George Osborne will use this week's summer Budget to launch a clampdown on taxpayer-funded subsidies for hundreds of thousands of higher earners living in social housing.
The Chancellor will announce that local authority and housing association tenants on incomes of £40,000 or more in London and £30,000 in the rest of England will have to pay a market, or near market, rent from 2017/18.
In the case of those living in local authority properties, the extra cash raised will go straight to the Exchequer, where it is expected to raise up to £250 million a year by 2018-19 towards reducing the country's debt burden.
Mr Osborne will argue that 9% of all social tenants in England are now on higher incomes while enjoying the benefit of an average £3,500-a-year per household in reduced rent.
They include more than 40,000 with annual household incomes in excess of £50,000 and a further 300,000 with incomes over £30,000.
The move builds on measures introduced under the coalition that enabled housing associations and local authorities to charge market rents to those on incomes of more than £60,000.
Writing in The Sun, Mr Osborne - who is expected to set out further details of the Government's planned £12 billion in welfare cuts - said the Budget would "reward work over welfare" and allow people to keep more of the money they earned.
"We've also decided it's time to act on the higher earners who use taxpayer-funded subsidies to live in council and housing association homes when they could afford the market rent that others on their salaries pay," he said.
"It's a simple matter of fairness. The welfare system I want to see is one that helps people to get good jobs instead of giving them handouts."
In other moves the Chancellor is expected to announce that he is abandoning targets set under the coalition to increase the level of environmental taxes.
The Sunday Telegraph reported that it follows a warning from officials that "green" energy schemes will require £9 billion-a-year in subsidies - paid for by consumers - by 2020.
Senior Tories have reportedly blamed the Liberal Democrats who ran the Department for Energy and Climate Change for the failure to control the cost of renewable energy programmes.