Osborne pledges £200m to train unemployed young

George Osborne is to promise £200m to train a new generation of highly skilled workers after Britain's vocational training was condemned by a leading economic watchdog.

The Chancellor is determined to present Wednesday's Budget as a reforming package that will make Britain a more attractive place to do business. The coalition is anxious to move on from its cuts package to focus on stimulating growth, although the Office for Budget Responsibility is expected to downgrade its growth forecasts for 2011.

Help for motorists facing a 1p rise in fuel duty is expected, while red tape hampering firms from expanding will be removed. Empty office blocks will cleared and turned into homes, and major corporations will be offered tax breaks on their foreign earnings to prevent an exodus from the UK. Mr Osborne could also signal a merger of national insurance with income tax to simplify Britain's complex tax system. He said: "We will be as determined in our pursuit of economic reform as we have been in our pursuit of economic stability." But critics warn increased freedoms for business will harm workers.

Nick Clegg, the Deputy Prime Minister, has promised "real steps" in the Budget towards raising the income tax threshold to £10,000 by 2015, a key Lib Dem policy which would cost £13bn.

Amid growing concern that rising youth unemployment risks creating a "lost generation" of unskilled young people, Mr Osborne is understood to have drawn up plans for 50,000 additional apprenticeships and 100,000 extra work experience placements in engineering, manufacturing and IT. "If we are going to rebuild the economy, we need jobs for the future," a Treasury source said. Official statistics show that 21 per cent of 16- to 24-year-olds are not in employment, education or training.

A spokesman from youth charity the Prince's Trust said: "These young people may have come from households where no one works, with no positive role models, or struggled at school, leaving with few qualifications. It is these vulnerable young people who need our support to help them into jobs."

Last week the Organisation for Economic Co-operation and Development (OECD) said low-skilled workers and the young have been "particularly hard hit during the recession" and highlighted the need for improving education. It said participation in training among 16- to 18-year-olds remains low compared with other major economies, in part because of "a confusing and rapidly changing array of often low-quality vocational programmes". It demanded a simplified system and a "further focus on high-quality apprenticeships". Mr Osborne is also expected to announce funding for the replacement to Labour's educational maintenance allowance, which helps children from poorer families to stay in education.

Labour has demanded a £600m fund for youth jobs, funded by repeating last year's £2bn tax on bank bonuses. Ed Balls, the Shadow Chancellor, questioned whether Mr Osborne has a clear vision of where jobs will come from. Writing in The Independent on Sunday, Mr Balls says: "The Government has boasted of a 'big bang' Budget plan for growth. But what we have seen so far – tinkering with planning laws, reheating failed policies and rowing back on workers' rights – looks like a damp squib."

In particular, Labour has claimed plans to exempt small firms with fewer than 10 staff from honouring some workers' rights risk creating "second-class citizens" in the workplace. According to research by the House of Commons library, up to 3.8 million people, including 1.8 million women, will not be covered by maternity pay regulations, the right to request flexible working and shared parental leave, or the abolition of the default retirement age.

It is suggested the move could contravene EU equality legislation because "there is the possibility of a disproportionate impact on women", the library said.

Before the Budget, Labour is expected to campaign against the changes, pointing out that in opposition David Cameron promised his government would be "most family-friendly ever". John Denham, the shadow Business Secretary, said: "About 3.8 million people working for businesses with fewer than 10 employees will be reduced to second-class citizens in the workplace, taking away employment rights that allow families to juggle busy home and work lives. If the Government believes that this is the answer to growth, it completely underestimates the scale of the challenge facing this country."