Tony Blair will today set out how he would radically overhaul the welfare state if Labour won a third term.

In advance of Tuesday's long awaited report from the Pensions Commission, the prime minister will underline his determination to reform the pensions, benefit and employment system.

Gordon Brown however has ruled out big increases in state spending to solve the pensions crisis.

An aide to the chancellor told the Times: "These new challenges are not solved by spending more money within the existing state structure."

Adair Turner, the head of the commission, has concluded that the country will have to face "unpalatable choices".

People will either have to work longer, be forced to save more for their retirement, or the state will have to step in to fill the gap.

In his speech Blair will set out plans to build an "opportunity society" in Labour's third term.