Gerrard looked a peripheral and frustrated figure during Sunday's defeat of Liverpool by Manchester United - a result that left the Reds 11 points behind leaders United in the Premiership title race.

Benitez told BBC Five Live Sport: "He's as happy as he is in the national team. He's playing for England boss Steve McClaren on the right side.

"Steve McClaren is clever, he knows the best season of Steven Gerrard was playing as a right winger going inside, not as a right winger close to the touchline, and scoring 23 goals.

"Steven is the captain, he knows the most important thing is the club, the supporters and, if he plays on the right side, going inside with freedom, and Momo Sissoko and Xabi Alonso can give the balance to the team. He knows that is better for the team."

Liverpool are looking to bounce back from their Old Trafford defeat by beating Reading at Anfield on Wednesday in the Carling Cup, but Benitez claims he is happier with the way his team is performing now compared with a year ago.

"Last season was worse for me. We started with a lot of problems in the Premier League and were 24 points behind," he said.

Benitez will again rotate his squad for the visit of Reading. Robbie Fowler will be back in the side after overcoming a back problem.

"When we decided to bring Robbie here, we knew he was a very good finisher and could do the job for us because he had a lot of passion," said Benitez.

"He knows he has some players in front of him this season but he can do a good job for us because he is a fan, not just a player, and he must support his team-mates and the young players and be an example for them."

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