Since he left the Government last year, Mr Field has criticised ministers' lack of radicalism. His decision to work with Mr Kennedy will be regarded as a serious embarrassment to Labour.
Mr Kennedy has pledged to make social justice, including care for the disabled and underprivileged, the key theme of his leadership. He wants his party to capitalise on public unease about government cuts in benefits for the disabled, single mothers and asylum seekers.
Mr Field, MP for Birkenhead, was appointed by Tony Blair in 1997 to mastermind Labour's reform of the welfare state. He was told to "think the unthinkable". But he returned to the back benches to become a stern critic of Labour's acceptance of the "deeply corrupting" means tests which had been brought in by the Conservatives.
"The Government seems to have lost the plot on welfare reform," said Mr Field. "I am always ready to discuss ideas and I am now willing to help Charles develop policy. We are old mates."
But yesterday, the Conservatives hit out at the Liberal Democrats for a too-close association with the Government. Campaigning in the west country, Ann Widdecombe, the shadow Home Secretary, accused the party of becoming the "bed buddies" of Labour. She said Liberal Democrat councils in the area had proved a disaster. "They have presided over a crisis in farming, brought the transport system to a standstill and pursued socialist economic policies which have wiped out hundreds of jobs in the valuable tourism industry."
However, the new partnership, which is expected to focus on welfare policy, including the establishment of mutual societies, will put pressure on Labour to water down its plans to cut key benefits. Earlier this year, Mr Blair's drive for welfare reform was set back when more than 80 MPs rebelled against plans to cut disabled benefits.
The issue is likely to blow up at Labour's party conference, when Alistair Darling, the Secretary of State for Social Security, may be forced to make concessions to get the Bill through the Lords in the autumn. Senior Labour peers are planning to vote against the Government with Liberal Democrat and Tory support.
Although Mr Kennedy has signalled his willingness to maintain discussions with the Labour leadership in the joint cabinet committee on constitutional reform, he is expected to consult his own MPs about whether the talks should cover other policies.
The new leader now wants to determine the direction of his party and establish a strong Shadow Cabinet style team, backed by party campaigners. He has also hinted at enhancing the role of deputy - a post for which Simon Hughes, second in the leadership contest, says he will aim for, if the incumbent, Alan Beith, stands down as expected in November.