The Government is to unveil “radical” proposals to reform benefits after ministers described the system as “broken”.

Work and Pensions Secretary Iain Duncan Smith will set out a series of options aimed at ensuring people would see the value of moving from benefit to work.

The minister is expected to say: “After years of piecemeal reform the current welfare system is complex and unfair. For many people taking a job leaves them no better off than a life on benefits, and this has trapped significant parts of our society in inter generational worklessness and entrenched poverty.”

He is due to add: “The complexity of the system also creates risk and uncertainty for the people in society who most need stability. We want to simplify the system to make it clear that work will always pay.

“Our reforms should also ensure the system is easier for individuals to understand and will reduce the high costs of fraud and error.”

The proposals will be set out in a so-called Command Paper, 21st Century Welfare, and are aimed at simplifying the existing tax and benefits system.

Ministers said they also wanted to unify the disparate elements that form the benefits structure as well as rectifying the “illogical” position of benefits paying more than work.

Options to be published will include combining elements of the current income-related benefits and Tax Credit systems, bringing out-of-work and in-work support together in a single system and supplementing monthly household earnings through credit payments reflecting circumstances such as children, housing and disability.

Ministers said five million people were “abandoned” on out-of-work benefits, with a “staggering” 1.4 million of them on benefits for nine or more of the last 10 years.

Shadow work and pensions secretary Yvette Cooper described Mr Duncan Smith’s announcement as “a sham to cover the fact that the Budget actually cut work incentives, cut jobs and cut help for people to return to work”. She added: “Labour’s minimum wage and tax credits made many families thousands of pounds better off in work. We think it’s good to go further, but the truth is that the Budget is heading in the opposite direction, cutting tax credits and increasing withdrawal rates.”