Fran Abrams, Political Correspondent, examined the details.
The cost of disability benefits rose from pounds 4.1bn in 1982 to pounds 23.5bn last year, and everyone in the Government agrees that reforms are necessary.
With the benefits rising at six per cent a year, the Department of Social Security "faces questions that have to be addressed radically," Mr Blunkett said in the memo.
He would welcome "humane and sensitively-judged reforms to support disabled people to work," he said, but added that some of the interim findings of Harriet Harman's part of the comprehensive spending review disturbed him.
Deep cuts in disability benefits across the board "would make a mockery of our professions on social exclusion and the construction of a more just society," he wrote. Under the Conservatives, Labour figures have argued, many people went on to Incapacity Benefit when they should really have been on unemployment benefits. One million people drew the benefit in 1979, compared with two million today.
Mr Blunkett recognised this in his letter, suggesting that more generous payments to people on IB were an incentive to fraud. In particular, an existing test in which people had to show they were incapable of any work encouraged those who might be able to do part-time or voluntary jobs to pretend they were more disabled than they really were.
Even if extra flexibility cost money - that is to say, if it meant even more partially-disabled people going on to IB - that should be seen as an investment in welfare to work.
New Deal cash for the long-term sick and disabled, totalling pounds 195m, would be used by the DSS and DfEE to experiment with different schemes.
However, plans to tax or means-test Disability Living Allowance would be inappropriate, the Secretary of State for Education and Employment wrote. This would create disincentives to people to work and save money, he argued.
The other major area of reform tackled in the letter was the allowance, which is paid according to level of disability rather than income. Mr Blunkett himself is entitled to DLA because of his blindness, despite his ministerial salary. In his letter he said about 12 per cent of the pounds 4.4bn annual cost of the allowance, which has quadrupled since 1993, was "misapplied".
The proposal that provoked the strongest rejection from Mr Blunkett, though, was a suggestion that the DLA should be handed over to local authorities. The disabled were a "weak political constituency" and would lose their benefits to schools and hospitals, he said.
Capping of local authorities would make the problem worse, and any moves to tighten the caps would mean inadequate support for the disabled.
"Disabled people will be victims of the lottery of local authority discretion," Mr Blunkett wrote.
He was also unhappy about some of the plans to reform Industrial Injuries Benefit. While he supported moves to make employers insure themselves against injuries, "no-fault" schemes could lead to sloppiness over health and safety.
However, abolishing industrial injuries benefits for existing claimants would be "unacceptable politically". Mr Blunkett said the Chief Whip, Nick Brown, would have to make a judgement on whether such a move could be pushed through the Commons, and on whether it would be worth risking another major backbench rebellion to do so.Reuse content