Ministers are considering converting disused ferries moored off the coast to process people seeking asylum in the UK.
According to Refugee Action, 35,566 asylum applications were made in the UK in 2019 - down from a peak of 84,000 in 2002.
Downing Street said it was looking at what other countries do "to inform a plan for the UK."
Labour called the proposal to process people on ferries "unconscionable".
The most senior civil servant at the Home Office, Matthew Rycroft, said "everything is on the table" when it comes to "improving" the UK's asylum system.
Home Secretary Priti Patel asked officials to look at policies, including housing people who are seeking asylum offshore.
On Tuesday, the Financial Times reported the Foreign Office had carried out an assessment for Ascension Island, a remote UK territory in the Atlantic Ocean - which included the practicalities of transferring migrants thousands of miles - and decided not to proceed.
Now the Times reports that the government is giving "serious consideration" to the idea of buying retired ferries and converting them into processing centres, but it says the Home Office rejected a proposal to use decommissioned oil platforms in the North Sea.
The paper also says processing migrants on an island off the coast of Scotland had been considered, but First Minister Nicola Sturgeon tweeted that "any proposal to treat human beings like cattle in a holding pen will be met with the strongest possible opposition from me".
Appearing before the Public Affairs Committee, Permanent Secretary Mr Rycroft said he would not comment on leaks to newspapers, but that the department was "brainstorming" ideas.
He said: "We've been looking at what a whole host of other countries do in order to bring innovation into our own system.
"No decisions have been taken. No final proposals have been put to ministers... this is in the realm of the brainstorming stage of a future policy."
Mr Rycroft said the UK would "always comply with all of our international obligations" and civil servants would "assess all of the various different possible ideas out there to see which are legal and which make operational sense… so that ministers can ultimately make decisions".
How does the government tempt fewer people to attempt a perilous crossing of the Channel to reach the south coast?
Well, one idea is to make it clear that even a successful crossing won't mean getting to stay in the UK - at least in the short term.
The government is exploring "all sorts of options" - not my words, but those of the most senior civil servant in the Home Office.
Hence the recent headlines about transferring asylum seekers to a lump of British rock in the middle of the South Atlantic - Ascension Island, or buying an old ferry to house them.
But remember, although the numbers coming over the Channel in boats are at a record high, they are still a small proportion of overall asylum seekers coming to the UK.
And rows about asylum are far from new.
Twenty years ago, it was the then-Home Secretary, Jack Straw, found himself in a row with his own party about what the Labour government should do about the issue.
So this is an historic problem for parties of both colours.
Labour's shadow home secretary Nick Thomas-Symonds said Labour would oppose any move to use ferries, adding: "Even considering this is appalling."
He accused the government of "lurching from one inhumane and impractical idea to another" and claimed it had "lost control and all sense of compassion".
The SNP's home affairs spokeswoman, Joanna Cherry, said the leaked plans showed "the callousness at the core" of the government, and the plans would "treat vulnerable asylum seekers as cattle rather than human beings".
But Conservative MP for Gravesham in Kent, Adam Holloway, said the Home Office was "completely right" to be looking at other options that were "some sort of deterrent" for asylum seekers.
He told Radio 4's Today programme: "We need to break the link in people's minds that if you get to Britain you're going to stay in Britain, you're going to stay in a hotel and you're going to be accommodated."
He added that the UK needed to find a "civilised version" of the model used by Australia, which has controversially used offshore processing and detention centres for asylum seekers since the 1980s.
The discussion comes as record numbers of people are crossing the Channel to the UK, with 400 arriving in one day in September.
A Home Office source said this week that ministers were looking at "every option that can stop small boat crossings and fix the asylum system", but no final decisions had been made.
Nearly 7,000 people have reached the UK in more than 500 small boats this year - by 23 September, 1,892 migrants had arrived during the month, more than in all of 2019.
But they are still a small proportion of the asylum seekers coming to the UK.
Tory MP Natalie Elphicke, who represents Dover, said the government had been "clear they are going to take whatever action is necessary to put a stop to these small boat crossings".
She told the BBC No 10 and the Home Office were looking at a "whole range of things" to address the "draw factor" of the UK, "from cruise ships and ferries through to offshore fast track assessment centres, through to changing the immigration law".
Earlier in the Commons, Cabinet Office Minister Michael Gove told Parliament the government was "actively looking at the steps that we can take" to stop illegal crossings in the English Channel so the UK can "maintain our commitment to providing a safe haven" but also "safeguard our borders".
Eligible for asylum
To be eligible for asylum in the UK, applicants must prove they cannot return to their home country because they fear persecution due to their race, religion, nationality, political opinion, gender identity or sexual orientation.
A caseworker decides if they have a valid claim by taking into account factors such as the country of origin of the asylum seeker or evidence of discrimination.
This is supposed to be done in six months but delays in processing claims have increased significantly in the last year.
While waiting for a decision to be made, asylum seekers are usually not allowed to work and are initially placed in hostel-type accommodation before longer-term housing is arranged.