Key assumptions in welfare-to-work contracts are likely to be changed to reflect the forthcoming recession, it emerged on Wednesday as the association representing private sector providers said that some contracts now look “uneconomic”.

Dave Simmonds, the chief executive of Inclusion, the welfare think-tank that analyses the market, said it estimated that a further £1bn ($1.6bn) – a two-thirds rise – needs to be injected into the programme to allow for the likely increase in the number of long-term jobless.