A modern welfare state that works: Britain's social decline can be halted, says the Commission on Social Justice in a report today. Sir Gordon Borrie outlines how

The UK is on the wrong track. We are three times richer than we were in 1960, but we are not three times happier. Signs of decline are all around.

Ten million people rely on benefits to support themselves. The number of families without a wage earner has doubled in the past 15 years. One in seven 21-year-olds has trouble with basic reading. Crime is the UK's fourth largest industry.

This morning the Commission on Social Justice will launch its strategy for economic and social change - a radical vision of work and welfare for the 21st century. It is an agenda that has its origins in the conviction that the UK's current decline is not inevitable.

We need not be the tired, resentful, divided society we have become. We can bridge the gap between the country we are and the country we would like to be. The UK can be both fairer and more successful. And it must be both to be either. Far from being mutually exclusive, fairness and success go hand in hand, and so must economic and social policy.

The commission is clear about what social justice means. It is not a dry and academic exercise. It is about the type of society we live in: the state of our schools, the prevalence of unemployment, the spread of insecurity in our streets.

Our report shows how change can come. We are not about to issue a list of soft options or quick fixes. We believe ours is a hard-headed strategy for change.

It would be easy to attack government mistakes of the past 15 years. But that is not enough. The UK's problems stretch back well before 1979. For much longer governments have failed to keep pace with revolutionary changes that have transformed the nature of work and society. There has been an economic revolution in skills and competition. It has cut the macroeconomic power of nation states, created the thriving economies of the Pacific Rim and East Asia and killed the notion of a job for life. Continuous innovation is now the key to economic survival and success.

A social revolution has changed women's aspirations and life chances. When Beveridge published his ground-breaking reports in the early 1940s, he was writing for a simpler world in which men were bread-winners and women care-givers. His welfare state was designed to provide insurance against the obvious risks of a standard life-cycle - ill health, unemployment and retirement. But life-cycles are more varied now. Women make up nearly half the workforce, jobs are often combined with education, and parenthood with work. The risks have changed, too, with divorce and long-term unemployment now high on the list.

A political revolution has challenged the growing centralisaton of government. People do not like to see Whitehall grasp control of their daily lives through the escalation of quangos and the accumulation of powers that formerly rested with local authorities. Our challenge is not to resist change but to shape it. For too long we have see-sawed between regulation and deregulation - public and private sector, individual and the state. The commission's report cuts through the stale slogans of left and right with an agenda for investment in individuals, families, communities and business.

Social justice is not about how much we spend on others. It is about how much we invest in ourselves. Our standard of living and quality of life can be radically improved. We need new opportunities to earn, learn, save and own. We need the security provided by an intelligent welfare state, designed to help people manage economic and social change. And we need to show new responsibility to each other because strong families and strong communities are the basis of a stable society.

First, we need a revolution in education and training. Not just the vital investment in nursery education and a secondary school system based on achievement and not failure, but an expansion of opportunities for lifelong learning - in higher education and beyond. To achieve this, we will need a new partnership between students, employers and government. People benefiting from higher education must be prepared to contribute to their learning costs. Second, we must transform the welfare state from a safety net in times of trouble to a springboard for economic opportunity. We have taken the slogan of full employment and given it substance.

We propose a sustained attack on long-term unemployment, supporting people in employment rather than unemployment. And we show, too, how reform of the benefits system can make work secure and worthwhile.

Instead of subsidising low pay to the tune of pounds 1bn through the Family Credit budget, we can make work pay. Instead of forcing unemployed home-buyers to remain on Income Support to get their mortgage paid, we should reform housing benefit to give modest help with mortgage costs and give those people an incentive to take a job.

There is a common theme here. People want a hand-up and not a hand-out.

Third, we show how a modern welfare state is essential to help people to cope with the risks of change - in the workplace or in the family. That requires top-quality public services rather than just cash benefits, and security in old age, through new initiatives to guarantee dignity in retirement at affordable cost.

Finally, we must invest in the social wealth of our country. Communities become rich because they are strong. At the centre of our investors' strategy for national renewal is the belief that we owe something to each but that we also gain from giving to each other.

Regeneration has to come from the bottom up as well as from the top down.

That is why the commission is committed to devolving power from Whitehall to local communities.

We call our strategy 'change and grow'. Change the education system so people can learn more and earn more. Change the welfare system and the labour market so that people can take a job and government can save money.

And change the operation of government so that local communities can be regenerated from the bottom up.

When the commission began work nearly two years ago, it set out three objectives: to establish a credible vision of the future, to develop the policies to get us there, and to build a radical consensus for change. Our work to date has achieved the first two objectives. With this launch of the report, we begin the third leg of our journey.

The writer is chairman of the Commission on Social Justice. 'Social Justice -Strategies for National Renewal', the final report of the commission, is published today by Vintage, price pounds 6.99