Today, the government finally admitted the truth. Its Youth Contract has utterly failed to get our young people back to work. The flagship scheme is now on course to miss its target by more than 92% - no wonder there are still almost a million young people out of work. The benefits bill for young people is now more than £3.6bn a year.

Today, Labour says we simply can’t go on like this. The system is broken and its needs to change, and one of those changes has to be a revolution in the way small business, government and schools work together to get our teenagers job-ready. That’s the conclusion of a radical report by Labour’s Youth Jobs Taskforce, led by Alan Buckle, deputy chairman of KPMG, which we publish today.

We asked Alan to spend six months talking to business about just what they can do to help tackle Britain’s youth unemployment crisis. We found some stark conclusions. British business is ashamed of the UK's sky-high youth unemployment – and champing at the bit to help – but all too often the system is getting in the way.

Look at Westfield’s work in east London to make sure Newham residents were first in line for work at the new retail park. Look at the National Grid’s programme to employ young ex-offenders. It’s a scheme that’s helped over 2,000 young people get a job. And look at the way that Labour councils like Liverpool, Sheffield and Manchester are creating Apprenticeship Agencies to forge a new partnership with small business to get young people onto the first rung of the careers ladder.

Businesses small and large want to join forces in tackling this crisis. But the government is letting them down. Our report finds that Britain’s small businesses have all but given up on the Work Programme and the Youth Contract which are respectively, abysmal and anonymous. Even Nick Clegg admits the system isn’t working.

But what the report exposes is that the problem now runs much deeper. Careers services have become all but extinct and young people now lack any independent advice on what skills to develop to land a local job and a local career.

The world of work is changing all the time, yet our young people have no guarantee of independent careers education and guidance at school, and the government has scrapped the right to work experience. No wonder six in ten firms say school and college leavers have not developed the self-management skills they need for work. Education and work are just too far apart and the result is a situation where we have nearly a million young people desperate for work at the same time as business is reporting skills shortages that are getting worse not better. We can’t go on like this. Our report suggests some big changes.

First, we have to find a new way to harness small business. According to the Federation of Small Businesses, nine out of ten unemployed or inactive people who move into jobs do so with small businesses. So we have to revolutionise the way apprenticeships work for SMEs. Liverpool, Leeds and Sheffield are creating apprenticeship training agencies to make it easy for an SME to say 'yes' to a young apprentice.

Second, it means exploring how small business, government and schools can come together to rebuild Britain’s careers service. Labour pioneers like Manchester City Council are piloting UCAS-style clearing houses for apprenticeships to help small businesses find the recruits they need.

Third, we should look at opening up access to job outcome data for schools, so parents can get a much better idea of how well local schools are preparing their children for the world of work.

Fourth, we have to multiply the ways we bring businesses and schools closer together. At the best primary schools today, pupils are offered 'work discovery' to inspire them about the world of work. That’s especially important for opening male-dominated professions, like engineering, to women. For older pupils, employers should accredit rigorous vocational qualifications as part of our Tech Bacc alongside a work placement. And why not encourage more business people to sit on governing boards? We would give all schools the freedom to innovate with the national curriculum, so they can work with local businesses to tailor courses for local labour market.

Finally, we need to look into ensuring that young people leave school with a plan for their future careers, whether that’s a university, apprenticeship or employment offer. No one should feel undersupported when they move into the working world.

For three years now, this government’s policy has been one effort after another to divide and rule. To find one 'welfare dividing line' after another. When did we ever achieve anything by turning on each other? We have only ever achieved great things when we’ve pulled together. That’s what needs to happen now. We can end the crisis of youth unemployment. Business is up for it. Schools and colleges are up for it. We’re up for it. We just need to get the Conservative Party out the way.

Liam Byrne is shadow work and pensions secretary; Stephen Twigg is shadow education secretary