David Cameron has announced that the Tories plan to offer National Insurance breaks to companies employing people who have been out of work for more than three months.
The Conservative leader has said the incentive would be funded by savings from people not being on unemployment benefit.
It is estimated that the scheme could create 350,000 new jobs and save firms £2.6 billion on tax bills.
The BBC reports that Mr Cameron said: "One of the biggest worries for people right now is unemployment.
"Instead of the government paying for them to be unemployed it can be paying for them to be in work."
He added that it costs the taxpayer £8,000 when someone goes on unemployment benefit but only £2,500 of that would be used to fund a cut in the amount of National Insurance paid by companies.
Meanwhile, a research group has called on chancellor Alistair Darling to temporarily cut VAT from 17.5 per cent to 12 per cent to help steer the UK through the recession.
The Centre for Economics and Business Research said that reducing VAT until the end of 2009 would cost £24 billion but may stop the recession from intensifying.
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