Iain Duncan Smith has signalled his determination to intensify welfare reforms, arguing that the crackdown on benefits is cutting unemployment.

The Work and Pensions Secretary used a speech in central London today to insist the Government is "delivering" after Labour left "whole sections of society... stuck on the sidelines".

The comments come amid speculation that the Tory general election manifesto could pledge to lower the benefit cap or extend other tough measures.

"The number of households where nobody had ever worked doubled - and the welfare bill rose by twice as much as average earnings," Mr Duncan Smith said.

"More than half of the rise in employment that we saw was accounted for by foreign nationals.

"And not just in London - three-quarters of Eastern European migrants in employment live outside London."

Mr Duncan Smith argued that immigration into the UK has been a "supply and demand issue".

"Businesses needed the labour and because of the way our benefit system was constructed, too few of the economically inactive took the jobs on offer.

"When we took office, there were nearly five million people on out of work benefits."

He added: "It was clear to me that the dispossession we were seeing was the product of a dysfunctional welfare system that made life difficult for people at every turn.

"The way that the system took money away from people as they tried to do the right thing and move into work at rates that no one would accept if it were a tax on higher incomes meant that for too many work simply did not pay."

Mr Duncan Smith went on: " My one aim as Work and Pensions Secretary has been to change this culture - and everything we have done, every programme we have introduced, has been targeted at supporting the hardest to help into work.

"The scale of the change has been enormous - and change at such a scale is never without its difficulties.

"But we are delivering and it is changing our country for the better.

"We are fixing society at the same time as the economy we are matching a firm economic settlement to a firm social settlement.

"And in so doing we are putting this country on a path to a more productive, more dynamic, and ultimately a more contented, future."

Appearing on BBC Radio 4's World at One, Mr Duncan Smith was asked if he believed the Policy Exchange's suggestion to lower the £26,000 benefits cap outside London was a good idea.

He replied: "I've heard these arguments on both sides of the fence and in principle these sort of arguments make sense because you want to have a level set at the right level.

"Of course, then you get into complexity and the issue about these things is how do you define a level that has income at a certain level - they are all variable - you have some cities in certain regions that have very high income but the region they're in is very low income.

"So there are complexities in this, so we're not doing any work on this at the moment - none."