Lilley says benefit rates could be decided locally

Key decisions on benefit payment to the poor could be decided at local level and according to local conditions under a radical suggestion floated for the first time yesterday by Peter Lilley, Secretary of State for Social Security.

The idea that parts of the social security system could be devolved to councils, agencies or other local bodies, instead of being uniformly and centrally administered, came as Mr Lilley promised more cuts in welfare spending on top of the £8bn reduction he forecasts will flow from current cuts and falling unemployment by 2000.

"Whenever changes are made in future I will consider cautiously whether some greater degree of localisation could bring improvements,'' the Thatcherite right-winger said in a keynote speech. Donald Dewar, his Labour opposite number, accused the minister of hinting at a return to a system that had died with the poor law.

The uncompromising message that it would be "dangerously complacent to halt the process of reform'' came in a speech to the Social Market Foundation, the market-orientated think-tank. "Localisation'' of benefit, together with the piloting of benefits locally before applying them nationally, were highlighted by Mr Lilley as two new propositions to follow the nine spelt out in his Mais lecture, which initiated the long- term review of social security nearly two years ago.

The third additional plank - "there are few self-financing ways of reducing the demand for social security by spending money elsewhere" - is a direct challenge to Labour claims that its "dole-to-work" measures could pay for themselves within two years. But most of the Opposition's fire was directed at what Mr Dewar called "flying the flag for the break-up of the benefit system.''

Mr Lilley said a national system made it "harder to mobilise local pride to generate positive alternatives to welfare dependence''. Citing Switzerland, where 3,000 communes decide on benefits for the poor, he said: "There are self-evident disadvantages

to such a system. But they have combined the most generous rates of benefit in Europe with one of the lowest levels of dependency.''

Devolution of power to local communities had already begun, with community care and local ceilings on rents for which housing benefit would be payable.

Mr Dewar said: "Is he really suggesting a patchwork of different levels of income support across the land? Are local communities to be encouraged to drive down benefit rates and so force on the jobless and the ill a new cruel form of labour mobility? Arethey to shop around looking for the best rates? This is a formula for reinforcing poverty with a vengeance. It has nothing to do with mobilising local pride.

"There must be no move to break away from national standards that are essential safeguards for those on benefit. Efficient administration is vitally important but so are decent levels of provision.''

Mr Dewar added: "He boasts of the savings that have come from policy changes. They are not painless.''