Long-term unemployed people would be stripped of benefits by a future Labour government if they refused to join a temporary job scheme, shadow chancellor Ed Balls warned yesterday.

Labour's compulsory jobs guarantee scheme would apply to all 18 to 24-year-olds who have been out of work for a year.

It would also cover adults over 25 who claimed jobseeker's allowance for two years or more.

In addition, new claimants for jobseeker's allowance would face losing their benefit if they failed a basic skills test and refused training.

Mr Balls said Labour's jobs guarantee scheme would provide paid six-month starter jobs for 50,000 young people who had been left on the dole for over a year.

But he revealed that government-backed wage payments would be for just 25 hours a week at the rock-bottom national minimum wage.

He warned: "It will be a tough contract. Those who can work will be required to take up the jobs on offer or lose their benefits. A life on benefits will simply not be an option."

Estimated costs of £1.9 billion in the first year would come from a £1.5bn tax on bank bonuses and savings made by restricting pensions tax relief for people earning over £150,000 a year to the same rate as basic-rate taxpayers.

Labour claimed that costs would fall to around £900 million a year in the first four years of the next Parliament.

The government would pay for the national minimum wage and the employer's weekly national insurance contributions for 25 hours a week over six months.

An extra £500 per employee would also go toward the cost of training and administration.

Participants would have to undergo training provided by the employer and engage in "intensive job-search activity" for a permanent job at the end of the six-month period.

Shadow work and pensions secretary Rachel Reeves said Labour was determined to "bring welfare spending under control."

A basic skills test would assess every new jobseeker's allowance claimant within six weeks of claiming benefits.