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Last Updated: Tuesday, 1 February 2005, 13:15 GMT
Blair signals more radical reform
By Nick Assinder
Political Correspondent, BBC News website

There could be no clearer signal of Tony Blair's determination to defy his detractors and press ahead with radical reforms of the welfare state than his remarks on incapacity benefit.

Blair is on the election trail
With another speech widely regarded as part of the unofficial election campaign, the prime minister left no room for doubt that, given a third term, he will return to an issue that has caused him significant political distress in the past.

His remarks came as he also admitted his biggest regret is that he failed to push radical change further, earlier in his premiership.

In a brief, unscripted and detail-light speech in Manchester - ahead of the publication on Wednesday of a five year plan on welfare - Mr Blair returned to a familiar theme.

It boils down to the notion that those who can work should work and those who cannot must be supported.

Find jobs

So his proposals on incapacity benefit are expected to see changes aimed at reducing by more than a million the 2.7 million who currently claim the benefit.

That may see "incentives" to work, by replacing the current payments, which are uprated every 6 and 12 months, with a flat rate.

There will also be other measures to help people find jobs.

It is part of the prime minister's stated aim of balancing rights and responsibilities and which, he hopes, voters will view as fair.

The danger, however, is that many, even on his own benches, will see the moves as penalising a vulnerable group and branding many claimants as scroungers.

Previous attempts to change welfare have led to precisely those accusations and landed Mr Blair with significant backbench rebellions.

Cutting benefits

So his new policy will be seen as taking-on that group of MPs, and even cabinet ministers, who are said to be looking for a less radical, more steady-as-she goes election manifesto.

His remarks also came the day after the Tories unveiled their plans for incapacity benefit claiming they would also encourage people back to work but would not get into a "contest" over cutting benefits.

But, aside from the prime minister's desire to "re-engineer" the welfare state, he also needs to find sources of income for a third term.

He is already facing Tory claims, supported by many independent forecasters, that there is a black hole in his finances which he will be forced to plug with post-election tax rises.

So the 7 billion cost of the Incapacity Benefit scheme could produce significant savings for the chancellor's coffers.

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