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Private sector participation is crucial to the government's "radical" benefits system reforms, prime minister Tony Blair revealed today.

Announcing the recommendations of a policy review report by banker David Freud today, Mr Blair identified raising the employment rate to 80 per cent as a key target in helping to ensure the future of the welfare state.

He said the reforms would build on the government's record of introducing tax credits, a national minimum wage and the "expanded role of the welfare state".

"If we want to meet the challenges of the future we need to go further. If we want to be able to afford our welfare state in the future… then we've got to get even more people off benefit and into work," Mr Blair explained.

Both the private and volunteering sectors are cited as important partners in aiding greater numbers of "harder-to-help claimants" into employment through increased training and employment opportunities.

Meanwhile these expectations, together with long-term mentoring and increased personalisation of employment support, would be balanced by heightened pressure on claimants to look for work, Mr Freud explained.

"I am proposing a structure in which the private and voluntary sector would be prepared to invest substantial sums, with minimal risk to the state. In return, I am looking to people with more barriers to work to engage fully with the new support system," he said.

Chancellor Gordon Brown took a longer-term view of the reform's significance, however.

"We will meet our aspirations not just for 80 per cent employment but a Britain that is equipped to meet the economic challenges of the 21st century," he said.

Responding to the government's proposals, Dr John Philpott of the Chartered Institute for Personnel and Development (CIPD) said gaining sufficient "buy-in" from employers was critical to the success of the reform package.

"In a jobs market where, as CIPD surveys find, a large proportion of employers are wary of recruiting from the ranks of long-term benefit claimants, more will… need to be done to bring employers on board," he warned.

"The ability of private and voluntary sector bodies to do so will ultimately determine the success of this next stage in the government's welfare-to-work policy."