Ministers will today announce dramatic reforms to the welfare state in an attempt to provide greater incentives for work and sanctions for those unwilling to do so. Central to the plan, being announced by the Work and Pensions Secretary, Iain Duncan Smith, is the proposed "universal credit", which would amalgamate dozens of existing benefits into one single payment.

Unemployed people who turn down offers of work, or refuse to apply for appropriate jobs, will be stripped of their benefits 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.

David Cameron said the changes would create "clear responsibilities and clear incentives for those on benefit to take steps towards getting back to work wherever it's feasible for them to do so".

Duncan Smith told BBC Breakfast: "We right now have a system that traps people, because it is complex, there are so many benefits withdrawn at different rates. People going back to work don't fully understand whether they are better off or worse, it is almost impossible to make that calculation.

"By simplifying and having one withdrawal rate we will actually make sure people will retain more of what they earn as they go back to work, thus making work pay more than being on benefits. That's the critical bit.

"We will help people look for work and get them work ready, that will go alongside it. Then, if having done all of that people have a job offer, they should take that work. That's a condition most taxpayers would accept."