The prize is big. If the proportion of people in employment can be raised from the present 75 to 80 per cent there would be a drop of about one million in the number receiving benefits and public-expenditure savings of £10 billion a year. As Tony Blair put it last week: “I do not believe that we will be able to provide our pensions or public services in the future unless we raise significantly the proportion of people of working age in work.”

How to get people off benefit and into work is being examined by David Freud, a former financial journalist and investment banker, in a review for the Work and Pensions department, due around the end of the month.

Over the past ten years more than 2.5 million more people have jobs, thanks primarily to the strong economy but also, in part, to the various New Deal programmes to reduce youth and long-term unemployment. The percentage with jobs, the employment rate, has risen by 11 points for lone parents and by 9 points for the disabled. That has still left 4.9 million people of working age claiming out-of-work benefits: nearly half are on incapacity benefit. The potential has been paradoxically underlined by the economy’s ability in the past few years to create jobs for 500,000 to 600,000 people from Central and Eastern Europe. If them, why not Britons without jobs?

The Freud review is looking at four areas. First, and most important, is introducing greater conditionality. John Hutton, the Work and Pensions Secretary, has already asked why so little is asked of lone parents until their children turn 16, merely an annual or quarterly interview. One third of such lone parents move straight on to incapacity benefit when their youngest child turns 16. At present, more than half lone parents in Britain work, but the rate is 80 per cent in Sweden and Denmark. Part of the answer is tighter conditions, applying work tests when children are much younger. But much also depends on the planned nationwide extension of childcare facilities.

Secondly, as Mr Hutton will say in a speech in Australia tomorrow morning, more private and voluntary providers should be used to help in providing jobs. At present, the latter manage to place roughly 10 percentage points more people into jobs in employment zones than the public sector-led New Deal does elsewhere. These private and voluntary firms are paid in relation to outcomes, including whether people are still in work after 13 weeks. This could be extended. Mr Hutton is considering longer-term contracts to improve incentives and innovation.

Thirdly, such programmes are not cheap. There are big potential savings from the £50 billion annual budget for working-age benefits, but there are likely to be sizeable costs in getting people into work. The use of private-sector capital is being examined.

Fourthly, changes to the benefit system to create the right incentives. This covers the transition from benefits to tax credits, but is very much a matter for the Treasury and the Chancellor.

The implications are wideranging: for rights to benefit; for the role of the private and voluntary sectors as providers (also a David Cameron theme); and for the broader fiscal outlook as we try to raise the number of people in work to support a growing retired population. This is part of what David Willetts, the Conservative education spokesman, has highlighted as the politics of balancing the rights and interests of different generations.

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