The Tories estimate the proposed changes would move about 350,000 claimants onto the lower rate of Universal Credit, saving around £538m a year.
Under the proposals, anyone fit to work would get six months on full benefits to find a job.
Every two years a claimant has previously worked would buy an extra year on the full rate of Universal Credit – but those who have not contributed enough would drop to a new “Subsistence Allowance”, worth 70% of the full rate.
The party said this would protect “those with a strong employment record”.
For example, a 58-year-old who has worked since leaving school but has been made redundant would keep the full allowance up to state pension age.
Claimants who are sick, disabled or already in work would also be exempt, with only those judged capable of work affected.
The Tories said loading the “Subsistence Allowance” onto a pre-paid card, with restrictions on what the money can be spent on, would ensure taxpayers’ money supports claimants with essentials like food.
Conservative leader Kemi Badenoch said the current system “where someone who can work chooses not to, and earns more benefits than someone in a job” was “unfair”.
“The best welfare is a well-paid job. So, we will be tough on those who exploit the system because the current system is unfair to workers, taxpayers and those who truly need support,” she said.
“Welfare must be a safety net for those who genuinely need it, not a lifestyle choice for those who can’t be bothered.”
However, Helen Barnard, director of policy and research at the anti-poverty charity Trussell, said the proposals were “deeply misguided”.
“Universal Credit already falls well short of what people need to afford the essentials like food and heating, forcing people across the UK to the doors of food banks,” she said.
“We see people’s health being damaged and their ability to find and maintain work undermined by the severe hardship so many are facing.”
Reform UK’s economy spokesman, Robert Jenrick, said the Tories had left record numbers on long-term benefits and the proposals “won’t even put a dent” in the welfare bill.
The Conservatives have already pledged to scrap Personal Independence Payment, the main disability benefit in England, Wales and Northern Ireland, for “low-level” mental health conditions to help cut the welfare bill.
The party also wants to make it harder to claim sickness benefits, which it said would mean more people are required to look for work.
Spending on benefits has ballooned in recent years and is forecast to rise to £408.6bn in 2030/31, according to figures from the Department for Work and Pensions.
Prime Minister Andy Burnham has insisted he will get the welfare bill down, for example by tackling but number of young people not in education, employment or training, but not through “crude cuts”.
