Welfare splits the nation, says Blair. But could it be his Vietnam?

A campaign for welfare reform opened yesterday with the Prime Minister condemning an outdated system that had helped create two nations, while William Hague warned that welfare would be Labour's Vietnam - a disaster. Our Political Editor reports on the start of a critical debate.

Tony Blair last night appealed to Labour activists to help build a national consensus for change in a welfare system that had split the nation - "one nation trapped on benefits, the other paying for them.

"One nation in growing poverty, shut out from society's mainstream, the other watching social security spending rise and rise, until it costs more than health, education, law and order and employment put together."

The Conservative leader said Mr Blair was a salesman without a product - before going on to compare the campaign to America's disastrous and humiliating debacle in Vietnam.

"This is a noble cause," William Hague told a Parliamentary Press Gallery lunch. "But as with Vietnam, they are not sure why they are there; they don't know how to bring to an end what they are opposed to; they do not know what victory is.

"But they will keep committing more troops in the hope it will lead to salvation. In the end they will be forced to withdraw through lack of resources."

The Prime Minister's spokesman said Mr Blair was attempting to deal with a legacy of failure after 18 years of Conservative government. In 1993, they had attempted to generate a debate for change, but the problems had continued to grow.

Last night, in a speech to party members in Dudley, West Midlands, Mr Blair said the welfare state was neither a pathway out of poverty nor a route to dignity in retirement; but rather a dead end for too many. A long-term, thought-out change of structure was necessary, even if the rewards did not come until the next century.

"To those who doubt we should do it," the Prime Minister said, "to those who believe it is too risky, too tricky, or even unnecessary, I say examine the evidence.

"With your head, I ask you to look at the facts. With your heart, I ask you to look at the current suffering. Then tell me the status quo is an option."

Among the many points made in a fact-packed assortment of social security "focus files", it was stated that while one in ten had been living in poverty when Margaret Thatcher became Prime Minister in 1979, the figure was now one in five - defined as those living on less than half average income.

Another "focus file" said the poorest 10 per cent of pensioners were on an average weekly gross income of pounds 69.90, compared with pounds 602.50 for the top 10 per cent of pensioners.

There was no mention of the "affluence test" mooted at the weekend by Harriet Harman, the Secretary of State for Social Security, and Mr Blair said: "The state pension will remain the foundation for security in retirement. Those of working age who through illness, disability or caring responsibilities cannot work, will always be protected by a Labour government."

Mr Blair set out four founding principles for change: society had a responsibility to help people in genuine need, unable to look after themselves; individuals had a responsibility to provide for themselves, when they could so; work was the best way out of poverty for those able to work; and fraud and abuse would not be tolerated.

More detail was provided by Frank Field, the minister for welfare reform, in a speech to the Thatcherite Centre for Policy Studies last night.

He said there was no question of a "big bang" approach to reform, because that would risk collateral damage to the innocent, but he did argue for a "patchwork", "a rich diversity" or a "mixed economy" of welfare provision", with the Government as a partner, not a dictator, in the construction of a new welfare state.

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