The unemployed, low paid and others on benefits could be given the social security cards to use in shops and supermarkets, but they could get cash on their accounts over the counter at post offices.
The embattled Cabinet minister David Clark, the Minister for Public Service, who is pioneering the idea, is engaged in a round of talks with the High Street banks to allow the cards to be used in their "hole in the wall" cash machines.
The introduction of cash cards for welfare claimants could bring an end to the black market in stolen Giro cheques, and give many of those in poverty a personal account for the first time through the Post Office.
Mr Clark has told MPs it is part of the "quiet revolution" he is carrying out in improvements of service to the public. Other ideas he is promoting include making it easier for people to renew their TV licences and road fund "tax discs" by using swipe cards in machines in shopping malls, rather than queuing at the Post Office.
The minister is fighting to retain his seat in the Cabinet, following speculation that it is likely to go to Peter Mandelson, at present the minister without portfolio, in Tony Blair's next reshuffle. Mr Mandelson told a committee of MPs this week that he would be publishing a Freedom of Information Bill before the summer recess, in July.
He is also planning to put the majority of Whitehall documents up to classified level of secrecy on a ministerial computer system, which has been tested against hacking. It would allow ministers to read each others' documents.
Labour MPs took the unusual step of coming out in favour of Mr Clark, with a Commons motion timed to coincide with his appearance before the Committee on Public Administration, chaired by Labour MP Rhodri Morgan.
The committee is expected to praise Mr Clark for his work behind the scenes in the Government, but warn that it may not be enough. Peter Bradley, the MP for The Wrekin, told Mr Clark: "You talk about a quiet revolution. I would like the volume turned up."Reuse content