Prime minister Tony Blair, chancellor Gordon Brown and pensions secretary John Hutton have each welcomed recommendations made in a "radical" review of Britain’s welfare system.

Conducted by David Freud and entitled Reducing Dependency: Increasing Opportunity, the new report suggests that welfare infrastructure should be simplified, with more efficient use of private and voluntary sector resources to help benefit claimants.

Repeat claimants should also to be encouraged to progress in their careers, rather than regress to relying on welfare; companies could receive rewards for encouraging claimants to remain in work, while lone parents could be urged to seek work once their youngest child reaches 12, the review recommends.

The Portland Group chief executive has "set out a compelling framework for the next stage of welfare reform which the government must now carefully consider," said Mr Hutton.

"We must make use of all the experience and expertise which exists in the private and voluntary sector in delivering welfare.

"These groups can make real difference in supporting the most disadvantaged into work and helping them stay in a job over the long-term, rather than coming straight back on to benefit," he added.

Mr Freud, formerly a journalist and banker and now working proactively to instil economic stability in the Middle East, hoped that those with "barriers to work" can "engage fully with the new support system".