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Mr Freud says most claimants should be looking for work
Fewer than a third of the 2.7 million or so people claiming incapacity benefit are legitimate claimants, a government welfare adviser has said.
David Freud, an investment banker hired by Work and Pensions Secretary James Purnell, said up to 185,000 claimants work illegally while on the benefit.
He told the Daily Telegraph it was "ludicrous" that medical checks were carried out by a claimant's own GP.
The system was "a recipe for getting people on to IB", he said.
Mr Freud, whose report on welfare last year was highly influential on the reforms set out by Mr Purnell on Monday, has recommended that private firms be paid "bounties" to get claimants off incapacity benefit and into jobs.
He said there was a "classic conflict of interest" embodied in the system of GPs carrying out claimants' medical checks, saying: "They're frightened of legal action."
He said that, compared with unemployment benefit, incapacity claimants received more money and did not get "hassled".
"The system we have at the moment sends 2.64 million people into a form of economic house arrest and encourages them to stay at home and watch daytime TV. We're doing nothing for these people," he told the paper.
Since the 1980s, there have been claims that successive governments have allowed the IB roll to grow in order to keep down the more politically sensitive count of the unemployed.
"When the whole rot started in the 1980s we had 700,000 (claimants). I suspect that's much closer to the real figure than the one we have now, Mr Freud said.
Recent figures showed that more than 500,000 young people under 35 are now claiming incapacity benefit. About 40% of recipients are claiming for mental health problems, some 250,000 because of stress-related illness, while others cite alcoholism, obesity or eating disorders.
Mr Freud said a new system, with private firms and voluntary organisations paid by results in getting claimants into lasting jobs and those who refuse to co-operate having benefits docked, could be in place within five years.
He told the paper it would be "economically rational" to pay as much as £62,000 to a company which managed to place an incapacity benefit claimant in a job which lasted three years or more.
Incapacity benefit costs the Treasury about £12bn a year.
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