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The government has unveiled plans for new work clubs run in partnerships with businesses and local communities to help people find jobs.
The announcement follows George Osborne's address to conference this morning where he said benefits will be capped.
Speaking to the Conservative Party conference in Birmingham employment minister Chris Grayling pledged to tackle the "madness" of a society where millions of people were on out-of-work benefits but immigrant workers were able to find employment.
"Britain today has five million people claiming out of work benefits," Grayling told conference.
"One in five households is entirely dependent on benefits, with no one working.
"Nearly a million people of working age have never worked. It is nothing short of a national scandal."
Grayling said the "biggest failure of all" was that workers from overseas had been able to find work while Britons were on benefits.
"That is why welfare reform is right at the top of the coalition agenda and it's absolutely why we have to change things," he said.
"But we are also dealing with the aftermath of a recession and the challenge of getting those who have lost their jobs in the last few months back into the workplace."
The employment minister said the government will join with work clubs, which will then allow jobs seekers to "work together and help each other", to get off the ground.
And the coalition government will seek to start a real drive to "encourage the unemployed to look at volunteering as an option" in order to build up their experience and skills.
Grayling said the government is seeking to build on the experience of the work clubs led by the Conservatives in opposition.
Backed by supermarket Asda, the first of a "new generation" of Work Clubs opened today, he told conference.
The minister added: "We'll help people to get back on their feet again. But if they refuse that support, then they will lose their benefits – as simple as that."
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