The long-awaited childcare scheme, costing pounds 300m, was welcomed as "tremendous" by lone parent groups, although they said they were disappointed that nothing had been done for mothers who could not go back to work.
The Chancellor called the scheme, which will establish 30,000 after-school clubs, "the biggest investment in childcare in this country". The five- year plan will be paid for by the Exchequer and the new opportunities fund. To staff the new clubs, 50,000 young people will be offered training as childcarers through the welfare-to-work programme.
"A national childcare strategy is no longer the ambition of workless parents. It is now the policy of this country's Government," the Chancellor said. Details of the new childcare programme will be announced today by the Education and Employment Secretary, David Blunkett, and the Social Security Secretary, Harriet Harman.
Liz Sewell, chief executive of the lone parents' charity, Gingerbread, said it was tremendous: "Childcare is often the final hurdle lone parents have to jump when they are trying to get back to work.
"A kids' club in every community will be a major boost."
However, Ms Sewell warned the pounds 300m investment would be of no comfort to those people who were stuck on benefit through no fault of their own.
Maeve Sherlock, of the National Council for One Parent Families, said: "Putting good, affordable childcare within the reach of lone parents could help provide a route out of poverty which so many badly need."
The reform of benefits, part of the modernisation of the welfare state, would start with the working families tax credit - "cash paid through the wage packet directly to families on low incomes, side by side with the national minimum wage".
It is likely to mean that a benefit payment, Family Credit, will be transformed into a tax credit, so someone returning to work would be taxed as normal, but the Inland Revenue would allow him or her to keep a proportion of the tax
A similar system works in the US, Earned Income Tax Credit (EITC), where it is received as part of a taxpayers' annual tax refund cheque, the amount being based on total earnings in the previous year. While one report found that EITC had encouraged 500,000 lone mothers in the US into work, there are potential pitfalls.
Evidence presented to the House of Commons social security select committee by the Child Poverty Action group said problems included the fact that payments go to the family's main earner rather than carer and all taxpayers need to file a tax return, which can be particularly difficult for people moving frequently in and out of work.
Mr Brown said the national insurance system would be reformed for the low paid. Under the present system anyone earning pounds 3,224 pays no National Insurance but someone earning even pounds 1 more than that is liable to pay NI at 2 per cent on the total sum. So hundreds of thousands of people on low pay would benefit if the Government lifts the level at which NI begins to kick in.
Mr Brown also announced an expansion of the New Deal for lone parents. Eight pilot schemes offering lone parents personalised assistance with job search, training and childcare are already under way and the scheme will be launched nationwide from October 1998. A pounds 195m programme to help the long-term sick and disabled get back to work would see new projects starting next spring.
For young people he announced that leading bus and rail companies - including National Express and Stagecoach - had agreed to offer discount travel to young people on the New Deal programme. National Express said it was offering half-price fares to youngsters on the programme who use its Travel West Midlands coach company as well as on four of its franchised rail routes - Gatwick Express, Central Trains, ScotRail, and Silverlink (formerly North London Railways).
The RAC said today: "We welcome this. Youngsters who have been out of work can find public transport expensive."