Jobless Britain. The spectre has haunted politicians for years. Across parts of the country, it is claimed, we are raising families with no cultural experience of employment.

For them, critics say, the welfare system is not a temporary safety net but a parallel universe, where some claimants are actually financially better if they avoid employment.

It seems fitting as the coalition government again floats the Big Society to put forward a bold proposal to help that generation which – to adapt the famous Timothy Leary quote – signed on and dropped out.

Worklessness is often part of a complex social picture. We deal here with a shifting mosaic ,where a culture of low expectations, poor school achievement and social deprivation can hobble potential high-achievers at an early age.

So, what am I proposing? Councils are not, after all, job-creation clubs – less so than ever under the current Government.

Here’s my suggestion. As councils and Whitehall debate the concept of area-based budgets, let’s divert a large part of the Department for Work and Pensions (DWP)’s budget into this notional regional framework to tackle unemployment in a new and radical way.

The engine of the welfare system is the DWP. It spends £1.4bn a year in my own region alone, and is one of the five public bodies which account for 70% of public expenditure, together with the NHS and the city council.

The problem is there is a perception that the DWP has become a machine for processing vast amounts of money rather than tackling the root cause of unemployment.

The parts of the DWP budget which would make sense in a ‘place-based system are incapacity benefit, jobseekers allowance and income support. Two other key parts of DWP spending – council tax benefit and housing benefit – are already administered by local authorities. None of us wants the job of paying pensions – which would still be done nationally.

Councils are closest to residents, and are ideally suited to combat the environment which spawns long-term unemployment. This approach knits together schools with training opportunities; tackles ill health and drug and alcohol abuse as obstacles to work; and believes that the kind of surroundings a person grows up in directly influence what level of aspiration they might have.

Councils, with detailed local knowledge, could also tailor benefit payments according to the kind of area claimants live in, rather than having them nationally set. We are also well placed to challenge those who claim, but don’t contribute by looking for a job. Councils are a unique people business, but there is no reason why we can’t be robust about the process.

Discussions on area-placed budgets are now regularly taking place in Whitehall. But we do need the DWP to come fully on board as this concept gathers a head of steam and we head into the autumn Spending Review.

With the DWP part of the mix, I believe so much more is possible. Without it, we condemn many useful citizens to the dole – and to the doldrums.

Cllr David Parsons is leader of Leicestershire CC, and chair of the LGA improvement board