Housebound and mentally ill will be told to work from home or have benefits cut under new welfare clampdown to cut joblessness that may cause confusion - but Rishi Sunak backs away from a major welfare squeeze

People housebound with physical and mental illness will be told to look for jobs they can do from home or face having their benefits cut under hardline welfare reforms.

Under plans to be unveiled by Rishi Sunak they will be told that being unable to leave home is no barrier to finding employment, thanks to modern technology.

New claimants from 2025 could lose handouts worth up to £4,680 a year because they can no longer be  'written off' as unable to work, the Times reported. 

It is expected to form part of a 'carrot and stick' approach to welfare, with Tory sources saying Rishi Sunak had backed away from a squeeze on overall benefits, saying the focus would be on 'reform, not cuts'.

The Prime Minister yesterday said it was a 'national scandal' that two million people of working age did not have a job.

Chancellor Jeremy Hunt has examined whether to break with convention and raise benefits by less than the 6.7 per cent inflation figure recorded in September.

Under one plan, benefits would have been 'uprated' next year by the lower October inflation figure of 4.6 per cent, saving the Treasury around £2billion.

However, a source said that the full rise had now been deemed 'affordable' after better-than-expected forecasts from the Office for Budget Responsibility were delivered on Friday.

The state pension is also now likely to be raised in line with the triple lock – the commitment to increase state pensions by the highest out of average earnings growth, inflation or 2.5 per cent – meaning an 8.5 per cent increase.

In a major speech yesterday, Mr Sunak indicated that the Government would look for savings instead by taking measures to drive down the number of people claiming unemployment benefits.

The carrot-and-stick package will include extra support and training for those wanting a job, coupled with tougher sanctions for those who refuse to look for work, who could have their benefits stopped completely.

The Prime Minister said that getting people off welfare and into work would allow the Government to continue to provide a 'generous safety net' for those who cannot work. Mr Sunak said that 'work – not welfare – is the best route out of poverty'.

He added: 'Right now, around two million people of working age are not working at all. That is a national scandal and an enormous waste of human potential.

'So we must do more to support those who can work to do so, and we will clamp down on welfare fraudsters because the system must be fair for the taxpayers who fund it.'

Treasury sources declined to comment on whether benefits would be uprated by the full 6.7 per cent or by a lower figure.

One insider said Mr Hunt 'wants to set out all the decisions on welfare in one go, and explain why he's doing what he's doing'.

Meanwhile, the Treasury moved yesterday to scotch speculation that wealthy pensioners could be stripped of winter fuel payments.

In a leaked recording, Paymaster General John Glen was heard saying it was time to 'look at' whether it would be possible to 'ration' the payments, which are worth up to £600 a year. 

Mr Glen, who was chief secretary to the Treasury until last week's reshuffle, was secretly recorded speaking at a Cambridge University Conservatives event last month.

In a leak to The Telegraph, he was heard saying that his own mother would be 'very comfortable' without her annual winter fuel payment. 

'I think we also need to come to terms with the fact that the triple lock is very expensive and how sustainable is that going forward in terms of pensions and all the other benefits?' he said.

He said means-testing winter fuel payments was 'very difficult', but added: 'These are the sorts of mechanics of government you've got to look at. Is it better if we spent more of that money on child poverty? It probably is. But these are the things we need to look at.'

But Exchequer Secretary Gareth Davies ruled out any change, saying: 'We are not going to be touching the winter fuel allowance.'