Michael Portillo, the Chief Secretary to the Treasury, and Peter Lilley, the Secretary of State for Social Security, both former Thatcherites, are seen as the driving force behind the move to target benefits.
One minister said: 'It would be politically inept to be cutting unemployment benefit at this time.'
Downing Street confirmed to the Department of Employment that John Major had no intention of allowing unemployment benefit to be cut in the current three-year review of public spending.
However, Mr Lilley is under pressure to seek savings on the social security budget. Requiring the unemployed to work for their benefits, under a 'workfare' regime, is a favoured option.
Other benefits may be targeted through means testing or taxation. That would require legislation. The Prime Minister's Office has confirmed that Lord Wakeham and Tony Newton, the Government leaders of the Lords and Commons, have been included in a new Cabinet committee to oversee this year's spending review, because of the possibility of long- term legislation on benefits.
The Prime Minister's Office has ruled out, for the time being, the option of reducing unemployment benefit from 12 to six months. That should help Gillian Shephard, the Secretary of State for Employment, to present an upbeat message on employment to the annual Conservative Party conference in October, in spite of last week's continued rise in the jobless total to 2.7 million.
Mrs Shephard is expected to announce a package of training initiatives to counter Labour criticisms. She has ordered a review of training to identify weaknesses in the programme and one option will be to target training schemes more closely to vacancies. The aim would be to guarantee that trainees will emerge with a recognised qualification or a job.
Officials have been asked to produce proposals by mid-September, when ministers are due to finalise their expenditure plans.Reuse content