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The fund will subsidise six-month work placements for people on Universal Credit aged from 16 to 24, who are at risk of long-term unemployment. The CBI praised the scheme as “a much-needed down payment in young people’s futures” and unions said it was “a good first step”. It comes after youth unemployment soared in the crisis with the number of under-25s claiming Universal Credit doubling.

For each “kickstarter” job, the government will cover the cost of 25 hours’ work a week at 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.

Employers will be able to top up that payment if they wish.

Mr Sunak said that 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 a similar scheme.

The chancellor has previously acknowledged young people could be the worst-affected by the crisis when it comes to employment, as they are the age group most likely to be on the government’s furlough scheme – which is set to end in October.

Already, between the start of lockdown in March and May, the number of people aged 24 and under claiming Universal Credit rose by 250,000 to almost 500,000.

Labour’s shadow chancellor, Anneliese Dodds, above, said that the kickstarter scheme “should help many young people to access work” but said the government had not yet done enough to address the threat of mass unemployment.

She called on it to extend 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, below, said the announcement could see the government “lessening the potential scarring impact of the pandemic for the next generation”.

But she said businesses and the government needed 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.”

Paul Johnson, the director of the Institute for Fiscal Studies, said that the scheme would “encourage employers to take on those most at risk” during this crisis but it could result in “creating jobs which aren’t really jobs” or push other people out of work.

Frances O’Grady, the general secretary of the Trades Union Congress, welcomed the support for young people but said unions would be “checking the small print to ensure every job provides proper training and a bridge to steady employment”.

The national chairman of the Federation of Small Businesses, Mike Cherry, 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.”

But the TaxPayers’ Alliance warned the scheme could turn into a “massive own goal” for the jobs market.

John O’Connell, the chief executive of the TaxPayers’ Alliance, said: “Subsidies for temp work won’t offer young people the proper opportunities they need to clamber onto the career ladder, but may only postpone painful youth unemployment. 

“Long term measures to boost jobs and investment, such as cutting the employers’ NI jobs tax, would be a much more sustainable answer.”

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