A regional welfare cap, lower than the £23,000 ceiling that is soon to apply to the whole country, is poised to be among a series of controversial measures in the Chancellor's emergency Budget next week.
As the axe falls in an effort to cut £12 billion from the social security bill, Mr Osborne could also ask families on housing benefit to pay some of their rent and slash tax credits, the top-up payments handed to low paid workers.
And state payments to thousands of sick and disabled people could be cut by £30 a week under further plans under consideration.
Briefings about how the Chancellor intends to make good on the Conservative election manifesto appeared in The Guardian, The Daily Mail, The Independent and on the BBC ahead of Mr Osborne's first update on taxation and spending without the Liberal Democrats.
Plans for a regional benefits cap were thrown out in the last Parliament, but there are thought to be concerns that housing benefits have ballooned to £25billion a year.
The current cap – £26,000, but soon to be reduced to £23,000 - has little impact outside London, where the shortage of homes fuels high rents charged by landlords.
Top Tories believe the policy to be popular, and are considering a level more aligned to pay outside the capital.
Mr Osborne is also expected to cut tax credits, but offset the impact by raising the personal tax allowance and making a commitment to do more to persuade employers to boost pay.
Meanwhile, housing benefit, which currently covers the full cost of the rent, could be reformed so all tenants have to pay at least 10%. Ministers have already said they will cut housing benefit for 18 to 21-year-olds.
And the £102.15 a week paid through the Employment and Support Allowance (ESA) could be reduced to the same level as Jobseeker’s Allowance - £57.90 a week for 18-24 years-olds and £73.10 a week for those aged 25 and over - if people are deemed likely to be able to return to some work in the future.