A grim picture of the level of poverty in the UK has been painted by the coalition Government as it unveiled plans to radically change the system to "make work pay".
Ministers complained that entire communities were existing at the "margins" of society, trapped in dependency and leaving disadvantaged children to become disadvantaged adults.
Work and Pensions Secretary Iain Duncan Smith said sanctions will be used against benefit claimants who refuse to take up jobs, while all those on incapacity benefit will now be reassessed.
Charity groups said root and branch reform of the benefits system was "long overdue", but union leaders said the Government should be reducing unemployment by creating jobs, not driving people off welfare and "further into poverty".
Civil servants who administered welfare programmes told Mr Duncan Smith the system was "breaking" and in need of urgent attention, he said.
He told an audience of welfare experts from the voluntary, private and public sectors that there was an "absurd" situation where some of the poorest people in the country faced huge penalties for trying to get off benefits and into work.
Pledging a new approach to fighting "persistent poverty", Mr Duncan Smith laid out some stark statistics showing there were more working age adults living in poverty than ever before, 5.3 million suffering "multiple disadvantages" and 1.4 million who had been on out-of-work benefits for nine or more of the last 10 years.
"This picture is set against a backdrop of 13 years of continuously increasing expenditure, which has outstripped inflation. Worse than the growing expense though, is the fact that the money is not even making the impact we want it to.
"A system that was originally designed to support the poorest in society is now trapping them in the very condition it was supposed to alleviate." he said.
A report published by the Work and Pensions Department on Thursday revealed that income inequality in the UK was now at its highest level since comparable statistics began in 1961 and showed that social mobility in Britain was worse than in the US, France, Germany, Spain, Sweden, Canada, Finland and Denmark, and a higher proportion of children grew up in workless households in the UK than in any other EU country.