A package of seven welfare reform focus files yesterday described the problem with a welfare benefit system that, as the Prime Minister told the Cabinet, was no longer working.
"We are a party committed to social justice and yet there is more poverty and social division coming out of the current system, as well as a growing cost to ordinary taxpayers," he told his colleagues before embarking on his first roadshow meeting, in the West Midlands, to make a personal case for change.
The latest fact-packed dossier updates information last presented to the country in 1993 by Peter Lilley, the Tory social security secretary, in a document called, "The Growth of Social Security".
In that paper, Mr Lilley called for "constructive national debate" on how to improve help for the vulnerable, while keeping the system affordable.
This time, however, Mr Blair is determined to see reform through, modernising the Welfare State just as he modernised the Labour Party - applying "traditional values in a modern setting".
Yesterday's "Case for Welfare Reform" said: "Our aim is to build a Welfare State fit for the 21st century, which extends opportunity and security to all."
But the principles laid down by Lord Beveridge, founder of the modern Welfare State in 1948, would remain central.
"Society has a responsibility to help people in genuine need, who are unable to look after themselves; individuals have a responsibility to help provide for themselves when they can do so; work is the best route out of poverty for people who are able to work."
The only addition to the Beveridge outline was that, fraud and abuse, now estimated at pounds 4bn a year, or enough to build 100 hospitals, "should be minimised and rooted out wherever found".
A "focus paper" on the evolution of social security quoted from the original Beveridge White Paper of 1942, saying: "Social Security must be achieved by co-operation between the state and the individual... The state, in organising security, should not stifle incentive, opportunity, responsibility; in establishing a national minimum, it should leave room and encouragement for voluntary action."
But it said that in the last 50 years there had been more than 120 Acts of Parliament. "Some of the changes have been piecemeal and as a consequence, inconsistencies and illogicalities have arisen."
Almost a third of Government spending goes on benefits, and over the last 20 years there had been a significant shift in spending on lone parents; there had been a strong growth of housing benefit; and benefits for the sick and disabled had been one of the fastest growth areas.
Meanwhile the number of pensioners had grown, but their share of spending had fallen - though it still accounts for a third of all welfare expenditure.
Within that statistic, however, the gulf between rich and poor pensioners had widened dramatically. The focus file on pensioners' incomes said that between 1979 - when Margaret Thatcher first took office - and 1995-96, national average earnings had increased by 38 per cent, while pensioners' incomes had risen by 64 per cent.
But that average concealed different experiences for the rich and poor. "The incomes of the poorest 10 per cent of pensioners have grown by 31 per cent in real terms since 1979. The richest tenth saw a larger real increase of 78 per cent."
The two-nation gulf is also disclosed in other areas, with a polarisation between "work-rich" and "work-poor" families in which no parent works. The number of completely workless households had doubled to 3.4 million since 1979.
But society as a whole has also become less equal and the rise in spending had "failed to banish poverty".
"Between 1979 and 1996 an extra pounds 43bn was spent on social security yet: overall numbers on low incomes grew - [more than] one in four people live on less than half average income today compared with under one in 10 in 1979 (income after housing costs); 32 per cent of children (4.2 million) in 1994-95 lived in a household below half average income, against 10 per cent in 1979; in 1979, the bottom 40 per cent of individuals held 24 per cent of national income; today they hold about 20 per cent."
Setting out the principles for the first phase of reform, the Government said: "We want the debate to be based on facts, without scaremongering. Our aim is to fight poverty, not increase it; narrow social division, not widen it; and extend opportunities, not deny them."
l Free copies of the focus files from the Department of Social Security on 0181 867 3201.
Leading article, page 20
My aims: the text of the prime minister's speech
The following is an edited extract of the Prime Minister's speech on "Building a Modern Welfare State", made to a meeting of Labour Party members in Dudley Town Hall, West Midlands, last night.
"My aim is to build a consensus for modernising social security. Tonight, I want to tell you why I am so passionate about this issue and why I believe the system must be improved if our country is to become the beacon to the world I spoke of at conference last year. All my political life I have been guided by these core beliefs: individuals achieve more together than they can alone; rights and responsibilities go together; every individual, no matter what their background, should be given the chance to succeed.
"This idea of community, of a decent society, is at the heart of my ambitions for this country. That is why it is at the heart of the party's new Clause Four. It makes me want to reform the welfare state, and deliver the social justice to which we are all committed. It is a central plank of building a modern Britain.
"The reform of our welfare state is not to betray our core principles of social justice and solidarity. It is to make them live, breathe and work again for the modern age. Over the last 18 years we have become two nations - one trapped on benefits, the other paying for them. One nation in growing poverty, shut out from society's mainstream, the other watching social security spending rise and rise, until it costs more than health, education, law and order and employment put together.
"When I look at the welfare state, I don't see a pathway out of poverty, a route into work or a gateway to dignity in retirement. I see a dead end for too many people. I do not believe this is how Attlee or Beveridge intended things to be. I want to clear the way to a new system. Long-term, thought-out, principled reform is the way forward.
"To those who doubt we should do it; to those who believe it is too risky, too tricky, or even unnecessary, I say examine the evidence.
"With your head, I ask you to look at the facts. With your heart, I ask you to look at the current suffering. Then tell me the status quo is an option."
Mr Blair said the costs of welfare, now at pounds 80 for every family per week, was alarming, and change was essential. "But any change we make will be made on principle: and the first of these is that all those in genuine need will always be helped and supported by this Labour government.
"That is my guarantee to you as leader of the party. It is the guarantee to the people who elected me as their prime minister. The state pension will remain the foundation for security in retirement. Those of working age who through illness, disability or caring responsibilities cannot work will always be protected by a Labour government. Second, work is the best route out of poverty for those who can work. Third, we believe in the responsibility of individuals to help provide for themselves where they can do so.
"These are the original principles of Beveridge. But today's welfare state is simply not true to those principles. It is not supporting many in genuine need. It is not helping all those into work who can work. It is not encouraging personal responsibility. And there is too much fraud."
Mr Blair said it would take time to get the long-term architecture right.
"But even if the rewards come in the next century, with the welfare state put on a sound, modern footing for future generations, then it will have been worth the argument and the controversy. This government will listen. But do not be in any doubt of my determination to see this through.
"No one with a shred of compassion would say we should not protect the vulnerable. But no one with a degree of common sense would say the present system should remain untouched."