Chancellor to tackle youth unemployment

George Osborne said £940 million would be spent on the Youth Contract programme which aims to supply 250,000 placements with private employers to help improve the job prospects of the young unemployed.

But he also warned that young people who refused to an offer of a work placement would face the threat of “mandatory work activity” and said that anyone who drops out of the scheme could lose their benefits.

A Treasury spokesman later said that detailed plans for what the work activity would involve are not yet drawn up.

More than one million 18 to 24-year-olds are currently out of work and the government also plans to toughen up the current signing-on regime with all young people out of work for five months expected to sign for their Jobseeker’s Allowance weekly rather than fortnightly.

Employers will also be able to receive £2,275 as an incentive to take on a young unemployed person in a full-time job, with funding provided for up to 160,000 such payments.

Funding will also be made available to help small firms provide up to 40,000 apprenticeships.

Fiona Blacke, National Youth Agency chief executive, said the near £1bn investment was “a positive start”.

She added: “There is no guarantee that the Youth Contract will provide young people with a full employment at the end of it, but we hope it will provide them with the essential experience needed for gaining work in the future.”

Mr Osborne also announced that working-age benefits would rise by 5.2 per cent next year. Benefits including unemployment benefit and disability living allowance are traditionally increased each April in line with the previous September’s inflation figures.

The spike in inflation in September to 5.2 per cent had led some observers to question whether the formula would remain in place.