Iain Duncan Smith is reportedly being urged by senior Tories to shut down all Jobcentres and let private companies and charities to step in to help Britain's unemployed back to work.
The proposal, backed by allies of chancellor George Osborne, is being considered for potential inclusion in the party's election manifesto for 2015, in what would be a radical step for Britain's system to help people into work.
One senior Tory told The Sun: “Introducing competition into the job search market is a natural Conservative thing to do. Tailoring help from experts for what people really need will work far better than the clumsy one-size-fits-all state solution.”
However, Duncan Smith is believed to be sceptical about the idea, with a source describing the proposal as "expensive and complicated".
A spokesperson for the Public and Commercial Services (PCS) Union told the Huffington Post UK: "Any failings in our social security system are entirely down to privatisation, with the work programme being the most obvious example, or a lack of staff and resources as a result of successive years of spending cuts. Jobcentres need the exact opposite of what some in the Tory party and their supporters appear to want."
This comes as a report by David Cameron's favourite think-tank Policy Exchange called for Jobcentres to be split up and forced to compete with charities and the private sector to help people into work.
Just over a third (36%) of Jobcentre users find sustained work because deep-rooted problems fail to be addressed, the report said, adding that they could be replaced with "Citizen Support" centres to better help jobseekers.
"The way public services are currently structured means that often a jobseeker ends up being passed from pillar to post," said Guy Miscampbell, an economics and social policy research fellow at Policy Exchange.
"This is confusing for the individual, creates barriers to help them into work and is expensive.
"Services have improved enormously, but there is still a lot more to do. What is needed is a radical overhaul of the system which puts the needs of the jobseeker first."
In response the Policy Exchange report, a spokesperson for the Department for Work and Pensions said: "Every day up and down the country our Jobcentre advisers are working closely with local authorities and other organisations to help people off benefits and into work. We now have an employment rate which has never been higher and record numbers of people in work.
"The Work Programme - which is run by private providers who are paid by results - is helping more people than any previous employment programme and has already helped 300,000 into lasting work, and through Universal Credit we are redefining the contract between benefit claimants and the welfare state and helping to make work pay."