The Government should give anyone without a job who wants to start a new business £100 a week for a year, says a new report from Policy Exchange – published a day after unemployment surged to the highest level in over three years.

A labour market that works argues for a new 2020 Enterprise Allowance, based on a successful scheme launched in the 1980s.

It is backed by Rt Hon Sajid Javid MP, former Chancellor of the Exchequer, and Rt Hon Lord Young of Graffham, architect of the original idea during the unemployment crisis of the 1980s, who warns: “it is highly probable that we shall shortly face the highest increase in unemployment ever known.”

More than twice as generous as any existing Government scheme, it would be available to anyone not currently employed, with a viable business idea and access to £2,000 start-up capital.

Any income from the new start-up should not affect what the individual might receive from Universal Credit, the report recommends, mirroring the original scheme described by Lord Young as “so simple as to be laughable”.

It should be marketed specifically at the under-30s, the report says. The original scheme proved popular with young people, a quarter of participants being under 25.