Clash looms over pensions crisis

Tony Blair insisted today that Labour would push through radical welfare reform despite a pre-emptive strike by the Chancellor against Downing Street's long-awaited pensions overhaul.

The Prime Minister moved to impose his personal authority on the issue with a speech setting out his vision for an "opportunity society" in a third term.

But Gordon Brown made plain that neither the public nor the Government would accept big increases in state spending to solve Britain's pensions crisis.

Former CBI chief Adair Turner, who has been commissioned by Mr Blair to come up with answers to the crisis, will tomorrow raise the prospect of tax rises to fund pension increases. Putting up state spending is one of three proposals, along with people working longer and saving more, to be outlined by Mr Turner.

In a surprise move, aides to the Chancellor said that he would not tolerate any tax rises. "We will do nothing to put the public finances at risk, including increasing public spending on pensions to European-style levels," one said. "These new challenges are not solved by spending more money within the existing state structure."

The hardline statement underlines-Mr Brown's desire to retain control over welfare policy despite the loss of his ally Andrew Smith, who quit as Work and Pensions Secretary last month.

Mr Smith's replacement Alan Johnson made clear at the weekend that compulsory pensions or raising the retirement age were off the agenda, although more people will be encouraged to work later.

Some within Downing Street are keen on raising the £77 a week pension to more than £100 and want a reduction in the means testing disliked by so many pensioners. But the Chancellor has spent years building up his means-tested Pension Credit system that offers extra help to the poorest.

In a speech to the Institute for Public Policy Research, Mr Blair was expected to say it would be a priority to slash the soaring cost of Britain's incapacity benefit bills and may unveil moves to roll out schemes to force claimants to take compulsory job interviews.

Shadow work and pensions secretary David Willetts today outlined the Tories' plans, calling for more help for victims of company pension scheme collapses.

Under one idea, employees would no longer have to opt in to a company scheme and would instead automatically be included in it unless they specifically opted out.