Ministers heard how a woman took on a gang terrorising her estate
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People evicted from their homes as a result of anti-social behaviour could find their housing benefit cut if they refuse to undergo rehabilitation.
The news came on the day Tony Blair met people who have become involved in tackling yobbish behaviour.
That happened at a meeting with key ministers reviewing progress on Mr Blair's flagship "respect agenda".
The benefit sanction was unveiled by John Hutton who said people were fed up with neighbours who had no respect.
The work and pensions secretary added: "The threat of sanctioning housing benefit will send a clear signal to the handful of people evicted each year for anti-social behaviour that they must address their problem behaviour and engage in rehabilitation.
"It is not right that people who get evicted should be able simply to move to another area and continue their bad behaviour."
Meanwhile Mr Blair has also warned councils they face funding cuts if they fail to tackle anti-social behaviour.
A Downing Street spokesman said from April funding for councils "will be dependent on them implementing detailed plans to tackle anti-social behaviour".
Police and council chiefs joined Home Secretary John Reid, Education Secretary Alan Johnson, Mr Hutton and Local Government Secretary Ruth Kelly at the meeting in Downing Street.
Mr Blair told them: "My impression, going out and talking to people about this, is that there is a real difference being made, especially where the powers are being used and people get behind it.
"But at the same time there are gaps."
Elaine Holland, a 36-year-old mother-of-two, told ministers how she had been a "prisoner in my own home" after she spoke out to give evidence against a gang of local youths.
She won a Home Office award for her efforts to prevent neighbours on her estate in Plymouth from being intimidated by the group.
She said she had been "abused, intimidated and blanked by other residents" before the gang leader was eventually served with an anti-social behaviour order (Asbo), banning him from the area for seven years.
'Right to protection'
Mr Blair launched the Respect drive in January promising to restore the liberty of law-abiding citizens.
Among the measures involved were increased on-the-spot fines for disorder, a national parenting academy and powers to shut down problem properties.
The deputy prime minister is in Canada
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New laws are also planned to try to deal with unruly children at a young age before they become a serious problem and to tackle so-called "neighbours-from-hell".
Sir Menzies Campbell, Leader of the Liberal Democrats, said the threat to councils was a "smokescreen for a government in turmoil... the prime minister is getting tough on councils instead of tough on crime".
The committee meeting came as speculation continues about deputy prime minister John Prescott's future.
There has been a flurry of stories about who will eventually replace the deputy prime minister.
Mr Prescott meanwhile is making a speech in Canada as part of a tour of North America to talk about climate change.
A poll conducted by Ipsos/MORI for the Sun newspaper meanwhile suggested the Tories are 10 points ahead of Labour with Mr Blair's rating dropping to minus 41, his lowest.
Two thirds of voters said they were dissatisfied with his leadership.
The poll was carried out between 25 and 30 May, with 1,984 people interviewed.