Lilley targets rising cost of welfare state

THE GOVERNMENT yesterday opened up the public debate on the future of the welfare state with a warning that Britain would have to control the 'remorseless growth' in pensions, health spending and state benefits.

In the foreword to a document published to prepare public opinion for action, Peter Lilley, Secretary of State for Social Security, said spending on social security had increased sevenfold since 1948. 'The message that underlying growth in social security has exceeded, and will continue to exceed, growth in the economy, is an uncomfortable one . . . . It is not possible for the system to continue indefinitely to grow more rapidly than the economy as a whole.'

Kenneth Clarke, the Chancellor, underlined the message at the world economic summit in Tokyo after the G7 agreed that controls would have to be applied to the rising cost of public pensions and health care. The Chancellor said that 'all governments are having to tackle the same things and we have a deficit in our public finances which we are committed to dealing with'.

John Smith, the Labour leader, accused the Government of softening up public opinion for savage welfare cuts. Mr Lilley denied that charge on BBC 2's Newsnight last night and said: 'There will not be cuts in spending. We are trying to contain that growth.'

Mr Lilley, a Thatcherite, is anxious to achieve substantial savings in his budget before the next general election. He has been pressing the Cabinet to allow him to raise the retirement age for women to 65, but that has been blocked. He is preparing to tighten eligibility for invalidity benefit, and ministers are considering plans to reduce unemployment benefit from one year to six months.

'If you take unemployment out of the equation, expenditure has been growing 3 per cent more than inflation. It will be 3.3 per cent more than inflation until the end of the century. That cannot be allowed to continue indefinitely,' Mr Lilley said. He there should be more encouragement to be self-reliant. 'That is what people want.'

Mr Clarke said the Government 'didn't believe in deficits in public finances', and professed himself 'quite happy' with the economic convergence criteria of the Maastricht treaty. The criteria, to be debated by EC finance ministers next Monday, call for deficits to be cut to 3 per cent of national output by late in the decade, a target Britain is unlikely to meet without further fiscal tightening.

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