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Long term unemployed people who find work will continue to receive some welfare benefits, under a radical new proposal from community and business leaders in Glasgow, writes Reg McKay.

A group which includes Glasgow council, Scottish Enterprise, the Benefits Agency, MPs and MSPs, has presented proposals for a pilot project to the department of work and pensions. If it is accepted, 1,500 unemployed people will be given full-time work guaranteed for three years, and their benefits will be reduced slowly over that period rather than immediately they start work.

The group argue there are no financial incentives for long term unemployed to seek work, and the immediate withdrawal of housing, council tax and other means tested benefits often result in them being worse off.

Tom Sleigh, the director of Pivot, an independent organisation established to lobby for solutions to poverty traps, said: "We are currently in a ludicrous situation where people can go from being not working and receiving full benefits to working 40 hours a week in a low paid job, and end up 80 pence a week better off."

Glasgow is seen is as having one of the worst unemployment rates in Europe with 20,000 registered, but the real figure estimated at being closer to 100,000 "hidden unemployed". The city also has some of Europe’s highest rates of drug addiction, crime, illiteracy and sickness.

Last year, Ron Culley, chief executive of Scottish Enterprise Glasgow, said it was impossible to get a bricklayer, plumber or plasterer in the city because the unemployed could not afford to train in these trades. Earlier this month, a report by the Organisation for Economic Co-operation and Development, the world’s most influential financial organisation, described Glasgow as a booming city but with "deep-rooted poverty, deprivation and ill health".

If the proposal is successful, the three-year project will target North Glasgow, Easterhouse and Pollock employing 500 people in each area. The delegation has argued that their proposals "make work pay".

Anne McKeechin, MP for Maryhill and one of the backers of the project, said: "The aim is to make work pay, to give people job security and training opportunities so that they can enter the ordinary job market without re-appearing in the benefits system."

A decision by the department of work and pensions is expected in the next two months.