The Prime Minister's aim of "British jobs for British workers" won't work unless the government faces up to the scale of effort needed to help millions of people currently on sickness benefits back into work, and tackles the skills gap for those not in employment, the CBI says.

The CBI’s warning comes in its submission to Work and Pensions secretary Peter Hain in response to the government's green paper on welfare reform.

The business group says it is unacceptable that more than 4.5m people remain on benefits, costing taxpayers £12.5bn a year. Tackling this would benefit business.

John Cridland, CBI deputy director-general, says: "The government knows what it has to do. But ministers need the political courage to push through with reforms and help people get back into, and stay in, work.

"Employers are creating job opportunities every day. But they should have the confidence of recruiting from their local communities, which would help tackle social exclusion and lift individuals out of a cycle of benefit dependency.”