Deputy prime minister Nick Clegg announced today that the funding would be made available to pay charities and private sector organisations to provide 55,000 16 and 17 year olds who are not in education, employment or training – otherwise known as NEETs - with skills training and related services.

The scheme is particularly targeted at under 18 year-olds who have left school without any GCSEs at C level or above.

But Pimlico Plumbers' founder, Charlie Mullins, said it would make more sense to give the money to employers directly so that young people could earn while they learn.

"While the deputy prime minister’s intentions are good, this is the wrong way to go about training kids. It looks like a collective call from training providers for additional funding has been answered. The money will disappear into a bureaucratic black hole rather than directly benefit young people and employers,” he warned.

While it was all very well for charities and other organisations to tap into this funding, it was crucial that employers were the ultimate beneficiaries. “My experience of training providers has been nothing short of disastrous so it's time to cut out the middle man and go straight to employers,” Mullins said.

Although businesses are able to bid for the funding as well, he added: "What employer in their right mind will spend time filling in tender documents for a social experiment?"

Employers are eligible to apply for contracts worth £2,200 for each individual they take on, receiving an initial upfront payment, followed by more money if they employ the young person for 12 months.

The new scheme, which is due to launch in April, is part of the government's Youth Contract initiative to try and deal with the more than one million young people who are currently out of work.

The CBI was somewhat more upbeat, however. The employers’ lobby group believed it was good news that the government had responded to business pressure to include 16 and 17 year olds in the Youth Contract, but nonetheless felt that the programme did not go far enough.

Neil Carberry, the CBI’s director for employment and skills policy, warned: “We still need to see urgent action in schools to minimise the risk of young people becoming NEETs in the first place through better careers and study advice and improved business-school links.”

While it was right that private and third sector suppliers should provide the initiative on a payment-by-results basis, they would need to work closely with local authorities, schools and other public agencies to ensure it delivered, he added.

Katerina Ruediger, skills policy adviser at the Chartered Institute of Personnel and Development, meanwhile, welcomed the announcement of a scheme that was “specifically targeted at the most difficult-to-reach groups with the poorest qualifications”.

Overplaying ‘lost generation’ rhetoric consistently risked diverting attention away from “the persistent and serious structural element of youth unemployment”, which affected about 10% of young people even in good economic times, she said.

“Well before the recession hit, the CIPD was finding a marked preference amongst employers to recruit people with more experience, even to entry-level jobs – to the detriment of young school leavers,” Ruediger pointed out.

But targeting “employability support” at people who were likely to struggle even in the good times was definitely the way forward. “The earlier government and employers working together can get to these people and given them genuine support and experience of the workplace, the better,” she said.