Hundreds of thousands of young people could be stripped of housing benefit and forced to live with parents

Prime Minister David Cameron has said that the current benefits system is giving families who depend on them the wrong signals (Getty Images)

Hundreds of thousands of young people could be stripped of housing benefit and forced to live with their parents as part of a new welfare crackdown signalled by David Cameron.

The Prime Minister insisted the system was giving the wrong incentives as he urged more action to prevent feckless families relying on state handouts.

The comments, in an interview with the Mail on Sunday, come ahead of a keynote speech on welfare Mr Cameron is due to deliver next week.

The measures said to be under consideration include:

* Scrapping most of the £1.8 billion in housing benefits paid to 380,000 under 25s, worth an average £90 a week, forcing them to support themselves or live with mum and dad instead.

* Stopping the £70-a-week dole payment for individuals who do not try hard enough to get work.

* Forcing a hard core of unemployed to do community work after two years - or lose all their benefits.

According to the newspaper, ministers are also looking again at plans to limit child benefit to a couple's first three children - although Mr Cameron will stop short of raising the idea.

Mr Cameron said the existing benefits system was "sending out strange signals on working, housing and families".

He went on: "A couple will say, 'We are engaged, we are both living with our parents, we are trying to save before we get married and have children and be good parents.

"'But how does it make us feel, Mr Cameron, when we see someone who goes ahead, has the child, gets the council home, gets the help that isn't available to us?'

"One is trapped in a welfare system that discourages them from working, the other is doing the right thing and getting no help."

Asked if he would take action against large families who were paid large sums in benefits, the premier replied: "This is a difficult area but it is right to pose questions about it.

"At the moment the system encourages people not to work and have children, but we should help people to work and have children."

Mr Cameron's proposal to axe housing benefit for the under-25s would include exemptions for special cases, such as domestic violence.

But he insisted: "We are spending nearly £2 billion on housing benefit for under-25s - a fortune. We need a bigger debate about welfare and what we expect of people. The system currently sends the signal you are better off not working, or working less."

Mr Cameron indicated that he favours new curbs on Jobseeker's Allowance, demanding the unemployed do more to find work. "We aren't even asking them, 'Have you got a CV ready to go?"' he said.

A hard core of 5,000-10,000 regarded as workshy could be forced to take part in community work if they do not find employment or training after two years.

The Prime Minister's hard line on benefits could exacerbate strains with Liberal Democrat coalition partner Nick Clegg, after a damaging split over proposals for scrapping GCSEs this week.

But Mr Cameron said: "As leader of a political party as well as running a coalition it's right sometimes to make a more broad-ranging speech."

A senior Lib Dem source said they were "incredibly relaxed" about Mr Cameron's intervention on welfare.

"This is the Prime Minister floating stuff as Conservative Party leader," the source said. "They have had a bit of a rough ride over the last few weeks and he needs to speak to his base. We understand that."

The party was "fully committed" to "making work pay", but would not necessarily agree with everything the premier said.

Mr Clegg will be making his own speeches to "differentiate" the coalition parties, although they were governing together.

Shadow Chief Secretary to the Treasury Rachel Reeves said the Government was spending more on unemployment benefits and housing benefit.

She told the Sky News Murnaghan programme: "So if the Government are really serious about dealing with the benefits bill, they've got to get the economy moving again, they've got to get people back to work.

"If you've got 2.6 million people out of work like we do at the moment, if you've got a million young people out of work, you're paying more out in benefits than you're getting less in, in tax revenue.

"That's not going to get the economy moving again, but also it's making it harder to get the deficit down as well. So to get the benefits bill down you need an economy that's growing and you need more people in work."

Shadow Work and Pensions Secretary Liam Byrne said: "This is a hazy and half-baked plan when we need a serious back to work programme for young families.

"Many young families with their first foot on the career ladder will be knocked off if help with their rent is taken away. And young families that want to work won't be able to move where the jobs are.

"The way to get the spiralling benefits bill down is start getting young people and young families back to work. That's why Labour's Real Jobs Guarantee financed by a tax on bankers' bonuses is the right thing to do.

"I'm afraid this is another smokescreen from an out-of-touch Prime Minister who's now put our country back into a double dip recession, forced up youth unemployment to over a million and is doing nothing to fix the unfolding chaos at the DWP. "

PA