Blair warns on benefit cuts

Tony Blair took charge of Labour's reform of the welfare state yesterday with a warning that "the facts are alarming".

He is to chair a ministerial committee including the Chancellor, Gordon Brown, and the Secretary of State for Social Security, Harriet Harman, on the "New Deal" aimed at getting people off benefit and into work to reduce a social security budget climbing to pounds 100bn a year.

Speaking to his constituency party in Sedgefield, Co Durham, the Prime Minister argued that the welfare state established by the 1945 Attlee government had been "left behind by economic and social change". The UK spends more on the Department of Social Security than on education, employment, health, and law and order combined, yet the poorest 20 per cent in society now get a lower share of benefits than they did in 1979.

Benefit fraud, Mr Blair contended, was running at pounds 4bn to pounds 5bn a year, enough to build 100 large hospitals. Yet almost a million pensioners do not get the income support to which they are entitled, and almost four million children are living in poverty.

"They are facts. The question is not whether to reform, but what sort of reform. The system is not working as the country wants it to. And yet people are saying, 'Don't touch the system.' With facts like that to contend with, we have no choice. We have to reform the system. If we don't, we will fail the very people we have to help."

Mr Blair made it clear he had not ruled out changes in disability and incapacity benefits paid to 6.5 million people, which created a furore last week. These benefits cost more than the entire school budget, he said.

Splits were appearing in the Cabinet's united front on the welfare state before Mr Blair made yesterday's pre-emptive strike. David Blunkett, the Education and Employment Secretary, has warned in a private letter to Mr Brown of his "grave anxiety" about the prospect of cuts in benefits.

His three-page note, which was dated 9 December - the day before 47 Labour MPs rebelled over cuts in one-parent benefits - complained that any shift to means testing could "undermine social cohesion" and risk further back-bench revolts, particularly over industrial injuries benefit.

Mr Blunkett warned that "deep cuts in the totality of support for those disabled people who cannot work or the poor who can only get very modestly paid work "would make a mockery of our professions on social exclusion and the construction of a just society".

The Cabinet is to hold a special meeting on the future of the welfare state early in the new year, to iron out a common strategy on the forthcoming Green Paper on social security.

The Prime Minister insisted that the Green Paper would lay down four principles for reform:

The responsibility of society to help those who are unable to look after themselves.

The responsibility of individuals to provide for themselves where they can do so.

For those who can work, work is the best answer to poverty; and

Fraud and abuse should be minimised and rooted out wherever they are found.

"This is not simply about trying to rein in the growth of the welfare bills," Mr Blair said. "It is about a fundamental change in the culture, attitude and practice of the welfare state to create a fairer and more efficient society."