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The government is to give firms that recruit people unemployed for more than six months "golden hellos" of up to £2,500, in a move that provides £500m to keep employers hiring.
The unexpected initiative, which will be announced at the government's jobs summit this morning, is the latest to tackle rising unemployment, predicted to hit 3 million by the end of the year. Last week, the skills secretary, John Denham, announced measures to increase apprenticeships by 35,000 and a system of internships to ensure students unable to find employment still find training.
Ministers gathering in central London for the jobs summit today will take part in round-table discussions with private and public sector employers and union officials. The prime minister is also expected to make a speech and hold a question and answer session.
This morning Gordon Brown told GMTV the government was leading the world in its policies for dealing with the global downturn.
"We have got a plan. It is pretty straightforward what we are trying to do. When the markets and private sector fail, and cannot invest properly in the economy, the only person that can is us, the government," he said.
"We are investing in the economy so that we can actually build up the economic activity, keep people in jobs, create more jobs and of course stop people being repossessed in their homes.
"There is no other way and those countries around the world are following what we have been doing because we are ahead of them in sorting out the banking system and now trying to get the economy moving."
Under the latest plans, the government will put £400m, nearly half of the £1bn contingency fund it set aside in last November's pre-budget report, to reward firms who hire someone who has been out of work for more than six months, according to a Downing Street aide.
The Department for Work and Pensions and the Department for Innovation, Universities and Skills will administer the scheme over a two-year period starting in April, and the DWP said it would also be funding £100m of the project through savings the department was making through the government's VAT cut. An aide said yesterday: "This is genuinely new money."
The government's scheme will give Jobcentre Plus staff the power to award up to £2,500 to a firm that hires someone unemployed for more than six months. New training places will also be funded, and volunteering that may help the jobless secure employment at a later stage will also be given extra money.
At the moment 262,000 people are registered as out of work for six months or more and the figure is expected to rise, but ministers hope today's scheme will encourage them to be hired to fill the 500,000 job vacancies still unoccupied despite the recession.
Yesterday a DWP aide said the government was unsure exactly how many employers would take up the "golden hello" scheme. By focusing on those unemployed for more than six months, the government is keen to underline the difference in approach between their response to a recession and that of the Thatcher government during the 80s.
This morning James Purnell, the work and pensions secretary, told the Today programme that the government was focusing on help for people unemployed for more than six months because 70% of people who lose their jobs find work within six months. He would not say how high he expected unemployment to rise but he said: "We haven't reached the bottom."
Purnell said that 300,000 jobs could have been saved in the recession of the early 1990s if the government at the time had introduced a fiscal stimulus package similar to the one being introduced by Labour now.
But David Frost, director-general of the British Chambers of Commerce, told the programme that the latest government proposals would have only a limited impact.
"With unemployment rising fast and projected to rise by over a million, from what I am seeing, companies are not recruiting so I am not sure at this stage in the economic cycle what the offer of a £2,500 grant to take on people is going to do," he said.
"We have got to focus on retaining those skills within the business because once they've gone they've gone."
The CBI deputy director-general, John Cridland, told the Today programme that the main priority for the government should be to restore the flow of bank lending to business.
DWP sources say the money for today's initiative is in addition to the £1.3bn already allocated to the DWP from the Treasury in the pre-budget report, which has been spent on keeping open 25 job centres earmarked for closure and recruiting 4,000 more staff.
Yesterday, an aide said the money would be allocated on a "sliding scale" depending on how difficult a placement proves to be. If the 262,000 who have currently been out of work for six months or more were allocated the full £2,500, the cost of the policy would reach £655m.
The DWP said: "This extra help will be flexible, tailored to each individual who takes it up, and accessible to job seekers who are six months out of work."
The shadow work and pensions minister, Chris Grayling, said: "Just holding a job summit is hardly going to solve the problems we face.
"Unfortunately, all we are getting from the government is a series of announcements on unemployment that are more spin than substance, and are just designed to cover up the fact that Gordon Brown's recession policies are not working."
By concentrating funds on the longer-term unemployed as opposed to the newly jobless, the government seeks to undermine the attack that the recession will make their welfare reforms unachievable. Politicians opposed to the government's welfare reforms had questioned whether reform can be carried out when jobs are few.
Announcing the scheme, the prime minister will say today: "My message is simple: we won't give up on you; but in turn you must not give up on work, on skills and on training. We must do everything we can to help those losing their jobs to find work again quickly, or to get a new skill, to maximise the chances of the unemployed getting jobs."
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