It has launched a consultation over how to implement the first UK-wide strategy for supporting veterans, which was unveiled earlier this month.
The new strategy seeks to prioritise addressing how veterans fare in the community, the workplace and the criminal justice system, as well as their employability, health and wellbeing, financial situation and housing needs.
A key part of the strategy is addressing public perception and understanding, according to the consultation document.
It reveals that by 2028, the government aims for the general public to "value veterans and understand their diverse experiences and culture".
To do this, it is asking for responses to the question: "How could the misconceptions about veterans be effectively challenged?"
The consultation states that "public opinion is divided on whether military service has a positive or negative impact on those returning to civilian life".
While serving in the armed forces is seen as having positive benefits such as self-discipline, loyalty and self-reliance, "it is also seen by some as resulting in veterans who are institutionalised, psychologically impaired and less able to build relationships outside the Armed Forces".
In terms of veterans looking for work, barely half (59 per cent) of the public "believe they are employable".
The consultation says: "This research supports that more could be done to build a more nuanced public understanding of veterans, especially to dispel popular myths, to improve experiences across all the themes."
It adds: "The UK Government will now develop a communications plan to continue to influence public perceptions about Veterans and use the 2018 baseline to measure impact, with the potential for future measurements to gauge effect."
The Armed Forces Covenant is described by the government as "a promise from the nation that those who serve or have served, and their families, are treated fairly".
Defence minister Tobias Ellwood, writing in the foreword of the annual report on the Covenant, released this month, said: "Addressing inaccurate public perceptions of veterans, and more broadly of life in the Armed Forces, will help us to improve the opportunities available to the Armed Forces community when transitioning back to civilian life. An effective communication strategy is critical to conveying the Covenant message to both service providers and the Armed Forces community, as beneficiaries."
There has been "an ongoing improvement" but "we have a long way to go", he added.
Ellwood cited new statistics showing that less than a third of organisations have heard of the Covenant and fewer than one in 10 have signed up to its aims.
The report stated: "Improving awareness of the Covenant among service providers across all sectors, as well as with the Armed Forces community as beneficiaries, continues to be a priority for 2019 and beyond."
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