David Cameron is "interested" in exploring the idea of varying welfare payments across the UK to reflect differences in wages and the cost of living, Downing St has said, in a move likely to draw more anger at Tory proposals to introduce radical reforms to the social security system.
The prime minister's official spokesman said on Monday that "clearly wage rates vary around the country".
"What someone receives in benefits compared to what they potentially get by going into a job has an impact on the incentives they face."
The implicit suggestion is that in areas of Britain where wages and the cost of living are lower, having the same benefit payouts as more affluent areas could act as a disincentive to come off benefits and get a job.
Although the idea remains just that, it's another sign that the Tories are considering standing at the next election with radical proposals to change the welfare state. On Monday David Cameron confirmed he was looking at plans to curb housing benefit for under 25s.
The PM said: "There are many who will have a parental home and somewhere to stay – they just want more independence.
"The point is this: the system we inherited encourages them to grab that independence, rather than earn it. Perversely, the benefits system encourages this process from one generation to the next."
An early draft of Cameron's speech on Monday included the idea of regional variations in welfare payouts, but this was dropped from the final text at the last minute. Despite this, Downing Street has confirmed it is still on Cameron's radar as a possible future policy.
The government is hazy on whether any changes to the welfare system would happen before the next general election. Number 10 says the ideas are likely to be included in the next spending review - expected next year.
Ministers are said to be cooling off the idea of introducing regional or local pay variations for civil servants and other public sector workers. Although George Osborne floated the idea in the Autumn Statement last year, signals from Whitehall in recent weeks suggest the changes would be too politically damaging for the coalition because many Lib Dems, particularly in places like Cornwall, fiercely oppose them.
Many believe that any form of regionalisation - whether for benefits, public sector wages or anything funded for by the taxpayer - is impossible because standards of living can vary hugely within a region. Tories in the north of England always worry how it would play out on their constituencies, others see it is risking an extension of the north-south divide.
But the government has indicated that it will need to slash the welfare bill by a further £10bn in order to meet its deficit reduction timetable - and Cameron's speech on Monday is seen as a way of outlining other ways in which the government could achieve that target.
In 2007 a form of public sector regionalisation was introduced for the Courts Service, with staff salaries being lumped into different zones. It led to a patchy map of Britain, with places like Manchester and Portsmouth put in the same pay zone. But attempts to widen this scheme to other parts of the public sector appear to be foundering, partly because Lib Dems are fiercely opposed.
At the moment Downing Street says these are Tory ideas, not coalition ones, in a sign that the two governing parties are already seeking to carve out distinct policy agendas ahead of the next election, scheduled for May 2015.
A Lib Dem spokesman said: "This is a speech by David Cameron as leader of the Conservatives floating ideas for the next election. He has every right to do that but it's not Coalition policy.
"Where we do agree is the the core principle of the Coalition's welfare plans - making work pay. Liberal Democrats want to ensure we have a system which, as well as being affordable, protects the vulnerable and gives a helping hand to those who are struggling to find work."
Cameron also signalled on Monday further curbs on Income Support for lone parents, saying: "We also need to ask if single parents living on benefits can do more to prepare for work. Today, we have 580,000 lone parents on out-of-work Income Support.
"Before this Government came to office, single parents weren’t required to look for work until their youngest child was seven years old – up to three years after they’ve started primary school. We thought that needed changing – so we’re bringing it down to five years-old, about the age they start school.
"But now there is free childcare for all children from age three, that does prompt a question about how some of that time, 15 hours a week, more than a thousand hours over a couple of years, should be used by parents on Income Support."
The ideas have been widely attacked, with some claiming the government is making life harder for young people while refusing to introduce means-tested benefits for pensioners.
Some people brand the Tories' welfare plans a cynical calculation because older people are more likely to vote. At the last election nearly three-quarters of pensioners turned out at polling stations, while fewer than 40% of people under 30 bothered to vote.
Shadow Work and Pensions Secretary Liam Byrne called it "a hazy and half-baked plan," saying: " "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," Byrne added.