Nick Clegg is to target the "ticking time bomb" of youth unemployment with a scheme aimed at helping the hardest hit.

The deputy prime minister will announce a £126m scheme aimed at helping the 55,000 most disadvantaged 16 to 17-year-old 'NEETs' (those not in education, employment or training).

Firms will be invited to bid for contracts worth up to £2,200 as part of the 'youth contract' the government announced in November, with payment dependent on results. The money will be allocated to organisations with a track record in getting NEETs into work.

“Sitting at home with nothing to do when you’re so young can knock the stuffing out of you for years," Clegg is expected to say on Tuesday. "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."

The deputy prime minister will acknowledge the "complex" problems that many of those the scheme is aimed at will face such as "truancy, teenage pregnancy, a lack of GCSEs and health problems" but will insist that there is a "moral duty" to help them.

Neil Lee, senior economist at the Work Foundation, told The Huffington Post UK the government was right to focus on those who "really, really need help" out of the one million unemployed young people in Britain.

"It looks like not a bad idea, payment by results can work. And also they've identified a really important problem, we talk about NEETS - that's quite a diverse group of people."

But he said the money allocated was "not a huge amount": "It will be interesting to see how much they can deliver for that amount of money.

"It's going to depend on circumstances a lot, whether there are the right sort of training programmes in place, the right sort of jobs. But targeting a core group, for whom that's really going to lead to a long-term disengagement with the labour market, that's good."

Lee added: "The work programme is paid by results. It's still not clear about how the work programme is working. That is another scheme that looks really good in practice but there are still problems with delivery."

Children and Young People’s Minister Tim Loughton said: “We are committed to supporting those 16 and 17-year-olds who have found it hard to find training or work upon leaving school. We want them to receive personal, targeted support from experts who will give them the confidence, skills and motivation to stay in education or find a job with training.

“Providers know how best to support young people back into education training and employment. It’s time we put them back on the road to success.

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

Labour’s Shadow Work and Pensions Secretary Liam Byrne said: “No-one will ever believe a word Nick Clegg says again. He promised big answers to the problem of youth unemployment yet what we have got today is something that won’t help 95% of Britain’s young unemployed. This is much too small and much too late to tackle a problem that is likely to cost our country £28billion over the next 10 years. The Government needs to bite the bullet and put in place a sensible tax on bankers bonuses in the next budget to help get 100,000 young people back to work.”