Disabled people face being stripped of monthly payments and given vouchers instead under a benefits crackdown being unveiled on Monday ahead of the local elections.
Other options being considered include requiring receipts to be provided to claim money back from the state, or offering treatment instead of financial support.
The proposed changes to Personal Independence Payment (PIP) will be announced as part of a wider blitz on benefits policy being championed by Rishi Sunak to tackle the nation’s worklessness crisis.
He will promote the plans on a trip away from Westminster on Monday as the Conservatives brace for what is expected to be a bruising set of results after Thursday’s ballots.
Earlier this month Mr Sunak sounded the alarm on the increasing number of people being signed off sick, noting a trend of younger generations to increasingly raise mental health concerns.
He argued that politicians have to be brave enough to question whether the current welfare system approach is working as well as possible, although critics warned that those in genuine need could lose out.
A Government source familiar with the plans told The Telegraph: “These reforms are not about making the safety net less generous, but PIP is a blunt and increasingly unsustainable benefit.
“By the end of the decade the bill will have more than doubled since Covid, to over £30 billion. So we need a proper conversation about whether the current approach is best supporting the rising caseload, particularly those with mental health conditions.
“We owe it to those who need the help the most to ensure the system is sustainable and working for them, including by providing extra support for those with the most severe conditions.”
Mel Stride, the Work and Pensions Secretary, will address the House of Commons on Tuesday about the plans, which are being published in a “green paper” consultation.
PIP is one of a number of forms of financial support people with disabilities can get from the Government.
It is separate from incapacity benefit, which is paid for those too ill to work, or support which can be given to disabled people in work via the Universal Credit system.
Around 2.6 million people of working age currently receive PIP every four weeks, which can amount to as much as £5,000 a year and covers any extra expenses for people with disabilities, from stairlifts to taxis.
The £22 billion spent annually on the payments is forecast to rise by 50 per cent in four years as more people, including those with mental health concerns, qualify for the support.
It has led the Government to propose a total overhaul of how the system works, with provisional ideas outlined in the consultation as ministers seek to work up specific plans after responses.
The Telegraph understands that one idea raised is one-off grants for costs such as home adaptations or expensive equipment. Vouchers that can be spent on improvements is another alternative.
A third is that disabled people would have to provide receipts for the purchases of aides or appliances. A fourth option would be for those with mild conditions to receive more state-funded treatment instead of money.
Another idea expected to be in the consultation is that people with long-term serious conditions should not be reassessed for PIP, thus easing the burdens on some people receiving payments.
The consultation will make reference to similar models in other countries, such as New Zealand, where a health practitioner verifies extra costs, and Norway, where a letter from a GP outlines costs associated with someone’s condition.
Mr Sunak said earlier this month that the number of people claiming PIP for mental health reasons has more than doubled, despite limited evidence that those suffering with conditions like anxiety face higher living costs as a result.
His plans will aim to cut the soaring welfare bill. With £69 billion now spent on benefits for working age people who are disabled or have health conditions, the cost now outstrips the budget for schools or transport.
The Prime Minister told The Telegraph earlier this month that reforming the welfare system was proof that the Tories were “delivering change on the things... that the country care about”, saying that the “choice at the general election is crystal clear”.
He is expected to make campaign stops across the UK this week ahead of Thursday’s polls. However, when asked about the party’s fortunes on Sunday, he told Trevor Phillips on Sky that “local elections are always difficult for incumbent parties”.
No10 hopes that the benefits reforms will draw a dividing line between the Conservatives and Labour in tackling the country’s “sick note culture”.
Mr Sunak’s proposals are likely to trigger renewed criticism from mental health charities who have said that the Prime Minister’s welfare shake-up risks harming those in genuine need.
James Taylor, director of strategy at the disability equality charity Scope, said Mr Sunak’s recent speech outlining the need for reform felt “like a full-on assault on disabled people”.
Meanwhile, Johnny Timpson, one of the Prime Minister’s dementia champions, quit last week in protest over the treatment of disabled people and the complexity of the benefits system.
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