From April next year the £300 million Help to Work programme, which aims to end the so-called "something- for-nothing" benefits culture, will target 200,000 recipients of Jobseeker's Allowance each year, including at least 20,000 Scots.
For the first time, it will mean people will have to do community work for a prolonged period or lose their benefits.
Tory HQ insists the option of people just signing on as usual "is going to disappear completely", with the more draconian regime seen by the UK Government as the next step in its welfare revolution following the benefits cap.
For the first time, the 200,000-plus Jobseeker's Allowance claimants will be required to carry out full-time community work of 30 hours a week for six months, attend the Jobcentre and search for work every day, or be placed in the new Mandatory Intensive Regime, a tough programme to tackle the underlying reasons they are not working, such as literacy or mental health problems.
Those who break the rules will lose four weeks of benefit for their first breach and three months' payments for any second offence.
The sanction will be imposed immediately, with money deducted from a claimant's next benefit cheque.
In his keynote speech, the Chancellor will insist that, unlike previous governments, the Coalition will not abandon Britain's long-term unemployed.
Mr Osborne will say: "Today, I can tell you about a new approach we're calling Help to Work.
"For the first time, all long-term unemployed people who are capable of work will be required to do something in return for their benefits to help them find work. They will do useful work to put something back into their community, making meals for the elderly, clearing up litter, working for a local charity.
"Others will be made to attend the Jobcentre every working day. And for those with underlying problems, like drug addiction and illiteracy, there will be an intensive regime of help."
On the economy, the Chancellor will insist the battle to turn around Britain is not even close to being over. "For what I offer is an economic plan for hard- working people, that will create jobs, keep mortgage rates low, let people keep more of their income tax free."
Yesterday, David Cameron made clear one of his red lines for any future Coalition would be a mansion tax, promoted by both the Liberal Democrats and Labour but which he strongly opposes.
The Prime Minister claimed the Coalition's Help to Buy scheme for England would not create a housing bubble.
He decried Labour's plan to increase corporation tax for larger companies to pay for a rates cut for smaller ones as "nuts", that would deter investment in Britain.
And on Ed Miliband's centrepiece announcement of an energy bills freeze, the Prime Minister said he would look again at regulation but wanted lower prices "not for 20 months but for 20 years".