LONDON (Reuters) - The government is to change the way disability is assessed in the hope of removing thousands of people from long-term incapacity benefit, Work and Pensions Secretary Peter Hain said on Monday.

A new test to be introduced from October will check people's abilities rather than disabilities, he said.

"The old test has been reliant on a physical incapacity. The new one is going to test people as to what they can do," Hain told the BBC.

"Can you sit in front of a PC screen and operate a keyboard or a mouse, rather than can you do a physically demanding job in an old industrial setting?"

He said people with mental health problems such as depression -- one of the most common disabling conditions -- would be assessed to see if they could be helped by psychological therapy to get them back to work.

Around 2.7 million people claim the benefit for not being able to work at an annual cost of 12.5 billion pounds.

The number on the benefit has trebled since 1979 and the government wants to reduce those claiming by one million people.

The revised test will be applied first to new applicants, and will be extended at a later date to those already claiming.

Hain said the changes were designed to help people, not to punish them.

"If you are on incapacity benefit for longer than two years you are more likely to die or retire there than ever get a job," he said. "If we can provide the support, the training, the skills, the professional help we can transform people's lives. I've seen it happen in many people."

The initiative was announced as a breakdown of those of on incapacity benefit was released under freedom of information laws.

It showed that more than 2 billion pounds was paid last year to those suffering mental health problems, including 1.1 billion for people with depression, newspapers reported.

The figures also showed that 2,000 people were signed off work for obesity and 50 were granted the benefit because of the skin disorder acne.

(Reporting by Tim Castle; editing by Peter Griffiths)