State-paid jobs for long-term out of work

Alistair Darling announces £40m scheme aimed at giving 5,000 hard-core unemployed 'proper jobs' and a boost to their confidence

The hard core unemployed will be given Government-paid jobs as part of a £40m scheme announced last night by Alistair Darling, the Work and Pensions Secretary.

Five thousand people on Jobseekers' Allowance will have a year's work with local employers paid at the minimum wage and with full rights over holidays and sick pay.

Lone parents, men over 50 and people on sickness and disability benefits will be among groups targeted by the new StepUP programme. It will be specifically aimed at those jobless people – including those with problems with literacy or self-confidence – who have been struggling to get back into the labour market.

Department for Work and Pensions officials said it was the first time that the Government had met the full cost of providing jobs for the unemployed. The scheme will cost the Treasury about £8,500 for each person taken off the dole.

A DWP spokeswoman said the former claimants would be given "proper jobs" in such areas as haulage or construction, or clerical work. Companies would not be allowed to remove staff to make way for the Government-funded employees.

People chosen for the scheme will be offered a choice of posts, but lose benefits if they turn them all down.

Mr Darling said: "There are still groups suffering high levels of inactivity and concentrations of high unemployment in some of our large cities and areas once dominated by heavy industry."

The scheme will be launched in April in Sheffield, Cardiff, Oldham, Sunderland, Lambeth in London and East Ayrshire. It will be extended to 14 other areas.

Mr Darling also announced a £6m expansion of the rapid response service that aims to help workers made redundant.

Making a Commons statement on the annual uprating of benefits, he said: "We're determined to ensure employment opportunity for all – including those who have missed out in the past – and these measures will help us do that. We're doing more to help people into work, and to help those who can't."

He also told MPs that pensioners would be an average of £400 a year better off because of Government handouts and that more than five million pensioners stood to gain under the new Pension Credit.

He said the credit would bring single pensioners' entitlement up to a guaranteed minimum of £100 a week in 2003, while couples would receive at least £154. The figures would rise in line with earnings for the rest of the Parliament.

Mr Darling said it would also provide "an additional top-up to reward pensioners age 65 or over who have saved for their retirement".

He said maternity allowance and statutory maternity pay would rise from £62.20 to £75 next April and increase to £100 a week in 2003, helping around 340,000 families a year. The "Sure Start" maternity grant will rise from £300 to £500 next year.

The disabled child premium will go up by £5 a week to £35.50 and top £40 in 2003.

Mr Darling also announced that the earnings of disabled people and their partners would no longer be taken into account in the independent living fund, worth an average of £130 a week.

David Willetts, the shadow Work and Pensions Secretary, said 60 per cent of pensioners would be put in a position where their income was determined by the means testing of the pensions guarantee.

He said the "tinkering" of the benefits structures and rates baffled hard-working families.

Steve Webb, for Liberal Democrats, said the Pension Credit was "far more complicated a thing to claim than the basic state pension".