MP in welfare warning to Blair

COLIN BROWN

Chief Political Correspondent

Tony Blair was urged last night by a leading backbench expert on social security not to adopt means-testing of child benefit and the state pension in Labour's fundamental review of the welfare state.

Chris Smith, Labour's social security spokesman, is looking at means- testing as part of Labour's review to reduce the burden of the welfare state under a Labour government.

As an alternative to means-testing, Frank Field, Labour MP for Birkenhead, urged Labour to expand the role of the mutual aid societies, including building societies.

He called for the party to consider proposals by the mutual aid societies for a three-tier welfare state: a state-guaranteed minimum; the compulsory purchase of a comprehensive policy covering all main social security needs; and voluntary membership of top-up additional insurance coverage.

Mr Smith will publish policy papers on reform of the welfare state in May: on pensions, welfare to work, child benefit, efficiency savings, and a possible statement of principles.

Mr Field, chairman of the Commons select committee on social security, warned the Labour leadership that means-testing would leave the poor in a social security ghetto.

Accepting that the rising cost of the welfare state was not sustainable in the longer run, Mr Field forecast a "major disengagement". "The easiest and most popular way of achieving this outcome would be for a further disengagement from universal benefits, allowing the middle-class to order their own welfare provision and regimenting the poor ever more into ghetto- type schemes," Mr Field said in the Allen Lane Foundation memorial lecture.

The Government was defeated last night in the Committee Stage of the Community Care (Direct Payments) Bill on plans to allow disabled people to buy care. About 700,000 people are now potentially eligible for the scheme - 20 times more than envisaged.