To launch the scheme the Government will provide £5 million and once agreed targets are met, the cities will be allowed to keep any money saved from incapacity benefit to invest as they see fit.

Initially Glasgow and Edinburgh will be among the first 15 UK cities to take part in the scheme and Dundee will follow early next year.

The move will see local people given freedom to tackle problems in their own areas and develop plans to ease people off benefit dependency and into work.

In Glasgow today, Work and Pensions Secretary John Hutton confirmedthe three cities had secured Cities Strategy Status.

This represents an overhaul of how the Welfare State provides services for people, with the cities getting greater freedom to provide individually-tailored programmes and solutions to local problems.

Councillor Joe Morrow, Dundee City Council’s economic development convener, said, “I am pleased we have been successful in our bid to secure Cities Strategy Status and welcome the extra funding, which will be used in Dundee to help people who have been on long-term benefits back into employment.

“The city council already has an employability strategy which is successfully helping parents overcome childcare difficulties to find their way back into work and also for young people who are not in education, employment or training.

“We are working with Jobcentre Plus, NHS Tayside, Scottish Enterprise Tayside and other partners in delivering these projects and private sector employers including Lend Lease, Michelin and the Alliance Trust are already committed to helping.”

John Hutton said, “This is great news for Glasgow, Edinburgh and Dundee.

“We are replacing the old one-size-fits-all welfare state that was run entirely from Whitehall, with tailored help for individuals. Local initiatives, harnessing the leadership our cities are providing will be a key part of this in years to come.

“Helping people off benefit and into work helps families out of poverty, boosts the local economy and provides savings for taxpayers.

“We want to reward cities who are successful by allowing them to re-invest a portion of those savings in the local community.”

It is expected delivery plans will seek to help individuals who may be farthest from the support currently available from the welfare state such as existing incapacity benefit claimants or people who are not on benefits.

Jim Murphy, Minister for Welfare Reform said, “We want to develop a new partnership between central government and the people who are delivering services on the ground.

“We think local areas will be able to deliver more if they can combine their efforts behind shared priorities, and are given more freedom to try new ideas and tailor services to local needs.

“We want to help as many people as possible get off a life on benefits and get into the workplace.”