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London's benefits bill has soared to more than the British defence budget, a new report warned today.

The study by the Centre for Social Justice highlighted that £36 billion went on working-age welfare payments in 2011/12 in the capital, compared with defence spending of £33.8 billion.

The benefits bill in Croydon alone was £1.7 billion, followed by Newham and Enfield, both £1.6 billion, and Barnet and Ealing on £1.5 billion, according to the analysis.

Barking and Dagenham had the highest welfare spend per head of just under £6,000 a year, followed by Newham with £5,256 and Enfield on £5,161 — with the lowest being Kensington and Chelsea at £2,695, apart from the City of London.

The report by the think tank, which was founded by Iain Duncan Smith before he became Work and Pensions Secretary, argued Britain is blighted by “welfare ghettos” where large numbers of people have been abandoned on unemployment benefits.

Centre for Social Justice managing director Christian Guy, said: “London is an economic powerhouse, but shamefully hundreds of thousands of people are held back from playing their full part. This is a tale of two cities with far too many people living in the shadows of success.”

In the study — entitled Signed Off, Written Off — the group said that as many as 6.8 million people, including 1.8 million children, in the UK have been trapped into long-term poverty.

The number of children in workless households, nearly one in five according to the report, was the second highest in Europe, second only to the Former Yugoslav Republic of Macedonia.

Parts of Denbighshire in Wales were among the worst affected areas, with 67 per cent of people aged between 16 and 64 in the Rhyl West ward dependent on unemployment benefits.

In Liverpool, there are nearly 70 neighbourhoods where the number of people claiming jobless benefits is 30 per cent or higher. This is followed by Birmingham (49 neighbourhoods), Hull (45 neighbourhoods), Manchester (40 neighbourhoods), Leeds (37 Neighbourhoods) and Knowsley in Merseyside, (31 neighbourhoods).

The Centre for Social Justice, which supports the Government’s welfare reforms, said the UK cannot afford to delay them. However, Labour and Green Party MPs claim the changes risk creating “no-go areas” for both the working poor and benefit claimants, by driving people out of some central London districts.

More than 7,000 Londoners face losing more than £100 a week in benefits due to the overall £26,000-a-year benefits cap per household.

The number of housing benefit claimants in private rented flats or houses in more central boroughs fell by more than 4,000 in the year to February, while it has risen by more than 5,000 in outer London.