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Government proposals to replace incapacity benefit with two separate benefits that differentiate between people were branded as a "mistake" this week.

Kate Stanley, head of social policy at the Institute for Public Policy Research, warned that considerable energy and resources were likely to be used up in "patrolling the border" between the two benefits and argued for a single one to be created.

Under government plans, people with severe conditions would receive disability and sickness allowance and qualify for more money than they do now. Those with more manageable conditions would receive a lower-level rehabilitation support allowance which could be topped up by engaging in activities that would help them to return to work.

But Stanley, who was speaking at an IPPR lecture, proposed instead an "earnings replacement allowance", available to anyone who satisfied the eligibility criteria of having a disability or a sickness that significantly limited their ability to work.

Under this, clients would agree a set of actions with advisers which would be mandatory, with incentives attached. These could range from rest and recuperation through to job searching and, according to the

IPPR and mental health charity Rethink, would be "particularly appropriate" for people with mental health problems, many of whom want to work.

Stanley warned that the government's plans could lead to increasing numbers of people drifting onto the disability and sickness allowance where it may be more difficult to stop them becoming socially excluded.