TONY BLAIR is to pay private companies and charities to push the hardcore jobless into work, with an American-style scheme offering help such as free haircuts, suits and tattoo removal.

Claimants who refuse to accept the help, or drop out of their jobs after fewer than three years, could lose their benefits.

The scheme is being overseen by John Hutton, the work and pensions secretary, and is said to enjoy the “enthusiastic” support of the prime minister. The aim is to cut the government’s £70 billion welfare bill.

The government is particularly concerned about the number of people who either refuse to take jobs, or secure jobs through government agencies only to give up and fall back into benefits dependency within weeks.

A spokesman for Hutton said: “We are talking about [something] as basic and effective as taking someone to buy a suit. Or, if their hair is all over the place, an organisation might arrange to take them to the hairdresser.” Free travel to job interviews is also being considered.

The plans are based on recommendations by David Freud, an investment banker commissioned by the government to find new solutions to long-term unemployment.

His blueprint for welfare reform will be published by Downing Street tomorrow. His approach is based on a US system, where a private company, America Works, is employed by many states to reduce welfare bills. It uses sales teams who compete to place candidates, with performance bonuses awarded to those who consistently make placements that last. The firm has strong links with companies such as AOL Time Warner, Pepsi, Sony Music, Donna Karan and Gap, all of which have taken on recruits.

In Britain unemployed people will be approached and offered information about vacancies and advised on how to improve their chances of obtaining work.

Once in a job, they can expect to receive regular motivational phone calls and visits to discourage them from dropping out.

The prime minister is understood to believe that firms that provide long-term posts for the jobless should receive some of the money saved by taxpayers when individuals come off benefits. The Treasury was cautious, but Gordon Brown, the chancellor, will endorse the plans.

One firm, Reed In Partnership, has helped 60,000 unemployed people find work. It offers “hard to place” candidates sessions with occupational psychologists. “We’re going into markets, estates, malls and anywhere else people congregate to let them know what’s on offer and encourage them to apply,” said a company spokesman.

Payments to private firms and charities will depend on candidates sticking to their jobs for up to three years.

Philip Hammond, the shadow work and pensions secretary, said: “We are all for the use of private providers, but these contractors must only be paid by results. They must only receive the money if candidates stay in the job.”

- The Tory leader, David Cameron, will today underline his determination to promote marriage with a warning that Britain is facing social breakdown.

In a speech to Tories in Wales, he is expected to defend his pledge to offer tax benefits to married couples, insisting that changes to the tax system can help to maintain social cohesion.

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