Victims who suffer sprained ankles, broken toes or bruised ribs would no longer be entitled to compensation under Government plans, Kenneth Clarke said today.
The Justice Secretary said the plans would see payouts target the most serious injuries and prioritise high-quality practical help, rather than helping those with relatively minor injuries.
Mr Clarke also said the compensation scheme would be extended to help British victims of terror attacks abroad.
Under the proposals, rapists and murderers will no longer be able to claim compensation for being victims of crime under the taxpayer-funded Criminal Injuries Compensation Scheme (CICS).
In the last year alone, more than 3,000 prisoners and ex-prisoners made claims to the scheme.
Mr Clarke said some £57 million has been paid to claimants who are convicted criminals over the last decade and the "scheme in its current form is not sustainable".
He also announced a new victims' code, "so victims know what to expect during the investigation and trials process, and know where to turn when things go wrong".
The current system has 14 different routes of complaint and it was unacceptable that "victims report being told too little too late about the progress of their case".
The "system shouldn't be rubbing salt into their wounds", Mr Clarke said.
And the victims' surcharge will also be extended.
Under present law, only criminals who are fined as part of their punishment are forced to pay the charge - which currently sits at a £15 flat rate.
But if the proposals are put through, the charge would be paid by anyone convicted of a criminal offence and could range from the present rate to £120, depending on the severity of the crime.
If offenders cannot pay the cash, it could be taken from their benefits or from money earned by working prisoners.
Mr Clarke told MPs: "Compensation should be focused on those with serious injuries.
"We are therefore proposing that the top 13 bands - over half the tariff bands - covering the most serious injuries are compensated at the present level.
"We will also protect tariff awards for the families of homicide victims, and awards for sexual crimes or persistent physical abuse."
He went on: "In order to offer that protection, and fund the scheme sustainably, we propose to reduce or remove awards for those with less grave injuries.
"Injuries such as sprained ankles, broken toes or bruised ribs, from which people tend to recover fairly quickly, will no longer be covered at all.
"And, in a further step, those who have committed crimes against others and have unspent criminal convictions will, in most cases, no longer be eligible to seek taxpayer compensation when others commit crimes against them."
Mr Clarke added: "The overall ambition of the changes is that total spending levels on victims should remain the same.
"However, I believe the proposals we are consulting on today will mean that finite funding will be used more wisely.
"Instead of compensation going to those with less grave injuries and those who have been breaking the law, it will be targeted where it counts - on the most serious injuries.
"The support services which many victims need as much as - or more than - compensation will be available when required, paid for as far as possible by offenders, not the taxpayer.
"For families bereaved by homicide, and those affected by serious violent and sexual crimes, these reforms will move compensation onto a sustainable footing, and at the same time improve the quality and availability of practical support and advice.
"This constitutes intelligent, radical reform to sort out a system that isn't working, and give a better deal to victims."
Current levels of compensation are based on 25 bands, ranging from band one, which attracts a payout of £1,000, to the most serious band, 25, at £250,000.
Under the proposals, the lower five tariffs would be scrapped and would no longer attract any compensation, payouts for bands six to 12 would be reduced, and the top 13 bands - the most serious - will remain unchanged, Mr Clarke said.
A victim who suffers a broken jaw which needs an operation and leads to "continuing significant disability" would currently be entitled to £8,200 in compensation under band 12, but this would be reduced to £6,200.
The same 76% cut to the payout would also apply to victims who suffer a serious disabling disorder, other than mental illness, which lasts more than 28 weeks but is not permanent, and to those victims who need a thoracotomy after a chest injury.
Those who suffer two collapsed lungs, or who fracture or dislocate both ankles or both hips but are likely to make a substantial recovery, or who lose their great toe, would also be in this category.
Others who suffer a fractured skull, with a depressed fracture which requires an operation, currently get £6,600 under band 11 of the scheme, but this would be cut to £4,600.
Payouts for moderate facial disfigurement (band 10) would be cut from £5,500 to £3,500.
Burns victims who suffer moderate disfigurement to their head and neck - band nine - would have their compensation almost halved, from £4,400 to £2,400, as would victims who suffer significant facial disfigurement through scarring.
An injury in band six, which currently results in an award of £2,500, would receive £1,000, according to the consultation document.
Minor burns to the neck, minor visible scarring to the head, face or neck, and a minor head injury, such as concussion or headaches lasting six to 28 weeks would all fall outside the new compensation scheme.
Higher fines for bad drivers will also be used to support victims, with about £20 from each fine going to the victims' fund, it is understood.
The victims' surcharge currently raises about £10 million each year, but the Government spends about £66 million on victim and witness support services.
"The balance is wrong," the consultation document says.
"By increasing the rate ordered on fines and extending it to the full range of sentences ordered in court, and also by using increased revenue from penalty notices for disorder and motoring fixed penalty notices (FPN), we aim to raise up to an additional £50 million each year."
Asked if the money from larger fines for driving offences would be used to help victims, Mr Clarke said: "Raising more money from offenders by the surcharge is in order precisely to improve the service we provide to victims of crime."
Last May, the Government announced that bad drivers will be hit with fixed-penalty fines of up to £100 under a scheme which aims to cut road deaths by as much as 57% within 20 years.
Motorists who tailgate, undertake or cut up other drivers could be handed the fine rather than being taken to court.
Current fixed fines of £60 for offences such as driving while using a mobile phone and not wearing a seatbelt could go up to between £80 and £100, Transport Secretary Philip Hammond said.
Today's consultation document said: "The proposed increases for motoring offences include those in relation to excessive speed, control of a vehicle, mobile phone use, ignoring signals and pedestrian crossings, and failure to wear a seatbelt.
"The exact amount of the increase will depend on a detailed assessment of what effect the increases would have on payment rates, and on public consultation by the Department for Transport early this year.
"To ensure that these offenders contribute to the cost of supporting victims, the Government has committed up to £30 million per year from increased FPN receipts to support victims of crime, including victims of road traffic crime."
Under the plans outlined today, anyone jailed for more than two years would also have to pay a £120 surcharge, while those sentenced to six months or less in prison would face a surcharge of £80.
The Government also plans to increase the maximum amount that can be deducted from benefits to repay the surcharge from £5 a week to £25 a week, "ensuring that offenders pay more, more quickly".