Cutting the number eligible for invalidity benefit and the number claiming housing benefit are also favourites for cuts this year or next, as part of the public spending review being conducted by Michael Portillo, Chief Secretary to the Treasury.
Housing benefit is paid to 11 million people at a cost of pounds 8.9bn and officials are working on a formula to lower the level of income at which people qualify.
The Government is also likely to tighten up on eligibility to invalidity benefit and introduce Restart programmes for the long-term sick. Labour has alleged people have been encouraged to claim invalidity benefit to cut the unemployment figures.
The options emerged at a private meeting of the Government's Social Security Advisory Committee. The committee was briefed by officials from the Department of Social Security, which has set up teams to examine the potential for cuts to benefits, including housing benefit, invalidity benefit and income support.
Officials have agreed the benefit will have to be taxed at source, before being paid, as recipients could not be expected to pay back 25 per cent at the end of each year. Advisers believe the tax measure will be announced in the Chancellor's autumn Budget and introduced with effect from 1995.
Housing benefit is already means-tested, so lowering the level of income on which people qualify is seen as the most practical way of cutting costs.
The advisory committee will report on the options for cuts in its annual report at the end of the year. Members do not believe cuts such as ending the universal payment of child benefit and the state pension are possible before the next election because of the Government's small majority.Reuse content