A clampdown has been launched targeting "foreigners [who] come to this country illegitimately and steal our benefits", home secretary John Reid has said.
John Reid says identity cards are central to measures
The plan is to stop illegal immigrants getting housing, healthcare or work.
He said the UK was now "throwing out" record numbers of asylum seekers and he hoped to make life "constrained and uncomfortable" for illegal immigrants.
But the Lib Dems said "impersonating Alf Garnett" could not absolve him of responsibility for migration failings.
Lib Dem home affairs spokesman Nick Clegg added: "The more John Reid yells at 'foreigners' the greater the suspicion will grow that he is simply trying to divert attention from this Government's own incompetence.
"What the public want is quiet competence, not loud incompetence."
Home office estimate: 310,000 - 570,000
Migration Watch estimate: 515,000 - 870,000
The Joint Council for the Welfare of Immigrants warned against "hyping up public emotions".
For the Conservatives, the shadow home office minister Damian Green said there was "nothing much new in here... it is a package of announcements rather than anything changing."
He said the idea that most illegal immigrants were in the UK "to scrounge off the benefits system" was factually wrong, saying instead that most were in the UK to work.
The Home Office plans include a proposal to run a pilot scheme to send text messages reminding people not to overstay their visas.
Mr Reid plans to use texts to help stop people overstaying their visa
This has been criticised by opposition parties, but Mr Reid dismissed it as a minor measure, stressing instead the core of the package was to beef up the powers of immigration officers to police the borders, as well as compulsory ID cards for foreign nationals seeking to settle in the UK.
Mr Reid told BBC Breakfast: "It is unfair that foreigners come to this country illegitimately and steal our benefits, steal our services like the NHS and undermine the minimum wage by working.
"Year on year, we are going to make it even more difficult for them to do that."
And he told BBC Radio Five Live: "We are now throwing out more asylum seekers - failed asylum seekers - than ever before."
'Watch list' of people not entitled to public services
Enforcement teams to track down bosses employing illegal workers
Compulsory ID cards for foreign nationals
Text alerts for people overstaying visas
Possible £20,000 fines for landlords housing illegal immigrants
Remove driving licences
Pilot schemes to use ID card data to ensure migrants pay for NHS care
Estimates vary widely as to how many illegal immigrants are living in the UK. The Home Office ran into trouble last year when it said it had no idea, but later produced an estimate of up to 570,000.
Pressure group Migration Watch puts the figure at between 515,000 and 870,000.
Measures being introduced to make life more difficult for illegal immigrants includes a "watch list" to alert government agencies if someone applies for services to which they are not entitled.
Workplace enforcement teams will also attempt to track down companies employing people who should not be in the country.
There will also be pilot schemes in three NHS trusts using data from the Immigration and Nationality Directorate to ensure migrants pay for care where required to do so.
Mr Reid said most people who came to the UK wanted to comply fully with immigration laws but those who did not should not enjoy the same benefits and privileges.
LEGAL MIGRATION 2004 - 07
EU accession countries: 427,000 (about 600,000 including self-employed)
Non-EU settlement: 318,330
Granted asylum: 123,000
Non-EU work permits: 261,235, plus 87,000 dependants
Source: Home Office
"That's why the time is now right to tackle the root cause of the problem - exploitation. We have to tackle not only the illegal trafficking but also the illegal jobs at the end of the journey.
"This new approach will make life in this country ever more uncomfortable and constrained for those who come here illegally," the home secretary said.
The policy has been welcomed by the Association of Chief Police Officers. Spokesman Grahame Maxwell said it was "a really positive step forward for the Home Office, police and other agencies".
Meanwhile, further education minister Bill Rammell said the Department for Education was "on the case" of colleges which act as a front for foreign nationals to enter the country and stay as students.
However, Joint Council for the Welfare of Immigrants chief executive Habib Rahman said: "Barring up to half a million irregular migrants in the UK from access to rights and services is not a realistic or humane response."
He added: "We want a more balanced approach, not just hyping up public emotions on some very emotive subjects."
He called for action on people trafficking rather than a crackdown on the "victims" of it and an amnesty on illegal workers.
Shadow home secretary David Davis accused John Reid of giving up on trying to deport hundreds of thousands of illegal immigrants, preferring to "spam them with text messages".
Liberal Democrat home affairs spokesman Nick Clegg said: "If tough rhetoric and gimmicks were enough to sort out our immigration system, we would have the best in the world."