Birkenhead MP Frank Field marked the 70th anniversary of the Welfare State by saying he believes the current climate of “austerity” offers the best prospect ever for serious welfare reform.

Mr Field said welfare “discourages work, taxes savings and does not encourage the declaration of earned income.”

He said it is a commonly held belief that it is only in a time of prosperity, when extra money is available to overcome unexpected adverse effects, that it is possible to bring about fundamental welfare reform.

But Mr Field said Britain’s experience in the record period of growth after 1992 - which was supposed to abolish the cycle of boom and bust cycle – disproves the theory that “throwing money around will somehow solve fundamental welfare reform issues,”

In a speech commemorating publication of the Beveridge Report in 1952, Mr Field said: “In the last decade £175bn was spent on simply meeting needs. This has resulted in the unstable welfare state we have today.

“Our current system discourages work, taxes savings and does not encourage the declaration of earned income.

“Voters, by contrast, are on the other side of the argument. They support the values of the good society and see welfare as one means through which such values should be reinforced.”

Mr Field poitned out that as Britain continues to age, there will be greater demands made on health, community care, and pensions.

He continued: “On current trends, if no changes are made, by 2050 the welfare and health budget will account for half of all government expenditure.

“No government will be able to deliver this share.

“It means that without tax rises which voters oppose, governments, to meet the welfare and health bills, would be required to abolish defence, education and one other major government department’s expenditure to meet this outcome.

“This is not serious politics.

“Here however lies the opportunity for fundamental welfare reform.

“There is no way any government will be able to persuade taxpayers to part with more of their reduced income to finance expenditure on topics decided by governments themselves.

“On the other hand the electorate knows it will become more vulnerable, both in respect of the need for greater health services and welfare support in the form of pensions, as life expectancy continues to grow.

“I believe it is more than possible to persuade voters to pay more towards health and welfare if it was promised that the sticky fingers of politicians would be kept off their funds.

“Here then is the opportunity to re-forge Beveridge in a form that would be as important for the 21st century as Beveridge was to the middle decades of the last century.”

Mr Field said it will only be possible if welfare reform is offered in a format where contributors control their own funds:

“The one part of welfare they most care about is the NHS. So why don’t we transform our health service onto an insurance-based model?

“Increased insurance contributions would be matched by tax cuts - as most of the NHS expenditure is financed through tax revenue - and governments would be required to pay the contributions of the poorest who are shown to exemplify good citizenship.”

The Beveridge Report formed the basis for post-war reforms which included expansion of National Insurance and creation of the National Health Service.