The UK's culture of welfare dependency is a "national crisis", Iain Duncan Smith has warned, as he unveiled the most radical shake-up of benefits for a generation.
The Work and Pensions Secretary insisted it was a "sin" that millions of jobs in this country were being done by foreigners because Britons were not "capable or able".
He said streamlining out-of-work handouts would ensure people were always better off when they were employed. But, in return, those who refuse to take jobs face being stripped of benefits.
Although Labour backed the package in principle, it said swingeing cuts to other parts of the welfare state would leave many worse off. Charities also cautioned that removing benefits from people who had no other income could lead to "destitution".
Under the proposals in the coalition's White Paper, the present complex system of at least 30 work-related benefits will be merged into a single Universal Credit. A new IT database will mean income can be assessed and payments adjusted in real time, so that claimants were better off for every extra hour they worked.
A work programme will be introduced to help people return to the workforce - with some long-term jobless required to do unpaid community work.
But unemployed people who persistently fail to turn up, or turned down and refused to apply for jobs, will lose their £65-a-week Job Seekers Allowance for up to three years.
The allowance will be removed for three months on a first offence, six months the second time and three years on the third breach of the new rules - with no right of appeal.
The new "claimant contract" is expected to come into force as soon as legislation is passed, and may not wait for the introduction of the universal credit beginning in 2013-14.
Mr Duncan Smith said it was "a sin" that 70% of the extra jobs created over the last 14 years had been taken by immigrants because British people were not "capable or able" to do them. That showed creating jobs was not the only solution to dealing with the five million on out-of-work benefits - 1.4 million of them claiming for nine out of the last 10 years.