Rachel Reeves is set to announce a scheme to guarantee paid work placements for young people who have been unemployed for 18 months - and stop their benefits if they don't accept it.
The scheme, which will be formally announced at Labour's conference in Liverpool, will promise all young people between 18 and 21 education, training or work.
The chancellor will use her speech at the conference to vow to "abolish" long-term youth unemployment, insisting welfare dependence is stripping people of their "dignity".
The Telegraph reports government sources say the new scheme will help thousands of young people into paid employment while simultaneously easing the benefits bill burden.
The newspaper reports Reeves will tell the conference: “I will never be satisfied while too many people’s potential is wasted, frozen out of employment, education, or training. There’s no defending it.
“It’s bad for business, bad for taxpayers, bad for our economy, and it scars people’s prospects throughout their lives.
“At the spending review, I pledged record investment in skills to support our young people. And so today, I can announce that with that investment we will fund a new youth guarantee.
“Every young person will be guaranteed either a place in a college, for those who want to continue their studies or an apprenticeship, to help them learn a trade vital to our plans to rebuild the country, or one-to-one support to find a job.”