Hit squads of inspectors are to be sent to areas where problems with benefit cheats are rife, the chancellor George Osborne has said.
In an interview with the News of the World, Mr Osborne compared welfare cheats to muggers robbing taxpayers of their hard-earned money.
He also warned that repeat offenders could have their benefits cut off for up to four years.
Benefit and tax credit fraud costs the taxpayer an estimated £1.5bn a year.
The government is planning to reduce the annual welfare bill by a further £4bn, on top of an £11bn cut made in June.
'Defrauding the system'
Details of how the savings are to be made are to come in next week's Spending Review.
Mr Osborne told the paper: "This is a fight. We are really going to go after the welfare cheats.
"Frankly, a welfare cheat is no different from someone who comes up and robs you in the street. It's your money.
"You're leaving the house at seven in the morning or whatever to go to work and paying your taxes - and then the person down the street is defrauding the welfare system.
"This money is paid through our taxes which is meant to be going to the most vulnerable in our society, not into the pockets of criminals."
The new anti-fraud drive will use hi-tech data-tracking techniques and another 200 inspectors are to be recruited to a new investigation service, said the Department of Work and Pensions.
Welfare reform minister Lord Freud said minor offenders would face instant £50 fines and offenders caught three times could face a three-year benefit ban.
He also said investigators would seek to seize more assets from benefits cheats.
In August, the government announced plans to use credit rating firms to help track down people fraudulently claiming benefits.