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The work and pensions secretary has said his plans for a new universal credit will lift 850,000 families out of poverty.
In a statement to the Commons, Iain Duncan Smith said:
"There will be no losers."
He said his reforms will break the cycle of worklessness and create a benefits system "fit for the 21st century".
There are currently five million people of working age on out of work benefits.
2.6 million are claiming incapacity benefit - one million have been on it for more than a decade.
These people have been "left behind" even during periods of strong economic growth.
Duncan Smith said these people have become "detatched from the labour market" and his aim is to bring them back in.
He reminded the House that most new jobs are taken by people from overseas, rather than the long-term unemployed.
Under the universal credit people will be better off in work than on benefits.
Duncan Smith said the plan will end the "perverse disincentive" that prevents some people getting into work. It will also solve social problems and reduce losses through fraud and error.
350,000 children will also be lifted out of poverty.
The government is to invest £2.bn in "breaking the cycle" with a comprehensive system of support to get people into work.
There will be a range of sanctions for those who refuse to co-operate, including compulsory work of 30 hours per week.
Job centres will determine which claimants should go on to these schemes, which will also target claimants who are suspected of having a job.
Duncan Smith pledged to make work pay, but also support those who cannot work.
He told the House his plan will also lift the poorest people out of poverty.
Shadow work and pensions secretary Douglas Alexander welcomed the announcement.
He pledged to support the government "if it gets this right", but claimed the chancellor has delayed and damaged reform plans.
Alexander asked for a pledge that other parts of the welfare budget will not be "raided" to pay for universal credit.
He called on Duncan Smith to reconcile his statement that the government has a duty to support those genuinely look for work with plans to cut housing benefit for anyone who has been unemployed for more than a year.
Duncan Smith said there is "no question" that his plans will improve the quality of life for the "bottom deciles" dramatically.
"The poorer will be better off," he said.
Roger Gale (Con, North Thanet) said the reforms are 25 years overdue and claimed job centres have become little more than benefit processing centres.
Duncan Smith said he plans reforms to job centres as in some areas "advice is not of a high quality". However he said most job centre staff do want to help their clients into employment.
The private and voluntary sectors will be given the opportunity to deliver programmes that get people into work, starting next summer.
Anne Begg (Lab, Aberdeen South) asked how universal credit will interact with the tax credit system.
Duncan Smith said at present there is no communication between DWP and HMRC about who is in work or on benefits.
A new IT system will bring tax credits and DWP together so that information "cascades" to both departments when a claimant goes into work. DWP will then ensure they are better off in work than in benefits.
Dods Parliamentary Communications Ltd