Publishing the review today, work and pensions secretary John Hutton said the government wanted to confront head-on the 'can work, won't work culture' - people on incapacity benefits who refuse to work despite being healthy and having access to employment opportunities.
'If we are to break the cycle of benefit dependency, we need to ask whether we should expect more from those who remain on job seekers allowance for long periods of time in return for the help we provide,' he said.
'And for those who don't do so, then there should be consequences, including less benefit or no benefit at all.'
In July the Department for Work & Pensions announced that 13 cities, including Birmingham and Edinburgh, would pilot projects that pool resources and expertise to tackle specific issues that stop people from getting into work.
Ahead of their launch in April 2007, councils are demanding greater local control over the 16-hour rule and flexibility for authorities to share data about benefits claimants across boundaries.
Mr Hutton told LGC: 'These problems are not insurmountable. We have not received their business cases yet so I would urge them to be more radical [with their proposals] not less. There are flexibilities that can be introduced and we are looking at that.'
One 'major challenge' was how to tackle significant pockets of poverty and worklessness in towns and cities.
John Hutton speech Welfare Reform: 10 years on, 10 years ahead
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