Ministers' plans to overhaul the welfare system may result in benefit claimants losing up to £5,000 per year and being forced to look for work. Hundreds of thousands of claimants may see their payments reduced to encourage them to return to work. Currently, 2.8 million people are out of work due to long-term sickness, with mental health being the most common reason.Liz Kendall, the Work and Pensions Secretary, is allegedly considering harsher criteria for those on long-term illness benefits. Most applicants are now not forced to seek employment. "The Tories failed on welfare because they failed at work," a senior official told The Times. "This Labour Government acknowledges that, given the proper help, many sick and handicapped individuals desire to work but are unfairly denied the opportunity.“We will bring forward big reforms that help more people into work, protect the most vulnerable, and boost growth – while putting the benefits bill on a more sustainable footing.”

Opposition from the Left

The newspaper reported that those with conditions such as depression and anxiety are likely to find it harder to claim.Any reforms are likely to face major opposition from MPs on the Left of the Labour party.

It emerged earlier this month that Downing Street is preparing billions of pounds worth of cuts to disability benefits in an attempt to calm markets over its economic plan.

No 10 and Treasury figures think significant reductions are needed in the welfare budget, including to personal independence payments (PIP).

The annual cost of support payments for people with disabilities and health conditions is forecast to soar from £22 billion to £35 billion by 2029 – a 60 per cent increase.

Benefit cheats also face being banned from driving for two years under a proposed new anti-fraud law.

People who owe more than £1,000 in wrongly claimed welfare payments and who have ignored repeated requests to return the money could be punished under the proposed changes.An analysis in December found that sickness benefits are worth £3,000 a year more than a minimum wage job.

A spokesman for the Department of Work and Pensions said: “We’ve inherited a broken welfare system in desperate need of reform.”

He added: “But the proposals we’ll bring forward will ensure the health and disability benefit system is fit for purpose, fair on the taxpayer and delivers the right support to the right people. We will work closely with disabled people and their organisations and ensure their voices shape any proposals.”