The Deputy Prime Minister has revealed a new scheme to try and tackle the “ticking time bomb” of 16 and 17 year-olds who are not in education, employment or training (NEET).

Nick Clegg said the government will be allocating £126 million to help more than 55,000 teenagers with no GCSES at A* to C.

The funding will form part of the youth contract, announced in November, and use a payment-by-results scheme.

Mr Clegg, speaking at the Groundwork Hub in south east London, said: “Sitting at home with nothing to do when you’re so young can knock the stuffing out of you for years.

“It is a tragedy for the young people involved – a ticking time bomb for the economy and our society as a whole.

“This problem isn’t new, but in the current economic climate we urgently need to step up efforts to ensure some of our most troubled teenagers have the skills, confidence and opportunities to succeed.”

Contracts worth up to £2,200 will be awarded to organisations with a history of putting young people back into work apprenticeships or training.

Charities and businesses will receive an initial payment for taking on a young person, followed by additional funds for when they start an apprenticeship, progress through a training programme or stay in a job for a sustained period of time.

Mr Clegg added: “Many of them will have complex problems: truancy, teenage pregnancy, a lack of GCSEs and health problems.

“So helping them onto their feet will not be without challenges and Government cannot do this alone.

“But we all have a duty to reach out to the young people who can be hardest to reach.

“That’s why today I am calling on charities and other organisations at the coal face to work with Government to help tens and thousands of lost teenagers onto a brighter path.”

The scheme will use a black-box funding approach and give businesses complete freedom in how they provide support.

Tim Loughton, children and young people’s minister, said: “Providers know how best to support young people back into education training and employment.

“We are looking forward to receiving some innovative ideas that really work from experienced organisations in all sectors.”

Liverpool, Leeds-Bradford-Wakefield and Newcastle-Gateshead will be allocated money as part of the ‘City Deals’ launched by the deputy prime minister in December 2011.

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