The DSS has costed the savings which could be gained by restricting benefit, which is currently paid for a year, to six months, forcing the jobless to rely on means-tested income support at an earlier stage.
Unlike income support, unemployment benefit, worth pounds 43.10 a week or pounds 69.70 for a married couple, is paid without any assessment of personal savings.
Peter Lilley, the Secretary of State for Social Security, has argued against the changes. Although ideologically committed to cost-cutting, he believes they would be politically insensitive at a time of rising unemployment. He will stress the political disadvantages of the move, should the Treasury press for instant savings.
Sources describe the review, which ministers believe they can resist, as a routine attempt to offer potential savings in negotiations with Michael Portillo, Chief Secretary to the Treasury, in the forthcoming public spending round.
The review has been prompted by the DSS's difficulty in offering obvious budget cuts. Most benefits are uprated annually and the Conservative Party manifesto promised to maintain and index- link child benefit.
Taxing child benefit has also been rejected. Ministers believe that, with non-working wives now taxed separately from husbands, the savings would be insufficient to justify the political outcry.
Ministers are reviewing arrangements for payments under the youth training schemes. They also face problems providing enough places for those young people who need them. At present 16-year-olds not in training cannot claim benefit.