The government is to pay more companies to hire young people, under Labour's latest plan to tackle spiralling rates of youth unemployment.

Firms will get a £3,000 grant for every person they take on aged 18 to 24 who is on benefits and has been looking for a job for six months or more.

An existing grant scheme that pays firms to take on those who have been out of work for even longer will also be expanded.

It comes as ministers grapple with an unemployment crisis among young people, with over 950,000 16 to 24 year-olds not in education, employment or training, around one in eight people in that age group.

The government hopes the new £3,000 "youth jobs grants" will support around 60,000 young people into employment over the next three years. The government is yet to detail how employers will qualify for the payments.

Alongside this, an existing scheme that subsidises six-month minimum wage jobs for benefit claimants who have been looking for work for 18 months will also be widened this autumn, covering those aged up to 24 rather than 21 now.

Government-supported foundation apprenticeships, where employers are paid up to £2,000 in instalments, will expand into hospitality and retail from April.

The changes mean government jobs subsidies will now target a slightly older cohort of young people than had previously been the case.

Employers currently do not have to pay National Insurance (NI) on the salaries of employees under 21 unless they earn more than £50,270.

Labour has faced criticism for hiking the NI rate last year, with the Conservatives branding the increase a "jobs tax".

Speaking ahead of a speech in which he will announce the changes, Work and Pensions Secretary Pat McFadden said it would give younger workers a "vital first step on the career ladder".

In an interview with BBC Breakfast, he argued the spike in youth joblessness was a "long term problem", with jobs in sectors such as retail in decline for a decade.

Alan Milburn – a former minister in the New Labour government – has been drafted in to conduct an official review into youth unemployment, with conclusions due to be published in the summer.

Ministers are also considering slowing down plans to pay adults of all ages the same minimum wage, after criticism from some employers, who said it would make it too expensive to hire young people.

However, government sources have previously indicated the commitment is unlikely to be reversed entirely.

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