Social security facing pounds 5bn a year cut

CUTS of pounds 5bn a year in social security benefits by the end of the century are being examined by civil servants as part of a government drive against public spending.

However, according to leaked Whitehall documents, the cuts would simply 'stabilise social security's share of general government spending'. They would seem to make little impact on the budget deficit, running at pounds 50bn this year.

The confidential papers, obtained by the Labour Party, indicate the wide range of cuts being contemplated. The pounds 5bn annual target dwarfs the pounds 1.3bn over seven years which would be saved by proposed invalidity benefit cuts. .

Early extracts from the documents, which had the Opposition and charities in uproar yesterday, showed plans to tax the benefit, reduce the amount paid, and withhold it from up to 60,000 people. It now goes to 1.5 million people, and costs pounds 6.1bn.

The 20-page draft policy paper, and a covering letter, due to be sent from Peter Lilley, the Secretary of State for Social Security, to the Prime Minister, were faxed, apparently by mistake, to the Press Association news agency.

The paper was drawn up after a meeting with Michael Portillo, Chief Secretary to the Treasury, and is due to be discussed on Tuesday by the two ministers and the Prime Minister. Details reveal that:

Most of the 60,000 people no longer able to claim invalidity benefit are likely to end up on the unemployment register;

It is assumed unemployment will still be 2.25 million by the turn of the century;

People will be encouraged to get private insurance to replace the earnings-related element of invalidity benefit.

The paper lists social security review objectives including: to focus benefits on the most needy; to encourage independence; to withdraw from where state provision is no longer appropriate; to improve work incentives; and to reduce fraud and abuse.

Gordon Brown, the shadow Chancellor, claimed the documents proved the Government had a hidden agenda to dismantle the welfare state, despite John Major's denials in the Commons on Wednesday. 'These documents reveal that ministers have lied, lied and lied again,' he said.

Yesterday Mr Lilley told the BBC radio programme Today that there was no question of 'taking money from those who are genuinely sick, who are in need and who want our help'. Nor was there any question of taking away or reducing the benefit already going to 1.5 million people.

At the Welsh Tory conference in Llangollen, Mr Major staked the future of his leadership on a vision of caring Conservatism with a call to stop 'squabbling' in the party, writes Colin Brown.

Trying to fight back from his worst week in office, he said the Government had no choice but to 'control public expenditure and restrain taxes'. It would examine everything but might discard any ways of saving money it thinks 'unfair'.

Conference report, page 4

Hurd 'will not stand', page 4