Ministers are currently discussing the idea, which is the latest examnple of Downing Street's determination to push through change by bypassing councils.
A Whitehall insider said: 'Centralising housing benefit would be possible in the next term. The logic is that this is a central government benefit, so it would make sense to have it administered centrally by the Benefits Agency. Centralising would cut down on fraud and improve ... efficiency.'
Housing benefit helps 4.5 million households pay for their rent. But the recent housing green paper highlighted the poor performance of some local authorities. More than 400 councils administer the benefit, but the Audit Commission suggested that only 56% of town halls in England and Wales do so 'efficiently'.