Housing benefit and jobseeker's allowance will be denied to people under the age of 25 if the Tories win the next general election as part of a "bold" move to prepare school-leavers for a tougher economic world, David Cameron has said.

In one of the biggest shake-ups of the welfare system for young people, a majority Conservative government would strip school-leavers of the right to sign on to the dole and would tell those under the age of 25 they need to be "earning or learning".

Tory aides insisted that the proposal, aimed at around 1 million of the so called Neets who are not in training, education, employment or training, did not amount to a punitive crackdown on the young. Sources insisted that the prime minister's proposal was an illustration of his determination to prepare school-leavers for the "global race" in which Britain can succeed by becoming a "land of opportunity".

In his keynote speech to the Conservative conference, the prime minister said: "In place of the broken education system, one that gives every child the chance to rise up and succeed. Our economy, our society, welfare, schools all reformed, all rebuilt – with one aim, one mission in mind: to make this country, at long last and for the first time ever, a land of opportunity for all."

Downing Street said the speech was a development of the prime minister's pledge last year to create an "aspiration nation" and was not a response to Ed Miliband's speech to the Labour conference. Miliband alarmed many Tories with his populist pledge to freeze household fuel bills for the first 20 months in office.

But Cameron criticised Miliband for moving to the left. He described his plans to in increase corporation tax as a "damaging, nonsensical economic policy".

The prime minister also dismissed Miliband's pledge to introduce a freeze in energy prices for 20 months. He said: "We've heard Labour's ideas to help with the cost of living. Taxes on banks they want to spend 10 times over. Promising free childcare – then saying that actually, you've got to pay for it.

"An energy promise they admitted 24 hours later they might not be able to keep. It's all sticking plasters and quick fixes … cobbled together for the TV cameras. Red Ed and his Blue Peter economy."

No 10 sources said that the three themes of Cameron's speech – the economy, welfare and education – had been decided months ago and were not shaped by Miliband's speech. They said that the move to strip the under-25s of housing and other benefits should be seen as part of the prime minister's positive vision to prepare Britain for a tougher globalised economy.

Outlining his plan, the prime minister said: "There are still over a million young people not in education, employment, or training. Today it is still possible to leave school, sign on, find a flat, start claiming housing benefit and opt for a life on benefits.

"It's time for bold action here. We should ask, as we write our next manifesto, if that option should really exist at all. Instead we should give young people a clear, positive choice.

"Go to school. Go to college. Do an apprenticeship. Get a job. But just choose the dole? We've got to offer them something better than that. And let no one paint ideas like this as callous.

"Think about it: with your children, would you dream of just leaving them to their own devices, not getting a job, not training, nothing? No – you'd nag and push and guide and do anything to get them on their way … and so must we. So this is what we want to see: everyone under 25 earning or learning."

The move would mark an expansion of the workfare scheme outlined by George Osborne in his speech on Monday. People who have been unemployed for three years will be obliged to do more to find a job or risk the loss of benefits under the chancellor's plans.

The proposal could save as much as £2bn in housing benefit. This will help the Tories reach their target of achieving an absolute budget surplus by the end of the next parliament.

Tory sources said they would finalise their plans after a review that is being conducted by Sir Jeremy Heywood, the cabinet secretary. Tory sources said there would be exemptions for people coming out of care. Single mothers might also be exempted.

The Liberal Democrats vetoed a proposal last year by Iain Duncan Smith to withdraw housing benefit on a unilateral basis from those aged under 25. The Lib Dems may be more open to the new idea because it is linked to jobs, apprenticeships and education.

The prime minister used his speech to hark back to an earlier period in his leadership, in which he sought to shed the Tory image as the "nasty party", when he asked the conference to stand to applaud the role of social workers.

He said: "Social work is a noble and vital calling. I'll never forget how after my son Ivan was born, a social worker sat patiently in our kitchen and told us about the sort of help we might need. This government has helped get some of the brightest graduates into teaching and we have pledged to do the same for social work."