New firms setting up in the region will be exempt from National Insurance payments on new employees for a year in a move designed to stimulate the private sector in regions braced to lose tens of thousands of public sector jobs.
The initiative – which will be launched by Ministers on Monday – will not apply to firms in London, the South East and the East of England, and forms part of a package of measures offering special protection particularly to the North.
Eligible new firms will be exempt from paying the first 5,000 of contributions on up to ten employees for 12 months, in a move designed to encourage private sector growth.
Chancellor George Osborne initially unveiled the proposal in his emergency Budget in June, amid concern about the impact severe spending cuts will have on regions more dependent on public spending.
Parts of Yorkshire and the Humber – particularly in South Yorkshire – have become increasingly dependent on the public sector boom over the past decade but tens of thousands of those jobs are likely to go as the coalition Government seeks to tackle the deficit.
Soon after becoming Prime Minister, David Cameron told the Yorkshire Post he would not "stand by" and let spending cuts damage the region's economy, promising to "offset" the impact of cuts outside London and the South-East.
In notes about the National Insurance scheme, HM Revenue and Customs said: "The Government believes sustainable and balanced growth must be based on private sector enterprise and investment.
"The creation of new enterprises in areas most dependent on public sector employment will support transition to a new, sustainable model of economic growth. The Government is therefore helping new businesses in these areas to create jobs, by reducing the costs of employing staff."
The scheme will officially be introduced in a National Insurance Bill in the Autumn but firms will be able to take part from Monday, Ministers have confirmed.
A 1billion regional growth fund is also being set up, which will fund projects which can create jobs in the private sector and stimulate the economy. More details of this scheme are expected to be unveiled in the autumn.
Some figures within the coalition have been worried too much emphasis has been put on tackling the deficit and spending cuts, without enough attention to economic growth, which has left the Government vulnerable to Labour warnings of a double-dip recession.
During the election campaign Sheffield Hallam MP Nick Clegg, now Deputy Prime Minister, warned of Greek-style riots in areas like South Yorkshire if savage cuts were imposed without public backing.