At present, those who work part-time lose benefit pound for pound above a small amount of earnings. That provides little incentive to take part-time work, even if it might lead to a full-time job.
Under the bonus, a credit equal to half the value of the extra earnings above the disregard will be built up - to a value of pounds 1,000 - which will be paid as a bonus when people go off benefit into full-time work. The scheme, which Mr Lilley claimed as 'the most imaginative innovation in this field for decades', comes as Labour's Commission on Social Justice is believed to be proposing similar bridge- building incentives to get people back to work.
The bonus, which could become payable from April 1996 and which is expected to benefit at least 150,000 people a year, would 'transform the system from a safety net that traps you, into a trampoline that you can spring from', Mr Lilley told the Tory party conference in Bournemouth.
'It will encourage part-time work as a stepping stone to full-time jobs, boost incentives and reward honesty,' he said.
Some people were reluctant to risk coming off benefit because of the uncertainty of whether a new job would last, or how much overtime would be available, Mr Lilley said later. 'The relative security of benefits as against jobs makes it difficult for people who would otherwise want to work (to make the move).'
The bonus, which can be built up over any period of time, would 'encourage people to take part-time work, to declare part-time work that they are already doing, and to take advantage of working more than 16 hours a week and coming off benefit,' Mr Lilley said.
The signs of changing times were also marked by Mr Lilley attacking yuppies as well as New Age travellers in his speech. He disclosed that his department has now found a wholesale answer to 'spivvy schemes to avoid national insurance contributions', in which 'yuppies' have been paid bonuses in 'gold bars, diamonds or vintage wines'.
Instead of banning such scams one by one as employer's invent them, the law is to be changed to define which payments - such as luncheon vouchers - are legal, making all others illegal. That, Mr Lilley said, should 'put an end to them once and for all'.
Prisoners are also to have their entitlement to housing benefit cut from 52 weeks to 13 weeks.