The Daily Telegraph (p10) reports that under the scheme, tenants receiving the allowance would be allowed to keep a proportion of any savings made by finding cheaper property.
The proposal, says the paper, an attempt to encourage a greater sense of social responsibility among the 4.7 million people who get most of their rent subsidised in housing benefit.
Ministers believe the present arrangements allow landlords to charge excessive rents while discouraging tenants from worrying about the size or cost of their homes. 'There is no incentive for people to be responsible over the accommodation they choose because almost everything is paid,' said a Whitehall source.
A housing benefit simplification project within the department of social security is drawing up the proposals. At the same time, the long-term future of housing benefit is under review as part of a wider overhaul of the structure of housing finance being undertaken by the department of the environment, transport and the regions.
Ministers believe that the administrative performance of local councils in handling housing benefit payments is patchy and that they have no incentive to improve because their costs are automatically reimbursed by the treasury.
Following recent figures which show that one in six people on housing benefit was being paid the wrong amount, ministers believe that many mistakes are due to a failure by claimants to register small changes in their personal circumstances.
The regulations are so complex that local authorities calculating entitlement to the benefit can be faced with up to eight different potential rent values for similar properties in the same street.