Time Out for the UK benefit system

Everyone's talking about it; on TV and radio, in the papers, at the school gate, over dinner, down the pub and online

what can be done about the benefit system?

I have loads of ideas, as do lots of others I know.  The trouble is that these ideas are only fabulously easy if you're not running the country, trying to stay popular and juggle the worst economic situation in several decades.

Amidst all this talk it seems like some actual policy making has been going on.  It seems as if change may actually come about in the near future.  And one thing is clear, we're about to call time out on the benefits system.

The issue is now, which form of punishment will be brought about when times up on time out.

Will it be option 1: "a freeze on household incomes" as put forward by IDS.

Or perhaps option 2: "a benefit freeze excluding child benefits" as proposed by the CofE Bishops and the Children's Society.

At first sight I liked the look of option 1; it seems grossly unfair to me that families on benefits can earn more than families who work to support their families.  Don't get me wrong, I don't want to see anyone on the street, but it can't be right that benefit funded households can afford satellite TV when many working houses can't.

But then The Children's Society analysed the proposal and discovered that the cap would affect over 200,000 children.  Wow!  Of course it's easy to argue that these children should not be affected if their parents cut back in other areas, but is this likely to happen.

So I was torn, seeing positives a c negatives to both options.  But fear not, I've got .....

Option 3: "cap benefits and provide child related funds by way of food, clothing, housing and heating stamps/ tokens" as proposed by me (it's always nice to have a third way).

It seems to me that one of the major problems with the value of benefits is how the benefits are spent.  In order for children to be protected there has to be a way of ensuring their needs are met specifically.  

The joy of stamps for clothing, food, heating and housing (as popular in the US) is that the families get exactly what they need and the children are protected.  I know this idea takes away personal freedoms, but surely having everyone's basic needs met can only do good for all.

Just my idea, 
I have no power so don't fear.  

What option would you choose?
Or have you got a fourth way?