Former Labour Social Security minister Frank Field said the Government had again failed to find the right solutions for welfare benefit
He told the BBC Radio 4 Today programme that he had doubts whether the proposed welfare reforms would make any difference to the system and added that he had "lost count... of the number of occasions the Government has published what it thinks are radical and tough proposals and for very little to happen".
"Over the last 11 years, it is important to remember, we spent £60,000 million of taxpayers' money supporting New Deals and Making Work Pay," he said.
"And the net effect of that, at a time when three million extra jobs have been created in the economy - the workless roll call has fallen by less than half a million.
"It continues to happen because the Government introduces reforms which design in the faults of the old system.
"The key fault of the old system is being brought into the new system and that is that if you can get through the employment capacity test - fail the employment capacity test - you will go on to a higher rate of benefit."
Instead there should be a single rate of workless benefit - with the extra cost of any incapacities met through disability living allowance, not benefits.
The proposals "do nothing to help claimants liberate themselves", he said.
Mr Field was brought in by Tony Blair to "think the unthinkable" on welfare reform in 1997, and came up with a radical programme to reduce means-testing, crack down on benefit fraud and encourage incapacity benefit claimants back into work.
But his proposals met stiff resistance from the Treasury, which saw them as unaffordable, and he is thought to hold the then-Chancellor Gordon Brown largely responsible for his being forced out of the Government after just a year.
Mr Purnell said: "Actually we are taking a really radical step in the direction which Frank suggested, which is that we are moving towards having essentially two benefits: JSA and the new benefit ESA, the employment and support allowance.
"So that will simplify the system, but if you were to go to a single benefit you would either have to cut the level of money that millions of disabled people get or you would have to bring everybody else up to the higher rate, which would cost hundreds of millions of pounds.
"We think that at this stage moving towards two benefits is a very big step forwards and we think it is the right thing to do."
He insisted Labour would "never, ever" stigmatise the jobless and was "returning to the founding principles of the welfare state".
"One of Beveridge's key principles was that it should not stifle incentive, opportunity and responsibility... it was eroded between the '60s and the 1980s and we are putting that principle right back at the heart of what we're doing.
Liberal Democrat work and pensions spokeswoman Jenny Willott said: "We need a radical simplification of the benefits system but the Government continues to drag its heels.
"Today's proposals completely ignore the disincentive to work that our complex benefit system has created.
"The fact that over half of children living in poverty are in working households is largely ignored. Reforms must ensure that work really pays or we will see poverty levels rising in Britain.
"The new measures for jobseekers mean that claimants without basic levels of literacy or any interview experience will wait six months before receiving any help to address these problems.
"The reforms must allow Jobcentre Plus to tailor support to each individual.
"James Purnell may think that privatising all back to work support marks out his modernising credentials but it lacks foresight.
"If recession takes hold, it may not be profitable for companies to bid for welfare contracts, yet the public infrastructure will have been completely eroded.
"There needs to be more careful thought about how the market would operate in a severe downturn with rising unemployment."
Benefits are a reserved power, meaning policy is set UK-wide from Westminster, but as skills and training are devolved matters there will be consultation with devolved administrations.
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