The long-term unemployed face having to “work for the dole” from next year by cleaning up litter or cooking meals for the elderly.
Chancellor George Osborne will give details of tough new conditions being attached to handouts pledging to end the “something for nothing” culture.
Hundreds of thousands of claimants who go through the coalition’s flagship Work Programme but still fail to find a job will be required either to do 30 hours a week of community work, report to a job centre daily, or undergo intensive treatment to tackle problems such as illiteracy or mental illness.
Those who break the rules, for example by failing to turn up for duties without a good reason, could lose their benefit for four weeks. A second offence would see them lose out for three months.
Mr Osborne will announce the US-style Help to Work scheme, which is to come into force in April, in his speech to the Tory conference in Manchester.
“For the first time, all long-term unemployed people who are capable of work will be required to do something in return for their benefits to help them find work,” he will say.
“They will do useful work to put something back into their community making meals for the elderly, clearing up litter, working for a local charity. Others will be made to attend the job centre every working day.
“And for those with underlying problems, like drug addiction and illiteracy, there will be an intensive regime of help. No one will be ignored or left without help. But no one will get something for nothing.
“Help to work and in return work for the dole. Because a fair welfare system is fair to those who need it and fair to those who pay for it too.”
Potentially, around 200,000 long-term Jobseeker’s Allowance claimants could be eligible for the new initiative.
But ministers believe that the numbers on it will be significantly lower, as many of those working covertly will decide it is no longer worth trying to claim benefits and drop out.
The scheme, devised by Work and Pensions Secretary Iain Duncan Smith, will cost around £300 million to implement with the money likely to be found from departmental underspends.
Mr Osborne is not expected to unveil specific action on living standards, despite pressure to respond to Ed Miliband’s energy price freeze pledge last week.
Instead, the Chancellor will stress the need to stick with the coalition’s economic plans, warning that the UK still has not fully recovered from the credit crunch.
“We have to deal with our debts and see our plan through,” he will say. “And yes, if the recovery is sustained then families will start to feel better off.
“Because what matters most for living standards are jobs, and low mortgage rates, and lower taxes. But family finances will not be transformed overnight. Because Britain was made much poorer by the crash.
“That is what happens when you get a catastrophic failure of economic policy of the kind we saw five years ago the result of a decade of Labour failure when bust follows boom when banks get bailed out and when government budgets spiral out of control.”
He will add: “This battle to turn around Britain it is not even close to being over.”
Home Secretary Theresa May is also due to address conference today.
Shadow treasury chief secretary Rachel Reeves said: “It’s taken three wasted years of rising long-term unemployment and a failed Work Programme to come up with this new scheme.
“But this policy is not as ambitious as Labour’s compulsory jobs guarantee, which would ensure there is a paid job for every young person out of work for over 12 months and every adult unemployed for more than two years.
“With Labour’s plans we would work with employers to ensure there are jobs for young people and the long-term unemployed which they would have to take up or lose benefits. Under the Tory scheme people would still be allowed to languish on the dole for years on end without having a proper job.”