Report reveals hit list for paring back welfare state: Pensions, child benefit and free prescriptions are targeted

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THE TORY party's hit list of targets for cuts to social security benefits and its parallel plans partly to dismantle the welfare state are revealed in a confidential briefing document discussed by party activists yesterday.

The Conservative Political Centre paper summarises the party's agenda for the future of the welfare state. It combines a list of targets which could be cut or taxed and also identifies benefits which could be replaced by compulsory private insurance.

On reducing costs the report points out manifesto promises to uprate the retirement pension and child benefit in line with prices. But it adds: 'However, we gave no commitment to continue to exempt child benefit from tax - though if it were taxed it is unlikely that very large sums would be raised.'

While pointing out difficulties the paper says benefits which could be means tested and targeted on those in most need include child benefit, the state pension and some benefits for disabled people. It also points out that it would be possible to means test services now provided free for all, such as accommodation and food in hospital and NHS prescriptions for retired people and children.

On equalising the state pension age the report lists the options and appears to favour raising the retirement age for women to 65, to save pounds 3bn. During an open session of the weekend conference in Cardiff, the paper's author, David Willetts, Tory MP for Havant, said it was sensible to equalise at 65 and use some of the savings to give extra help to people over 80.

Another option for reform is encouraging people to opt out of the state system altogether. The report says: 'This could be done by a mixture of compelling people to take out private insurance for certain eventualities and giving them incentives in the form of rebates from tax or national insurance contributions.'

Options identified include obliging employers to take out private insurance for industrial injuries from which they have to pay the victims of industrial accidents - this now costs the state pounds 650m a year in benefits.

People could be given incentives to opt out of the state pension scheme and provide personal or occupational pension arrangements by giving rebates on national insurance contributions. This would reduce the state's responsibility towards pensioners in the long run, though in the early years the Treasury would lose national insurance contributions.

Another candidate is mortgage interest payments for people on income support, which now costs pounds 1bn. The report says 'it might be possible to oblige people to take out private insurance with their mortgage to cover them in the event of their becoming unemployed or losing their income for other reasons'.