The blueprint for revolutionising the social security system is the first public indication of how far the Tory right is prepared to go in dismantling the welfare state, targeting money solely on lower-income groups.
The proposals are put forward today in a pamphlet written by five backbench MPs from the 1992 intake. The fact that Mr Lilley and Mr Portillo are members of the group ensures that their ideas will receive influential backing in Cabinet. Earlier proposals from the group on education, the health service and privatisation have been adopted by the Government.
Both ministers have ordered spending reviews and are looking for significant cuts - Mr Portillo to help reduce the pounds 50bn Public Spending Borrowing Requirement, and Mr Lilley to his ever-increasing social security budget, which is set to reach pounds 80bn this year.
The proposals in Who Benefits? Reinventing Social Security, would reduce the benefits system to a minimum safety net for the poorest groups and remove all benefits from the better-off. The Whole Person Benefit would be paid at different levels according to individual circumstances.
The State Earnings Related Pension, mortgage interest tax relief, rent rebates and rent allowances would be abolished; unemployment benefit entitlement would be cut from 12 to six months; the state pension age would be equalised for men and women at 65, and eventually at 67; the earnings-related element of invalidity benefit would be phased out and invalidity benefit would be taxed as income.
Child benefit would be replaced with child tax allowances and funds targeted on children in needier families within Whole Person Benefit. Other benefits such as disability and invalid care allowances, and sickness and maternity pay, would also be incorporated with the single benefit. The changes would be introduced in three phases over about 10 years.
The pamphlet does not say how much the new benefit would be, or how much the changes would save overall. One of the authors, Barry Legg, MP for Milton Keynes South West, said: 'We are not in a position to detail costings . . . but if you can focus resources on those who need them most, there are going to be substantial savings - 25 per cent of the social security budget now goes to the wealthier half of the population.'
Donald Dewar, Labour's social security spokesman, said: 'This is a clutter of ill-digested ideas. The proposed cuts in unemployment benefit are a clear breach of the contributory principle. The creation of a single benefit is thoroughly impractical. These are paving proposals for a two-tier welfare state.'