The New Deal is failing the most vulnerable jobseekers and should be replaced with a more personal service, the Liberal Democrats said yesterday.

Party activists agreed at their annual conference in Bournemouth that the £750 million spent each year could be better targeted at older and disabled people.

And they also backed a proposal to end the use of sanctions such as losing benefits in favour of a system of incentives.

Spokesman Paul Holmes said most of the people getting employment through the New Deal would have found jobs anyway because of the buoyant market.

And report after report, including many by the Government itself, had found that it was "giving the least help to the most needy".

Under the party's plans, disabled people, lone parents, ethnic minorities and the over-50s would benefit from more contact with advisers and support tailored to their needs.

"As a nation we cannot afford to continue to ignore the plight of those who face the greatest difficulty in getting work.

"It is unjust to them and, with an ageing population profile, it is an appalling waste of the nation's human capital," Mr Holmes told party representatives.

He also warned that threatening sanctions rather than offering incentives to encourage people to stay on the scheme could raise crime levels.

"Studies show that sanctions drive the most needy into the black economy, into crime, back into drug and alcohol abuse, into homelessness.

"Cut already low benefits to parents and their children are inevitably penalised too."