John Key's National Government looks set to mount the most determined attack on welfare payrolls since the current system was created in 1938 after a far-reaching review made public yesterday.

A welfare working group led by economist Paula Rebstock recommends forcing almost three-quarters of sole-parent, sickness and invalid beneficiaries, including all sole parents with no children under 3, to look for at least part-time work.

It would make sole parents who have another baby while on the benefit look for work when their babies reach 14 weeks, and would make long-lasting contraception free for all women on benefits.

All existing welfare categories would be rolled into a single benefit called Jobseeker Support, paid at the rate of the dole, with supplements for sick and disabled beneficiaries and sole parents.

The welfare system would be transferred to a new Crown entity with a business-oriented board.

In the longer term, both welfare payments and support could be contracted out to consortiums of iwi, voluntary and private organisations.

The group says its dramatic reforms could slash the number of working-aged beneficiaries by 100,000 by 2021 and cut net costs by $1.3 billion a year.

Mr Key signalled that the Government would pick up at least some of the proposals, including the requirement for sole parents with no children under 3 to look for at least 20 hours of paid work each week.

"That makes sense because it ties up with the Government's 20 free hours," he said. The state pays for 20 hours of "free" early childhood education from age 3.

He said the proposal to make parents who have another baby while on the benefit look for work when the infant is 14 weeks old would be "a step too far. "I feel a bit queasy about that."

But the Government could still pick up an alternative proposal by a minority of the eight-member working group to make sole parents who have another baby on the benefit look for work after one year - the maximum legal parental leave entitlement.

This was the only issue on which the working group was divided.

Although Mr Key would not rule out some changes before the election, he said most initiatives would be implemented "in further years".

The working group recommends gradual changes over the next three years, with the key shift to the new single benefit and work requirements in June next year.

It has shied away from some more extreme ideas raised during its 10-month review, such as axing benefits after five years or transforming the current tax-based system into a European-style insurance system.

But it recommends a quasi-insurance system modelled on the ACC's non-earners account, which is funded by taxpayers to cover the full future costs of accidents for people outside the paid workforce.

This system would give the new Crown entity, Employment and Support New Zealand, an incentive to spend money upfront to reduce long-term welfare.

The new entity "would primarily be a contracting agency that contracted non-government providers for services", including contracts with iwi, health services, training companies, job support services and employers.

It also recommends "selective use of 'work-for-welfare' programmes" for people who have been on welfare for six months and are "at risk of not complying with job search requirements" - the nearest it gets to time-limited benefits.

The group proposes rationalising extra support above the new basic benefit. Accommodation supplements, now based on individual housing costs, would be replaced by flat-rate supplements in each region, and other hardship grants would be replaced by capped regional funds.

It says about 20,000 invalid beneficiaries with high support needs should get the current invalid benefit plus the maximum disability allowance - a total of $301 a week compared with the $243 invalid benefit.

But the other 65,000 current invalid beneficiaries would get the dole of $198 a week plus individualised payments for the costs of their disabilities, providing an effective subsidy if they get paid work but with less overall state support than at present.

The group proposes a range of "carrots" to help people back to work.

The benefit clawback rate would be cut from 70c for every dollar earned above $80 a week to 55c for every dollar above $20.

Pre-school and childcare funding would be shifted from middle-class to low-income families, and sole parents would keep the full new housing supplement if they move into fulltime study.

But all beneficiaries with children would have their benefits transferred to third-party managers or payment cards if their children failed to attend pre-school from age 3 and school from age 6, or to get their full Well Child checks.

Young people under age 18 would also have their benefits paid to responsible adults or agents unless they are sole parents who have completed budgeting and parenting courses.