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Regional benefit levels considered
Proposals under consideration within Government could change the welfare system so claimants receive different levels of benefits depending on where they live.
Downing Street revealed that regional benefits were one of the options for shaking up the welfare system which Prime Minister David Cameron has been looking at.
But the idea was dropped from a speech in which the PM floated cash-saving measures for the welfare state.
The Welsh Government said it would resist any move to regional benefits, which it said would disproportionately hit families in Wales.
Shortly before Mr Cameron spoke in Kent, his official spokesman told reporters that the PM would say: "We are looking at whether public sector pay should be more responsive to local pay rates and that is something we should look at for benefits too."
The spokesman explained: "Clearly, wage rates vary around the country and what someone receives in benefits compared to what they could potentially get by going into a job has an impact on the incentives they face. That is the logic for looking at this question."
Aides confirmed that the question had been discussed within Government and featured in early drafts of the PM's speech, but stressed that it was not included in the final text. And the spokesman later said: "Speeches go through a number of drafts. The point is that he set out the questions that he thinks should be addressed in the speech that he gave."
For Labour, shadow work and pensions secretary Liam Byrne said: "The Government's welfare plans are so shambolic that some policies didn't even survive the morning. This is real back-of-a-fag-packet stuff."
Shadow Wales secretary Owen Smith said: "I've no doubt why David Cameron chose to drop the idea of regional benefits from his speech at the last minute. For someone who's spent his political career trying to hide the true nature of his party, he may have thought this would be one toxic policy too many.
"The Prime Minister's priority when it comes to welfare spending should be addressing the extra £5 billion his Government has added to the unemployment benefit bill as a result of tipping our economy back into recession."