Ministers plan biggest shake-up of the welfare state for 60 years

The Government is to embark on the biggest shake-up of the state benefits system for 60 years, according to David Blunkett, the Work and Pensions Secretary.

In an interview with The Independent, he disclosed that a green paper he will publish next month will go much wider than the plan to reform benefits for the sick and disabled trailed in Labour's election manifesto.

Mr Blunkett said he was determined to simplify the system across the board in what would be the most wide-ranging changes since the modern welfare state set out by the Beveridge report was introduced by the post-war Labour Government.

Four months after he returned to the Cabinet, the former Home Secretary is determined to make his mark by slimming down a system that has 29 different benefits with 272 separate rates.

He said: "It is going to be a radical look. I want to go wider than Incapacity Benefit. The whole benefit system is a patchwork of past ameliorations and contradictions, with sticking plaster all over the place.

"Where one decision led to an anomaly, we then addressed that by bringing in another change or another additional amount. There is a plethora of additional payments, all of which go back decades, none of which you would put in if you were starting from scratch.

"I have been around a very long time, but I have only just learnt about some of the supplements and additions [to benefits]."

Mr Blunkett admitted that he would not be able to recast the whole system overnight. "I am not pretending we can do it in one fell swoop because it is mind-blowingly complex," he said.

Insisting that his purpose was not to cut benefits, he sought to reassure Labour MPs by saying: "The challenge is to simplify the system and maintain fairness."

He said he wanted to bring in "more generous" payments for the 500,000 severely ill or disabled people now on Disability Living Allowance.

But those among the 2.6 million people on Incapacity Benefit who are capable of work will be expected to attend work-focused interviews with personal advisers.

There could be a two-tier system, with higher benefits for those actively seeking work and lower rates for those who do not. But Mr Blunkett hinted this would apply to new rather than existing claimants and that he would not impose a maximum time-limit for staying on Incapacity Benefit. "It won't be crude," he promised.

Mr Blunkett is in the United States this week to look at its welfare schemes. In a speech in Washington today , he will spell out his vision of a new model welfare state based on "active inclusion". The Government would help people to cope with the "insecurity and instability" caused by the global economy but in return, people would also have to help themselves.

Referring to his five months in the political wilderness after his resignation following his affair with The Spectator publisher Kimberly Quinn, Mr Blunkett quipped that he knew that "work is good for you".

But he will not be highlighting his own blindness as an example of what can be achieve by the disabled. Instead, he wants to trumpet the stories of people who have come off Incapacity Benefit into work. "It will cause less irritation," he said.