However, ministers stand by their intention to use other means, including new limits on availability of council housing, to fulfil Conservative Party conference pledges to discourage single parenthood.
Mr Lilley, who reacted angrily to the leak of the document, told BBC 2's Newsnight: 'We do not believe we are going to solve this problem by curbing the benefit system. We have to look elsewhere for causes to see if there is a change in attitude that may help; whether there are other aspects of policy that may impinge upon it; certainly, the availability of housing has a relevance - that is why we are reviewing the Homeless Persons Act (which gives housing priority to lone parents). We want to look across the board.'
While ministers disowned parts of the document - a package of advice from civil servants - it seemed clear cuts in social security benefits directed at single mothers are still on the agenda for the medium term. The Prime Minister's Office said ministers were holding talks on the ability of the social security system to 'deal with the issues raised in the growth of lone parenthood'.
The leaked document lists options under two categories - those under active consideration and those for possible future attention. The latter includes recommendations for improving child care provision and support to help single parents back to work, which could cost pounds 100m- pounds 200m. Proposals include suggestions that both sets of grandparents should have to contribute financially to grandchildren's upkeep.
The report, which has been discussed by the Cabinet Committee on Home and Social Affairs, made clear its main purpose was to identify cuts in public expenditure. Social security Budget proposals which ministers are likely to approve include: cutting one-parent benefit and lone-parent premiums; limiting amounts payable to separated couples, both of whom depend on benefits; restrictions on benefits to discourage lone parents who continue having children while on income support; increasing the attractiveness of family credit (for parents who work); and encouragement to families to let lone parents stay on in their family home.
Under that last proposal, lone parents aged 16 and 17 would lose benefits and their own parents would get extra benefits to meet the extra cost.
Other proposals in the document likely to be adopted include changes to homelessness legislation so lone parents no longer receive automatic priority and may receive only temporary accommodation; and more comprehensive sex education in schools and improved health service guidance to discourage unwanted teenage pregnancies.
Lowering the age of consent from 16 to perhaps 13, so children have access to contraception, was given as a possible future option. However, John Redwood, a leading Thatcherite in the Cabinet who was the first to raise the issue of lone mothers, rejected that idea.
Another Cabinet source said the Treasury had blocked some of the main proposals for lifting lone mothers out of dependency on benefit by providing more support for workplace nurseries or giving more generous allowances for earnings to enable them to take work. Although that could produce long-term savings, the Treasury had said it could not afford the extra short-term cost. 'The Treasury said you can demonstrate the cost; you can only estimate the savings,' said one ministerial source.
In an earlier interview yesterday, Mr Lilley said the Government would continue to 'support those lone parents struggling to bring up their children because we believe our duty is to ensure the children's interests are put first'.