Chancellor George Osborne should reverse the coalition government's austerity plans and focus on young people and investment, according to the Trades Union Congress.

As Osborne puts the finishing touches to the budget to be unveiled on 21 March the TUC has called on the government to provide incentives to get companies investing more in the economy.

It criticises the "cut-price, poorly targeted and unpaid work experience schemes" for not helping fight the rising tide of youth unemployment.

It has asked Osborne to introduce a guarantee of paid work or training for any young person who has been out of work for at least six months and called for the introduction of a youth credit for all 16-24-year-olds to "promote access to training and work placements".

It also demanded the reversal of cuts to corporation tax, which it claimed serve to "prop up the City". Taxes on investment and infrastructure development should be cut instead, it said.

Austerity measures were "plainly not working", said the TUC. It suggested a new state investment bank, similar to those operating in the German KFW banking group, to get money flowing again.

It did, however, support Osborne's programme of credit easing but argued it should be doubled to £40bn.

"Over the last year growth has flatlined, more people are out of work and government borrowing has risen sharply as a result. The government's austerity strategy is plainly not working," said TUC general secretary Brendan Barber.

"Rather than carrying on with self-defeating cuts, the chancellor should do what's right for the economy and prioritise tackling our jobs crisis and getting businesses to invest more of the £724bn they are sitting on.

"Bold new measures such as youth credits and job guarantee will help get young people's careers off the ground. A tax system that rewards investment, rather than propping up the city, with help to generate growth and jobs in the real economy too.

"The chancellor must not lose sight of the UK's long-term growth prospects either. A state investment bank and a modern industrial policy may not gel with his laissez-faire instincts but they will help deliver the rebalancing of our economy that virtually everyone outside the City accepts we need."

Shadow chancellor Ed Balls has criticised Osborne for sparing the highest earners and called on him to take the pressure off low and middle income families by reducing tax relief on pension contributions for the wealthy.