ID cards will mean people have to give the state less information about themselves, Home Secretary David Blunkett has said.
Plans for ID cards have been criticised by civil liberties groups
Launching the Identity Cards Bill, Mr Blunkett said 80% of the public were behind the proposal and it was sad many politicians did not understand them.
Tony Blair said ID cards would "protect rather than erode civil liberties".
Lib Dems have vowed to stop the plans, which they regard as "deeply flawed". The Tories expressed some misgivings.
If the cards are introduced, they would constitute the first national ID scheme since the Second World War ones ended half a century ago.
The Home Office says people will pay £85 for a passport and ID card together or a undecided fee for a separate ID card.
The first cards would be issued in 2008 and Mr Blunkett has suggested Parliament could decide in 2011 or 2012 whether to make it compulsory for everybody to own the cards, although not to carry them.
The new bill would also create new criminal offences on the possession of false identity documents.
And civil penalties would include up to a £1,000 fine for people who fail to say they have moved house or changed other details and up to £2,500 for failing to sign up if the cards become compulsory.
The whole scheme would also be overseen by a new independent watchdog.
The home secretary, who is facing claims about his private life, said the plans were part of a package to tackle people's fears about crime and security, both real and "subliminal".
"Strengthening our identity is one way or reinforcing people's confidence and sense of citizenship and well-being," he told MPs.
"Know your true identity and being able to demonstrate it is a positive plus and is a basic human right which all of us should treasure."
Ministers say the cards can help tackle terrorism, make national borders more secure, and prevent abuse of benefits and public services.
Mr Blunkett said he was ready to consider further safeguards for the scheme.
Rather than requiring more information from people, he said the cards would ensure a "less intrusive" way of collecting details than the national census.
But Labour MP Glenda Jackson said most of her constituents opposed the idea as she questioned the cost of checking ID cards.
Shadow home secretary David Davis said he would not have countenanced ID cards before the 11 September attacks but would do so now, even if they were not a panacea against terrorism.
The Conservatives would only back the scheme if it met five tests, including its effect on civil liberties and whether the Home Office was capable of making it work, he said.
He questioned the cost of the cards, put by the government at £3bn.
Lib Dem spokesman Mark Oaten said Home Office figures showed 277,421 passports were lost or stolen between 8 December last year and mid-November this year.
He added: "The cost and inconvenience of losing your ID card will be much worse - you will effectively be a non-person until the card is replaced.
"Labour's ID Cards Bill is deeply flawed and must be stopped."
'No silver bullet'
Civil liberties groups complain the cards will compromise fundamental individual freedoms.
Mr Blair said the cards were not a "silver bullet" to prevent terrorist attacks but nor did they produce "Big Brother" government.
"They will help protect civil liberties, not erode them, because people will be able to produce their
own identification," he said.
"I simply point out that without proper security then there can be no opportunity."
Mr Blair stressed the penalties for those misusing the identity database.
Anybody convicted of tampering with the database would face up to 10 years in prison.
And any staff administering the scheme who improperly disclosed information from the database could be jailed for up to two years.
The bill's key details have been unveiled before Monday.
A national database would be created holding personal information such as names, addresses, and biometric information for all those who are issued with a card.
Biometrics include fingerprints, facial scans and iris scans, all of which are unique to each individual.
The bill would ensure that access to "specified public services" would be linked to production of a valid ID card.