A drive to get 2.8 million “long term sick” into work has been launched following warnings that the record-high benefits bill is set to rise even further.

Businesses and charities will be asked for ideas after the number claiming they are too sick to work rose by 800,000 following the Covid pandemic. At the same time, employers are struggling to fill 812,000 vacancies.

Work and Pensions Secretary Liz Kendall has appointed former John Lewis chairman Sir Charlie Mayfield to lead a review, which will report in the Autumn.

It’s part of the Labour government’s “mission” to grow the economy overseen by Chancellor Rachel Reeves, who is to make a major speech next week following a tidal wave of criticism over her decision to increase National Insurance contributions for employers.

Ms Kendall said: “Millions of people have been left without support to get into work and on at work, and completely held back from reaching their potential for far too long, and the record-high cost of long-term sickness benefits is evidence of that fact.”

Official figures show 2.8 million people aged 16 to 64 have dropped out of the workforce saying they have a long-term illness. They are not classed as unemployed because they are not looking for work, and the number is up from 2 million in 2019.

Incapacity and disability benefits currently cost £64.7billion but Treasury watchdog the Office for Budget Responsibility warns this is set to rise to £100.7billion by 2030.

Employers say the National Insurance increase introduced in last year’s Budget has pushed up the cost of recruitment and the number of vacancies has fallen by 24,000 since September according to the Office for National Statistics, but some sectors including the hospitality industry and healthcare are still struggling to find the staff they need.

Business and Trade Secretary Jonathan Reynolds said: “It isn’t right that too many businesses are missing out on the people they need, while those who want to work can’t because of long-term sickness.”

Sir Charlie, who is also chair of the British Retail Consortium, is to meet businesses and health and disability organisations across the country to discuss the problem. An initial report will be published in the spring with final recommendations presented to Ministers later in the year.

In advance of next week’s speech Ms Reeves has announced plans to give mayors such as Andy Burnham in Greater Manchester more control over transport and training, as she asks regional leaders to help her grow the economy.

She suffered another blow this week as supermarket giant Sainsbury’s announced it was cutting 3,000 jobs, with Conservatives blaming Budget measures including the National Insurance increase. Shadow business secretary Andrew Griffith said: “Thanks to Labour’s budget 3,000 jobs will be lost and 3,000 families will suffer without the security of regular pay.”