Cameron proposes food vouchers as part of radical welfare reform

The Government could break the link between benefits and inflation, David Cameron said today (PA)

Helen Dent, the chief executive of Family Action, said: "Safeguards should be put in place so that children are not punished by Government for their parents' problems."

Regional benefit levels and "in-kind" support for the poor rather than cash payments are under discussion for a wholesale reform of the welfare system under a future Conservative government.

The Prime Minister raised the spectre of food vouchers by suggesting the Government could replace cash benefits in a bid to cut the £84bn bill for working-age welfare.

A proposal to introduce regional welfare levels – so that people in areas where pay is lower receive lower benefits – was removed from his speech at the last minute but Downing Street later said that the idea was still "open to debate".

Mr Cameron made clear he was not putting forward policy proposals and said he wanted to have "a real debate and ask some searching questions about welfare". However, critics said his ideas were clearly skewed in favour of a benefits crackdown and designed to appeal to voters who believe the welfare state is too generous.

"Financial help through the benefit system provides a vital lifeline for hundreds of thousands of children," said Matthew Reed, chief executive of the Children's Society. "Taking this away in yet further cuts to welfare would be a complete disaster for children up and down the country."

Mr Cameron said he wanted to end a "culture of entitlement" which saw some people living long-term on welfare with higher incomes than neighbours who work. Among the ideas he floated was the withdrawal of housing benefit from under-25s, removing the right for high-earners to keep their council homes, a reduction in the £20,000-a-year cap on housing support and limits on the additional benefit received by families with three or more children.

He also suggested it might be possible to curtail cash payments to those on welfare.

Perhaps the most controversial section of the speech was briefed to reporters before Mr Cameron had spoken, before being dropped from the final version. In it, Mr Cameron was to suggest introducing more regional flexibility into welfare payments because benefit levels affected incentives to work.