Media playback is unsupported on your device Media caption Deputy Prime Minister Nick Clegg: "I think fairness starts with doing the right thing for our young people."

Deputy Prime Minister Nick Clegg says a £1bn plan to provide subsidised work and training placements will "provide hope" to thousands of young people.

The three-year youth contract scheme will give employers subsidies worth £2,275 to take on 160,000 18-to 24-year-olds for six months.

Youth unemployment hit 1.02 million in the three months to September.

Labour questioned how it would be funded, following reports that working tax credits were to be squeezed.

Asked about the reports on BBC Radio 4's Today programme, Mr Clegg said the initiative would not be paid for by one single tax or spending measure.

He confirmed the government was considering a "number of savings" - likely to be announced by George Osborne in Tuesday's Autumn Statement when the chancellor will present the official economic and public finance forecasts.

Wage incentives

Ministers are under to pressure to do something about youth unemployment, which hit a record high in the three months to September. One in five 16-24s are not in full-time work, education or training.

Media playback is unsupported on your device Media caption "The government is really on our case to get jobs but there isn't any to get," says Krystina Robinson

The new programme begins next April and aims to get young people into a range of employment sectors - from retail and construction to the green economy.

Up to 410,000 work and training placements will be created in England, Wales and Scotland by giving employers wage incentives equivalent to half of the youth national minimum wage.

Proposals include:

250,000 young people will be offered work experience placements lasting up to eight weeks. These will be available to every unemployed 18-to 24-year-old who wants one and has been seeking work for three months or more.

A £50m programme for the 25,000 most disadvantaged 16-and 17-year-olds in England - those not in employment, education or training - to get them onto an apprenticeship or into work.

At least 20,000 additional incentive payments for firms in England to take on 16-to 24-year-olds in apprenticeships.

More support for young people at job centres, such as extra time with advisers and a careers interview.

'Demoralised'

ANALYSIS We know how much the new youth contract will cost, but the government is under pressure to say where the money will come from. Deputy Prime Minister Nick Clegg said it would cost £1bn over three years to subsidise 410,000 new work places and provide more incentives for apprenticeships. It is thought a squeeze on tax credits could provide some extra funds. But when Mr Clegg was pressed on this, he said the new scheme was not paid for by one other measure and the government has had to make a lot of very difficult decisions to make savings in all sorts of areas. A Treasury spokesman said there is not strict hypothecation in the tax system - where money from one tax is spent on one specific area - and said we would see how it all balances in the Autumn Statement. Young jobless: Your comments Youth unemployment lessons from history

The government says the £1bn being made available is new money - not a reallocation of existing funds - and that certain expectations will be placed on those taking part.

For example, anyone who drops out of a work experience placement or subsidised job will lose their benefits.

Ministers have yet to finalise the detail of how the money will be issued but have suggested it will be paid directly to businesses taking part.

Mr Clegg told the BBC that young people were rightly "demoralised" at the lack of opportunities in the job market and the imitative was consistent with the government's commitment to ensure the next generation did not "pay the price" of economic troubles not of their making.

"It provides hope to the many, many young people who, at the moment, are feeling, very anxious and uncertain about their future," he told BBC Radio 4's Today programme.

Labour said the initiative was a watered down version of the last government's future jobs fund, which the coalition scrapped after coming to power.

This initiative guaranteed under-24s out of work for six months a job or training and Labour say 50% of those who took part ended up with a permanent position.

"This underlines what a serious mistake it was to scrap the fund just after the election," shadow employment minister Stephen Timms told the BBC's Daily Politics.

"The future jobs fund broke the mould. If you talk to young people who took part in that programme a lot of them say it changed their lives for the better."

But Mr Clegg said Labour had offered too many "here today, gone tomorrow" jobs in the public sector and the coalition's focus was on giving private employers the incentive to give young people a foot in the door.

'Taking a gamble'

Employers' organisation the CBI said the scheme was "good news" while Norman Pickavance, the head of human resources at supermarket chain Morrisons, said the company had recruited 8,500 under-24s over the past year and such schemes gave people "a huge boost in confidence".

But businessman and Labour's former enterprise tsar, Lord Sugar, warned that companies had to have a reason to take on new staff.

"We can't just create jobs," he told the BBC. "A government cannot create a job, a private organisation cannot just create a job for the sake of it. I have to have some business to deploy these people in."

And TUC general secretary Brendan Barber said there was a risk of young people being exploited through work experience: "Keen unemployed youngsters desperate to find work shouldn't be conscripted into edging out other workers who should have been paid the going rate for the job."