare' scheme for the jobless in which hundreds of thousands would be are denied benefit unless they undertake work or training. Apart from the debate over the morality of such a programme, the Treasury regards it as being far too expensive.

Gillian Shephard, Secretary of State for Employment, is known to oppose universal workfare, but is under political pressure to introduce a 'tougher' flavour to her policies. In a speech to the Carlton Club last week, the Prime Minister held out the possibility of people working for their benefits.

At present, compulsion is restricted to 16 to 18-year-olds who lose all their state income unless they signify their readiness to undertake the Government's Youth Training scheme. After being unemployed for two years, adults must attend a week-long Restart course aimed at encouraging them back into the jobs market. If they do not attend, they lose 40 per cent of their benefit for seven days. In April, 'Jobplan Workshops' are being introduced for people out of work for a year on the same basis.

More than 160 jobs are to go at Royal Mail's sorting office in York, it was announced yesterday. The office, which employs 750 staff and deals with mail from North Yorkshire, is to install automatic letter sorting machines.