The proposals, leaked to The Independent, reveal that ministers want those who can afford it to insure themselves against "foreseeable risks".
Left-wingers claim the changes mean "the end of the welfare state" and could eventually result in the jobseeker's allowance (formerly unemployment benefit) being replaced by private insurance.
In the short-term, the Government may reduce state help towards mortgage payments should householders lose their jobs. But ministers insisted last night they would not encourage private health insurance to reduce pressure on the NHS.
Labour's plans for a "new welfare state" will be discussed by its national policy forum in Swansea this weekend before being approved at the party's annual conference in October.
Under the proposals, the new targets set by the Government would include increasing the amount of money people devote to savings and insurance "without increasing the proportion borne by government". They envisage a partnership between the public and private sectors "to ensure that, wherever possible, people are insured against forseeable risks and make provision for their retirement".
This weekend's meeting will be told that the Labour leadership has rejected strong pressure from the party's grass roots to uprate the basic state pension in line with earnings rather than prices - a link broken by Margaret Thatcher in 1980. During a consultation exercise, many local Labour parties demanded government action to "stop poorer pensioners falling further behind the rest of society".
Left-wingers led by Baroness Castle of Blackburn, the veteran campaigner and former social services secretary, are planning to fight the welfare plans, but Tony Blair is expected to win approval for them. He will argue they will enable the Government to focus resources on the poorest people and tackle social exclusion.
The new welfare strategy is based heavily on getting people off benefits and into work. Ministers plan further changes to the tax and benefits systems to "make work pay".
One minister said last night: "We want to change the whole culture of the benefits system, away from simply telling people what benefits they are entitled to and instead asking them what help they need to become independent."
To allay the left's fears, the Government will set several targets for tackling social problems. They include reducing the number of people of working age and children living in workless households; cutting the number of jobless out of work for more than two years and increasing support from the tax and benefit systems for families with children.
But Mr Blair's critics are worried about his vision of a reduced role for the state. One document to be discussed at this weekend's meeting admits there are limits on public spending because of voters' reluctance to pay higher taxes.
Hinting at more private funding for education, it says that "global economic pressures and modern political realities... reinforce the need to set clear priorities, develop additional sources of funding, and invest public resources in ways that achieve modernisation and reform."
Yesterday Mr Blair told his Cabinet that ministers must focus on "driving through" their policies - in a barely coded message to end the faction- fighting blamed for the Government's crisis in the past three weeks.
In a speech to the Institute of Public Policy Research, Mr Blair insisted Labour must appeal to Britain's new, expanded, middle class. "Slowly but surely, the old establishment is being replaced by a new, larger, more meritocratic middle class," he said. It would include millions who traditionally might see themselves as working class, but whose ambitions were far broader than those of their parents and grandparents. But the Prime Minister rejected left-wing criticism that his appeal to "middle Britain" meant ignoring the poor. "Far from abandoning our traditional support, we are saying that in a modern Britain everyone must have the chance to fulfil their potential, whatever their background, age, sex or race."
Mr Blair told his critics Labour must "take the people" with it as it builds a new consensus. "There would be no point to our victory, no real purpose to our Government, if it was simply to be followed by defeat and the reversal of what we have achieved. That has been the curse of Labour governments past."
But Harry Barnes, the Labour MP for Derbyshire North East, said Labour must "ditch" Mr Blair's "third way" strategy. In an article in next week's Tribune newspaper, he said the twin objectives - a private enterprise, free market economy and social justice measures - were "entirely incompatible".Reuse content