It will be seen as evidence that the Tories are trying to close the gap with Labour by adopting more radical policies.
Mr Dorrell, the Secretary of State for Health, will also today announce private insurance schemes for long-term care for the elderly in council-run residential homes, which could be privatised if the Tories win the election.
Ministerial sources last night denied the plans for social services had been watered down because it was feared they would be a vote-loser. "I don't think anyone looking at this White Paper will say it is soft. It will be like the pensions announcement in its radicalism," one Whitehall insider said.
The proposal would tilt the grants system from government to requiring local authorities to pay the private sector to supply up to 85 per cent of the services currently provided by council social services departments.
Mr Dorrell has told officials he does not want a "level playing field" between councils and the private sector in the provision of social services. "He wants to tilt the playing field towards the private sector," said another Whitehall source.
The White Paper is ready to be published on Wednesday, but the timing will be decided by a Cabinet committee chaired today by Michael Heseltine, the Deputy Prime Minister.
The proposals will form part of the Tory manifesto. They will be seen as part of Mr Dorrell's strategy to establish his credentials with the right-wing alongside Peter Lilley, the Secretary of State for Social Security, who announced his plans for privatising pensions last week.
Mr Dorrell will also announce long-delayed proposals for encouraging more people to take out private insurance to cover the cost of long-term care in their old age. The plans will be carried in a draft Bill to be taken through Parliament if the Tories win the election.
He said on BBC television's Breakfast with Frost that the means-test will be made more generous to allow patients who have insurance to retain assets worth pounds 1.50 for every pounds 1 worth of insurance cover. It means a pensioner with pounds 10,000 of cover would be able to keep assets of pounds 15,000 on top of the current disregard of pounds 16,000 before means-testing would bite.
John Major promised action last year following protests from elderly Tory supporters who were being forced to sell their homes - assets which they wished to pass on to their children - in order to pay for long-term care before they qualified for means-tested state care.Reuse content