William Beveridge reads today like an Old Testament prophet: full of moral declamation and visionary objective. His 1942 report set goals to attack the five giant evils: Want, Disease, Ignorance, Squalor and Idleness. The ecstatic reception of his report (or at least the abridged version) was the response of a society in the midst of an existential war, still traumatised by the scourge of unemployment in the previous decade.

As we face up to another difficult economic era, with unemployment forecast to rise steeply, many of the issues that Beveridge tackled still remain, regrettably, unresolved. Today's Welfare Reform White Paper represents a significant change in the approach to the welfare state, aimed at calling a halt to the build-up of a dependency culture and in tackling our pockets of obstinate poverty.

The central proposition in the White Paper is that virtually everyone will be expected to set entering the world of work as their goal, including many of the people who have languished on incapacity benefit for years. Substantial support for individuals in achieving this objective is being developed, and should be ready in time for the next economic upswing.

Beveridge would have approved. “Most men who have once gained the habit of work would rather work... than be idle... But getting work... may involve a change of habits, doing something that is unfamiliar or leaving one's friends or making a painful effort of some kind,” he wrote.

His solution was that those unemployed for a certain period “should be required, as a condition of continued benefit to attend a work or training centre, such attendance being designed as a means of preventing habituation to idleness and as a means of improving capacity for earnings”. It is here that the roots of what are now labelled “active labour market policies” originate. And the essential history of welfare to work in this country reflects how the pendulum swung away to a passive approach in the late 1960s and back, over the past two decades, to an increasingly active policy.

There was an assumption that a Keynesian macroeconomic policy would bring about full employment by itself. Jobcentres were split from benefit offices in 1974, while eight years later, with unemployment rising towards three million, the requirement to look for work while on benefit was removed entirely.

Those two measures have been reversed. However, we are still struggling with a third of the repercussions from this era: the soaring number of people on disability benefits - with about 2.6 million still on incapacity benefit (up from 740,000 in 1983). In origin this phenomenon no doubt reflected government massaging of the unemployment figures.

However, the enlargement of the category has proved incredibly difficult to undo. And in terms of the location of the economically inactive, this group are far and away the most significant. Indeed, until the past few months, the roughly 900,000 of standard unemployment claimants on jobseeker's allowance were little more than the frictional number necessary for the economy to function.

Like Hotel California in the haunting Eagles song, incapacity benefit is a trap: “You can check out any time you like, But you can never leave.” While it has become tougher in recent years, in earlier decades it was easy enough to enter (“Plenty of room in the Hotel California”). In practice many would like to find a job - and are explicit in survey after survey in confirming this ambition - but are inhibited by the risk of failure and of undermining their entitlement to their benefit. Steps to mitigate this risk have worked only at the margin.

Government, the medical profession and lobby groups used to think they were doing such people a favour - freeing them from the burdensome necessity of earning their own living. Research in recent years has unequivocally established the exact opposite: that work is good for people with disabilities and not working is really bad for them.

The disability lobbies have taken the principle thoroughly on board. At a conference in early September organised by the disability network Radar, the audience overwhelmingly accepted that, with adequate and appropriate protections, “the majority of disabled people can and should work”.

Some of our greatest national heroes suffered from disabilities; from Nelson with his lost eye and arm, to Churchill with his “Black Dog” depression, to the physicist Stephen Hawking, bestselling author regardless of immobilisation. Despite the extreme nature of each of these examples, their success points to the importance of skills and capabilities.

Indeed, the underlying problem for our inactive people with disabilities is likely to lie more with their lack of skills than their disability alone. This reflects one of the main relative weaknesses of the UK economy - the large numbers without basic qualifications (at 35 per cent, twice the level in Canada, the US and Germany).

It is reasonably straightforward to spring the trap in the welfare system and today's White Paper does just that. It proposes to move everyone - existing claimants joining new ones - from incapacity benefit on to the new employment and support allowance. The bulk will be categorised in the former category “employment” and will therefore be able to start the journey into the world of work without jeopardising their benefit status.

Single parents, similarly, will be able to move towards the labour market as the benefit system is simplified with the removal of income support.

It is one thing to streamline the system. It is quite another to provide the much-enhanced level of support - the motivation and new skills - that will be needed by many to succeed in the workplace.

The heart of the solution here is to move away from general programmes towards an approach based on personal advice for each individual, which has proven effective in the extensive piloting of recent years.

A series of five trials across the country will test a funding mechanism in which private and third-sector consortiums invest in bringing people back into the world of work and are paid out of subsequent savings in welfare payments. Such a payment by results approach is likely to focus the providers on successful outcomes rather than the provision of services that can be inappropriate for many clients.

As we face the first recession in the adult lives of many working-age citizens, it is vital that we close the benefit trap and develop effective ways of restoring people into economic activity. Otherwise we risk condemning yet another generation to unfulfilled and dependent lives. That is the importance of today's White Paper.

David Freud is the government adviser on welfare reform and the author of Reducing Dependency, Increasing Opportunity: Options for the Future of Welfare to Work, an independent report to the Department for Work and Pensions, published in March 2007

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