But the government should also reward welfare recipients who are working by allowing them to keep more of their income each month, the Opposition leader said.
Each person on social assistance should have a personalized plan that sets out certain activities they need to perform in order to receive their benefits, Hudak added.
"We want to make sure (to) reinforce in Ontario the dignity of a job," he said. "To make sure that at all times, if you can work or you want to work, you have that opportunity."
Hudak was mum on how long people would have to be on welfare before their benefits would start to decline, or how big a reduction they would face, saying he would seek advice from caseworkers, welfare recipients and others.
It's among 12 proposals the Tories are floating to fix what they're calling an outdated and inefficient social assistance system.
Other ideas include merging Ontario Works and Ontario Disability Support Program into a single program, which would still be funded by the province but administered by municipalities. Another idea, taken from the United States, is introducing a debit card that could only be used to buy food.
The province should also encourage employers to hire people with disabilities by providing tax deductions for buying special equipment or technology, the Tories proposed.
Money could be saved by reducing "management layers" and supervisors to make the system more efficient, as well as allowing non-profits, charities and the private sector to bid on contracts to administer social programs.
But Hudak said he's not considering mandatory drug testing for Ontario's 475,000 welfare recipients or raising the minimum wage.
The Tory proposals are just ideas they're putting out for discussion, not official party policy, he said. They haven't committed to implementing any of the changes if they form the next government.
Many of the suggestions were taken from two government-funded reports, one by economist Don Drummond on government cost-cutting and another by Frances Lankin and Munir Sheikh on reforming social assistance.
The current system for social assistance has been an "abject failure" under the governing Liberals, hamstrung by hundreds of rules and regulations that are tying up caseworkers and keeping them from doing their jobs, he said.
"We've developed a very fixed system full of bureaucracy that is putting people in a web of dependency instead of giving them a hand up to move into the workplace," Hudak said.
"The best social program is a job."
The Liberals quickly pointed out that when the Tories were in power under former premier Mike Harris, they declared war on the poor, cut welfare by 22 per cent, froze ODSP rates and downloaded the costs of social assistance to municipalities.
Like Harris, Hudak is villifying the poor, said Community and Social Services Minister John Milloy.
"Going to Tim Hudak for advice on welfare reform, it's sort of like going to Kim Kardashian for tips on a long and happy marriage," he said.
The Liberal government has increased welfare and ODSP rates by nearly 15 per cent and has been uploading the costs of social assistance from municipalities, he said. It also plans to incorporate some of Lankin and Sheikh's recommendations, particularly the ones dealing with improving job opportunities for people with disabilities.
People on welfare already have to demonstrate that they're looking for a job or trying to get training, he said.
The number of people on social assistance has increased, Milloy acknowledged. That's largely due to the economic downturn and the rising number of mentally ill people seeking help, he said.
The Tories have been floating a number of trial balloons in a series of so-called "white papers," covering topics such as the economy, labour, health care and taxes. There are more to come on health care services and education.
Some of the more controversial ideas include getting Ontario out of the gambling business, making Ontario a "right to work" province by giving people the right to decide whether to join their workplace union, and potentially selling the Liquor Control Board of Ontario.
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