THE North-East faces the prospect of a “lost generation” unless the Chancellor focuses his efforts on youth unemployment in the next Budget, a leading business group warned last night.

Almost one in four of young people aged 16 to 24 in the regoin are out of work with a youth unemployment rate of 24.2 per cent – and the young generation is being squeezed by higher living costs.

The youth unemployment rate is the highest in the UK outside London, where it stood at 24.4 per cent in the last quarter of 2013. Yorkshire and the Humber is lower at 22.4 per cent.

Youngsters across the country are three times as likely to be out of work as the rest of the UK population.

The British Chambers of Commerce (BCC) last night suggested a set of proposals to help drive down youth unemployment across the UK, saying it was responding to employers’ concerns about how work-ready young people were and a “deficient” education system.

It said growing jobs, improving skills and encouraging enterprise among young people was crucial to securing future growth.

Its call came as a youth campaign charity issued a report which showed that of those young people who were employed, the pay gap between the under 21s and over 50s had ballooned by 50 per cent in the last 15 years, while people in their 20s had seen rents rise by more than a third.

The Intergenerational Foundation, (IF) which last year said the North-East of England was the worst place in the UK to be young because of its high youth unemployment and low political engagement levels, said that the youngest workers were being hit hardest as the pay gap widens.

Liz Emerson, co-founder of IF, said: “Our research clearly demonstrates that the under-21s are being squeezed by falling wages and higher living costs compared to older colleagues.

“Urgent action is needed to ensure North-East young people in particular, are given greater support in the form of cheaper travel to work, better pay and lower housing and living costs.”

She described the young as the “new poor” and said policy makers had to do more to protect them.

The BCC, in a submission to Chancellor George Osborne ahead of next month’s Budget, proposed tax relief for those investing in companies run by young entrepreneurs who often struggle to obtain finance from other sources such as banks.

Proposals also include a £100m future workforce grant scheme to give 1,000 payments to firms hiring long-term unemployed people or a new apprentice, to create 100,000 new jobs this year.

The organisation is also calling for a two-year extension to a successful scheme giving apprenticeship grants to employers, to help create 80,000 additional apprenticeships.

BCC director general John Longworth aid: “Businesses across Britain tell me they want to hire young people. Yet many cannot afford to take the risk, especially at a time when other, more qualified applicants are coming forward for the job vacancies on offer.

“If the Chancellor wants to avoid a lost generation among today’s 16-24 year-olds, he must use the spring Budget to help businesses take on and train up young people, whether they are going straight into jobs or into apprenticeships.

“Getting young people into employment is vital, pressing and easily affordable right now.”

He said the BCC proposals would cost less than seven per cent of the Government’s spending on overseas aid last year.

No-one from the North East Chamber of Commerce was available for comment yesterday, but chief executive James Ramsbotham said last year that it was “vital” that vocational pathways like apprenticeships were not overlooked.

The new Bishop of Durham, the Right Reverend Paul Butler, who was enthroned on Saturday in Durham Cathedral, said one of his priorities in his new role was to look at youth unemployment.