Nick Clegg has pledged to create hundreds of thousands of work placements for young people in the face of record levels of youth unemployment.

The Deputy Prime Minister and leader of the Liberal Democrats announced the creation of a £1 billion Youth Contract aimed at helping jobless young people get back into work or education.

The move comes the day after official figures revealed that a record 1,163,000 16 to 24-year-olds were "NEET" (not in education, employment or training) in the third quarter of this year.

The number of people in this age group who are looking for work increased by 67,000 in the quarter to September to 1.02 million, the worst total since comparable records began in 1992.

Mr Clegg announced that under the Youth Contract, from next April, over a three-year period at least 410,000 work places will be found for 18 to 24-year-olds. This includes wage subsidies worth £2,275 handed to employers to take on 160,000 18 to 24-year-olds.

Each of these "wage incentives" is worth half of the youth national minimum wage and last for six months. They will be available for those youngsters that need the most help after three months, and all of those who have been on Jobseeker's Allowance (JSA) for nine months.

Mr Clegg also said the contract would offer a work experience placement of up to eight weeks for every unemployed 18 to 24-year-old that wants one. Extra funding for apprenticeships and a £50 million programme to help persistently NEET 16 and 17-year-olds will be on offer too, the Government said.

Under the plans, young people who fail to sign up to the Youth Contract will be considered for "mandatory work activity", while those who drop out of work experience or jobs without good reason will lose their benefits.

Launching the initiative at a college in Leeds, Mr Clegg told the BBC: "It's heartwrenching when you hear from young people how demoralising it is for them to be sitting at home week in and week out, sending out one job application after the next and often not getting any answer or explanation about why they're not getting a job.

"It's a very big new initiative which means that every single unemployed young person will have the opportunity to earn money or learn."