Chancellor Rishi Sunak will announce a £2bn «kickstart scheme» on Wednesday to create more jobs for young people.
The fund will subsidise six-month work placements for people on Universal Credit aged between 16 and 24, who are at risk of long-term unemployment.
The government said it would lead to «hundreds of thousands of new, high-quality government-subsidised jobs».
Labour welcomed the move, but said the government had failed to «rise to the scale of the unemployment crisis».
The pledge will form part of Mr Sunak’s speech, alongside a £3bn «green» fund and boosts for apprenticeships.
Changes to stamp duty are also expected, and VAT could be altered.
The Treasury said the «kickstart scheme» would be part of a «three-point plan for jobs… to help Britain bounce back from coronavirus».
The CBI praised the first part of the plan as «a much-needed down payment in young people’s futures».
The chancellor’s statement is expected at 12:30 BST (11:30 GMT), after Boris Johnson faces Sir Keir Starmer at Prime Minister’s Questions.
Mr Sunak announced he would deliver an economic update last week, after the prime minister set out his «new deal» to build after the coronavirus outbreak.
The chancellor has already outlined a number of measures in the build up, including:
- Vouchers of up to £5,000 for energy-saving home improvements as part of a wider £3bn plan to cut emissions
- A pledge to provide 30,000 new traineeships for young people in England, giving firms £1,000 for each new work experience place they offer
- A £1.6bn package of loans and grants for the arts and heritage sector
- The doubling of front line staff at job centres, as well as an extra £32m for recruiting extra careers advisors and £17m for work academies in England.
For each «kickstarter» job, the government will cover the cost of the National Minimum Wage – £4.55 for under 18s, £6.45 for 18 to 20-year-olds, and £8.20 for 21 to 24-year-olds – for 25 hours a week, and employers will be able to top up the figure.
The government said it would allow young people «the opportunity to build their skills in the workplace, and to gain experience that will improve their chances of going on to find long-term sustainable work».
The scheme will open for applications in August, with the first jobs expected to start in the autumn, and run until December 2021 – with the option of being extended.
It will cover England, Scotland and Wales, and the government said it would provide additional funding to Northern Ireland for such a scheme.
The government is keenly aware that younger workers are more exposed to the devastating economic impact of coronavirus, and long-term unemployment for them inflicts long-term scars on the economy.
In some of the hardest hit sectors – such as retail, hospitality and leisure – one third of the workforce is aged between 16 and 24.
And these areas are fertile ground for young people to start their own businesses.
But they are also the sectors least likely to bounce back quickly, which is why the chancellor will announce plans to find new jobs to replace the old ones young people typically filled.
What seems certain is the government focus will shift on Wednesday from a mode of «protect and survive» for the jobs of the past to one of trying to create the jobs of the future.
Almost 500,000 people who are 24 or younger were signed up to Universal Credit in May – a rise of 250,000 since before lockdown started in March.
The chancellor has previously acknowledged young people could be the worst affected by the crisis when it comes to employment, and also be the most reliant age group on the government’s furlough scheme – which is set to end in October.
Speaking in the Commons on Wednesday, Mr Sunak is expected to say: «Young people bear the brunt of most economic crises, but they are at particular risk this time because they work in the sectors disproportionately hit by the pandemic.
«We also know that youth unemployment has a long-term impact on jobs and wages and we don’t want to see that happen to this generation.
«So we’ve got a bold plan to protect, support and create jobs – a plan for jobs.»
‘Move at speed’
Labour’s shadow chancellor, Anneliese Dodds, said the scheme «should help many young people to access work».
But she called on the government to extended the furlough and self-employed schemes, and create «tailored support» for older people or those living in hard hit areas.
The director general of the CBI, Dame Carolyn Fairbairn, said the announcement could see the government «lessening the potential scarring impact of the pandemic for the next generation».
But she called on businesses and the government to «work to deliver the kickstarter scheme simply and at speed», adding: «There can be no time lost in preparing young people who are entering one of the toughest jobs markets we’ve seen in decades.»
The national chairman of the Federation of Small Businesses, Mike Cherry, said a focus on jobs was «absolutely essential to lift the country out of the economic hardship caused by the Covid crisis».
But he appealed to the government to ensure smaller firms could benefit from the scheme, adding: «Small businesses must not be left waiting in line behind big corporates when they could get people to work now.»