He told a conference in Nottingham that a Labour government would set up pilot schemes to offer three choices to people who had been unemployed for more than a year.
They would be offered "a personal job account" and three six-month routes from welfare to work, financed by the money that would otherwise be spent on benefits and schemes such as Training for Work.
It is estimated that the notional account, which could be topped up by European money in unemployment black-spots, could be worth an average pounds 2,000 over the six months. The money would be paid out weekly, not in a lump sum.
Mr Blunkett said the three back-to-work options were: "Neighbourhood Match", offering work experience and skills training for people on local regeneration schemes; "Learning for Work", offering education for a work- related qualification; and "Business Start", giving assistance for people to start a business.
Each pilot scheme would be carefully appraised, "especially its ability to yield net savings to the public purse".
But Mr Blunkett added that additional action would have to be taken to help people who had been out of work for more than two years. "For them, we shall offer 'Job Plus' - this will be a regular private-sector job, plus training, including an element of employer rebate," he said. "The rebate would be funded by the windfall levy on the excess profits of the privatised utilities."
Mr Blunkett said a similar programme had been tried with the Tories' "Workstart" pilot schemes, which had had the greatest take-up among smaller companies. "However, smaller companies are less likely to be able to provide the training needed to equip the employee with the skills needed to move into unsupported employment.
"That is why we are proposing a more substantial rebate ... we have suggested pounds 75 per week for six months when taking on somebody unemployed for more than two years - insisting that training should be a key element."
He added: "We need to be flexible ... putting together a range of options to run side by side, adding up to a radical new approach to tackling long- term unemployment."Reuse content