SICK and disabled people must prove they are actively looking for work to receive extra money in a fresh attempt to cut the spiralling £7.6bn bill for incapacity benefits.

A welfare shake-up unveiled yesterday will also remove automatic benefit increases after six and 12 months.

But the Government pledged more generous handouts for claimants willing to take part in "work-focused interviews" and for those who are too disabled to take a job.

The package, billed as the most important for 60 years, was given a cautious welcome by charities who said it would help the sick and disabled "make a contribution".

And the Labour backbencher who led the revolt against the last attempt to cut sickness benefits backed the latest changes, reflecting the belief they were more carrot than stick.

But the Tories accused the government of a version of Groundhog Day, insisting the same pledges to reform welfare had been "made again and again and again".

They pointed out that the changes would apply to new claimants only and therefore have no effect on the existing 2.7 million people receiving sickness benefits.

They include about 100,000 people in the North-East, including the former mining community of Easington, where one in five working- age people claim the benefits.

Under the changes, incapacity benefit will be split in two with a "rehabilitation support allowance" for those able to get back into the job market.

It will be worth about £55-a-week initially, but people "taking steps" to find a job could receive more than the present maximum incapacity benefit rate of £74.15.

People with the most severe conditions will receive a new disability and sickness allowance, which would automatically be worth more than £74.15.

Everybody claiming they were too sick to work would be placed on a holding allowance of about £55 for up to 12 weeks, while their case was assessed.