The proposals are in a draft letter to the Prime Minister from Peter Lilley, Secretary of State for Social Security. Benefit cuts, aimed at saving the Treasury pounds 1.3bn over the next seven years, were agreed at a meeting on Wednesday between Mr Lilley and Michael Portillo, Chief Secretary to the Treasury.
In the letter that was faxed by mistake to the Press Association news agency, Mr Lilley says: 'I propose a three-pronged course of action which would focus the benefit more closely on the long-term sick, make it less generous and make it taxable.'
He acknowledges the changes are 'bound to be controversial' and will cause 'some outrage'. He also said that he could not make further cuts being demanded by Mr Portillo. The proposals will be discussed at a meeting between the two ministers and the Prime Minister next Tuesday.
Last night a political storm erupted over the cuts. Gordon Brown, the shadow Chancellor, said Mr Lilley had to go to the Commons to give more details. 'I am going to force the Government to tell us the truth about the real threats behind the public spending review to thousands of sick and disabled people.'
Other documents with Mr Lilley's accompanying covering letter give examples of the kind of people who would be barred from receiving benefit. They include: 'A retired builder with heart disease who has angina pectoris, ie, gets pain in the chest after excessive bending, heavy lifting and carrying.'
About 1.5 million people claim invalidity benefit at a cost of pounds 6.1bn a year.
People can claim it if an average employer would be disinclined to employ them compared with a fully fit person. The new regulations would define incapacity as 'medical incapacity for all work by reason of physical or mental disablement'.
The document says incapacity had to be defined in such as way that it could 'easily be presented, defended and understood, particularly as moves to restrict entitlement would be controversial'. It adds: 'We expect the new assessment process to exclude between 10 per cent and 20 per cent of people who would qualify for IVB under existing rules. This would amount to between 30,000 and 60,000 people.'
This year's social security budget is pounds 78bn - one third of total government spending.
There are several sections headed 'sweeteners'. One reads: 'We would need to consider softening the impact of the new regime and providing some visible assistance with the transition back to work for those people not assessed as incapable of work.'
Angela Hadjipateras, policy officer for the campaign group Disability Alliance, said the proposed cuts were far worse than she had feared. 'The future looks very grim for thousands of disabled people. It is deplorable that cuts like these can be made to some of the most vulnerable people in society.'
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