Chancellor George Osborne may lower the maximum amount of benefits families can claim to £20,000 a year, Treasury sources have said, as a cap is rolled out nationwide for the first time.
The benefit cap, which has been trialled in four London boroughs since April, was brought in across the country yesterday, limiting the amount families can claim at £500 per week, or £26,000 a year.
At the same time, a senior aide to the Chancellor said that the Treasury were seeing how the cap "beds in" before exploring a further reduction.
"We've had representations. we want to see how the policy beds in, but clearly over time lowering the cap is an option."
As it stands, the cap, which is set lower at £350 per week for single people, is said to reflect the average working household income. The Department for Work and Pensions estimates some 40,000 households will be affected by the policy.
Campbell Robb, chief executive of homeless charity Shelter said: “Right now millions of families are living on a knife-edge, and all it takes is a sudden job loss or hours being cut back to put their home at risk.
“The existing benefit cap already means that families who fall on hard times face a desperate struggle to keep their homes until they can get back on their feet. Reducing the cap further will create an even bigger gap between the support these families receive and the rent they actually pay, putting more at risk of losing their home.
“We’ve got to ensure there is enough of a safety net there to protect ordinary families from becoming homeless.”
The Tory party are continuing to look at other ways of bringing down welfare spending.
Speaking to the Daily Mail, Conservative party chairman Grant Shapps said that under-25s who are out of work should be denied housing benefits to end the "bizarre incentive" in the current system which makes it easier for unemployed people to move out of home than those who save to do so.
The benefits cap applies to the total amount received by those claiming jobseeker's allowance, child benefit, child tax credits, housing benefits and a range of other benefits.
There are some exemptions to the cap, with those who receive disability living allowance or its successor, the personal independence payment, or other benefits, such as industrial injuries benefit, war widows allowance or widower's pension unaffected.