A new points system that aims to ensure migrants wanting to work in the UK have the right skills is at the heart of the government's new immigration strategy.
Mr Clarke says there must be confidence in the system
Home Secretary Charles Clarke told MPs migrants were vital for the UK economy and society but it needed controls.
The plans include fines for employers using illegal workers. There are also moves to prevent asylum abuse.
The Tories say Labour is offering "half steps" and the Lib Dems say the plans may not produce an efficient system.
The five-year plan comes as immigration looks increasingly likely play a contentious role in campaigning for the election - widely predicted for May.
IMMIGRATION AND ASYLUM PLAN
New points system for migrants wanting to work or study
Financial bonds for migrants in sectors open to abuse to guarantee they return home
End to automatic right for immigrants' families to settle
Fixed penalty fines for each illegal worker used by employers
Only skilled workers allowed to stay permanently, after English language tests
End to appeals for those wanting to work or study
Refugees only given temporary leave to stay while safety in home country reviewed
More detention of failed asylum seekers
Fingerprinting of all visa applicants
Tony Blair told BBC News there was real public concern and it was in Britain's interests to allow in only those migrants' whose skills were really needed.
To critics who say he has taken too long to act, he said: "This requires a long, hard patient slog, not a magic bullet."
In the Commons, Mr Clarke stressed the positive effects of immigration and warned: "It is a lack of confidence in our systems of control that can foster bigotry."
He announced an end to the automatic right to settle for immigrants' families.
Existing work permit schemes would be rolled into one Australian-style system where migrants qualified for a certain number of points according to their skills.
A new labour market advisory group would recommend what skills British businesses needed.
In sectors particularly open to abuse, workers would have to pay money up front as a bond which they would only get back once they returned home.
And all visa applicants would be fingerprinted as part of tighter border controls.
The changes mean only high-skilled workers will be allowed to settle in the UK - temporary labour from inside the European Union will now fill low-skill vacancies.
On asylum, Mr Clarke proposed that genuine refugees would no longer have permanent leave to remain in the UK.
Instead, they would get permission to stay in the country for five years before it was decided whether it was safe for them to return to their countries of origin.
He also promised more detention of failed asylum seekers and agreements to return them home.
Maeve Sherlock, from the Refugees' Council, said refugees the plans risked leaving refugees "in limbo" for five years.
"It seems particularly unfair on refugees who may have lost their whole families or suffered torture or, at worst, ethnic cleansing," she said.
Tory leader Michael Howard said immigration had "tripled under Mr Blair without any discussion, without any debate, without any real consultation.
"We think Parliament should set a limit," he told Channel 4 News.
"That is what happens in Australia. Mr Blair doesn't think there should be a limit."
Liberal Democrat home affairs spokesman Mark Oaten said Labour was right to reject the Tories' idea of quotas on asylum.
But he warned about the dangers of a "bidding war" on the issue between the other two major parties.
The UK Independence Party also wants a points system for economic migration but complains there are no limits on the number of EU workers coming to the UK.