Gordon Brown has pledged £500m to help people who have been unemployed for more than six months into jobs or work-based training as the government attempts to stem further increases in unemployment.

The Prime Minister told employers, unions and recruitment trade bodies at a jobs summit this morning, that firms would be paid up to £2,500 for every person they train who has been unemployed for more than six months.

More cash will also be available to help people learn new skills to find work.

Brown vowed that communities would “not be written off” but business leaders urged caution, saying the scheme would have limited success.

David Frost, the director-general of the British Chambers of Commerce, told the summit with unemployment projected to rise by over one million and companies not recruiting at the moment the focus should be on retaining skills in organisations.

Others warned the PM that protecting skilled jobs was far more important as was restoring the flow of credit to businesses from banks.

John Cridland, Confederation of British Industry deputy director-general, told Sky News: They [the government] has got to help the banks get back into lending by using the national balance sheet to underwrite loans to the business community.”

Meanwhile, the Federation of Small Businesses has launched a five-point plan, promoting part-time working, investment in apprenticeships, simplified regulation, lower taxes and greater opportunities for small firms to bid for government contracts for, which it claims could create 400,000 new jobs.   

Commenting on the investment, Kevin Green, chief executive, Recruitment and Employment Confederation (REC), says: “The key is to ensure that broad employment strategies actually work on the ground and at a local level. Within this context, the active cooperation between job centres and private sector recruitment agencies will be crucial to ensure that job seekers get the right support and guidance.  This is especially true at the high end where specialised recruiters have expert knowledge of their sector and can move people into appropriate new work opportunities quickly.

“Incentivising employers to take on longer-term unemployed may act as a prompt but the key is to ensure that we limit the number of jobseekers falling into that category in the first place - for example, by making the most of the UK’s flexible labour market and the opportunities that temporary, contract and interim work can provide. The preventative measure of helping new job seekers access short-term opportunities is as important as the ”cure” of incentivising the recruitment of the long-term unemployed.”