Brown's `revolution'to merge tax and benefit

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THE GOVERNMENT will unveil sweeping reforms to the welfare state in the next week, taking a big step towards the eventual merger of the tax and benefit systems.

Gordon Brown, the Chancellor, plans to extend the Government's welfare- to-work programme when he presents his draft Budget next Tuesday.Its two main planks will be "enterprise and work for all".

In the long run, the changes could include a guaranteed minimum income for everyone in work and the extension of the New Deal programme for jobless youngsters to all unemployed people.

The next stage of the reforms will be unveiled on Thursday, when Mr Brown and David Blunkett, the Education and Employment Secretary, will announce a pounds 270m scheme to ensure that people aged over 50 who have been out of work for six months receive an income of at least pounds 170 a week if they take a full-time job. If they earn less than that, their pay will be topped up by an employment credit worth up to pounds 60 a week. Those working between 16 and 30 hours a week will have a guaranteed minimum income of pounds 110 a week.

The "New Deal 50-plus scheme" will be launched in nine trial areas before going nationwide next April, when 1.2 million people and their dependent partners will qualify.

"We are making work pay for everyone and restoring the right to work for the over-50s," a government source said last night. "The over-50s will not be left on the scrapheap."

The credits will ensure the over-50s who work will earn pounds 60 a week more than they would on the minimum wage. The top-ups will be paid by the Inland Revenue, mirroring the pounds 5bn working families tax credit, which will eventually be extended to childless families.

Cabinet sources admit the changes will mean more means testing. Tomorrow the Government faces a backbench rebellion by as many as 60 Labour MPs over proposed cuts in incapacity benefit.