Labour is calling for a radical rethink of the welfare state, arguing that the benefits system has betrayed its founding principles and "skewed social behaviour".

In a significant redrawing of Labour's position on welfare, the shadow work and pensions secretary, Liam Byrne, on Tuesday argues that the ballooning of the system has provided support that is unearned, and mislaid the original ideal of providing help to those that contribute.

Heralding a series of speeches over the next few months designed to mark out new territory for Labour, Byrne claims the party must recast the welfare state to meet the original intentions of its founder, William Beveridge.

In an article for the Guardian marking the 70th anniversary of the Beveridge report, Byrne identifies the spiralling housing benefit budget, benefits for long-term unemployment, and the lack of proper incentives to reward responsible long-term savers as three key flaws in the current welfare state. He writes: "Beveridge would scarcely believe that housing benefit alone is costing the country over £20bn a year. That is simply too high."

He insists the party needs fresh thinking, adding: "One more heave behind our old agenda won't do." As part of that rethink, he also hints that he would like to see the contributory principle once again restored as a building block of the welfare state so there is a clearer link between what people put in and what they receive.

Byrne is already facing resistance from some in the party, who are hopeful that Ed Miliband's leadership would resist criticism of welfare claimants and instead focus solely on opposing the cuts being imposed by the Conservatives.

Miliband in the past has been reluctant to engage in anti-welfare rhetoric, and his aides distanced him at the weekend from any suggestion that some claimants were "scroungers". But his calls for a responsible society found echoes last year when he claimed that responsibility applied as much at the bottom as at the top of society.

Byrne, appointed by Miliband last year, believes the centre ground of politics has shifted to the left on issues such as bankers and equality, but that most voters, including traditional Labour supporters, still want a tough line on welfare.

From the moment of Labour's election defeat in 2010, Byrne has argued consistently that the doorstep response to the Brown government had been anger that it had been unable to stand up for those in society who earned just too much to win any state help, and yet had suffered a squeeze on their living standards.

Most polling shows the Conservatives enjoy a strong poll lead on welfare, and the work and pensions secretary, Iain Duncan Smith, has struck a chord with his promise to make work pay through the introduction of universal credit.

But Labour believes that as the cuts bite in 2012, more voters will look at how the pain is being distributed through society, so long as Labour is seen not to be protecting what Byrne describes as the appalling benefit bill. In a bid to persuade Labour supporters to embrace his message, Byrne argues that Beveridge, seen as a Labour icon even though he was a liberal, had never constructed his system to accommodate extended mass unemployment.

He writes: "Beveridge would have wanted reform that was tough-minded and asked everyone to work hard to find a job. He would have worried about the ways his system had skewed social behaviour because he intended benefits to help people who had their earning power interrupted because of illness, industrial injury or the capriciousness of the trade cycle. He never foresaw unearned support as desirable."

He points out that Beveridge himself wrote: "Unemployment benefit after a certain period should be conditional upon attendance at a work or training centre."

Byrne has been looking at schemes in Australia and the US, and is inclined toward requiring the unemployed to work after a fixed period.

He also suggests that families trying to do the right thing are offered too little reward and incentive – in social housing and long-term savings – for the kind of behaviour that is the bedrock of a decent society. He has suggested well-behaved tenants should be given some form of reward in social housing.

He is also looking at how the welfare state needs to be recast to deal with the new saving demands facing the country.

He argues families are facing a radically new lifecycle for savings and risks – with tuition fees to pay back, big mortgage deposits to save for, and the cost of social care and a pension that needs to nourish them far longer in old age.

Despite the Conservatives' current poll lead on welfare, Labour believes the coalition is vulnerable as huge new cuts to tax credits and children's benefits land just as the squeeze on living standards grows.

The Tories, Byrne claims, "are simultaneously presiding over an exploding welfare bill while cutting back on contributory benefits and services like childcare – vital if we are to ensure that the rhetoric on making work pay becomes a reality for all." But Byrne believes Labour will only get a hearing if it is seen to make its own difficult choices on welfare. He will argue that against a backdrop of tightening belts, Beveridge would want every penny to count.