Gordon Brown stands accused today of misleading the public over his much-vaunted plans to help young people through the recession. Leaked documents show the government is planning drastic cuts for its flagship plan to train a new generation of apprentices.

Confidential papers obtained by The Observer show that, while Brown and his ministers have suggested they are raising investment in training, skills and apprenticeships, behind the scenes they are preparing some £350m of cuts for 2010-11 that will slash the number of training places on offer by hundreds of thousands.

Last night business groups, unions and opposition parties accused the government of duping young people – and businesses that train them in return for state help with funding – into believing it is investing more during the downturn, when the reverse is the case.

The cuts represent part of the £5bn in immediate spending reductions across all departments promised by Alistair Darling at his April budget, which the Treasury insisted would not compromise front-line services. The leaked documents show, however, that these cuts will severely limit help for young people seeking training and qualifications – and will raise fears that other core services such as schools and hospitals will also suffer.

The memo, marked "Protected – Funding Policy" and sent on 12 October by the Department for Business, Innovation and Skills (BIS) to business secretary Lord Mandelson and skills minister Kevin Brennan, contains preferred options for slashing the £4bn skills budget.

While the cuts are described as "efficiency savings", the documents make clear they would have a massive impact on front-line services.

The cuts would mainly affect the 19-plus age group wanting to join courses at FE colleges and independent training companies, or become apprentices. The leaked papers suggest an initial £100m would be found by identifying savings in quangos and administration. But they make clear a further £252m would fall on the delivery of key government programmes, such as Train to Gain, Adult Apprentices and Skills for Life.

They estimate that a cut of £100m would mean losing "a total 133,000 learners from the baseline". According to BIS's own methodology, the total reduction of "learners" would, therefore, be 335,000. In 2008-09 there were 3.7 million learners aged 19-plus.

The options include:

■ Cutting by 10% the amount of money for apprenticeships for over-25s. Last year the government promised to boost investment in this area.

■ Delaying the introduction of "skills accounts" – a flagship programme due to be fully operational in 2010-11 – under which people of 19 and over would be given personal budgets of up to £7,000 to spend on training.

■ Cutting by £25m funding for the new Adult Advancement and Careers Service set up last year.

■ Halving the number of Career Development Loans.

■ Reducing funding for the Train to Gain scheme under which employers receive money for training people already in work.

■ Freezing salaries and cutting staff at further education colleges.

David Willetts, the shadow universities and skills secretary, said last night: "What's particularly shocking about this document is that the bulk of the cuts are in front-line services. Many other departments including schools and health could be part of the same exercise. They talk about re-skilling Britain, but in reality they are misleading young people about the help on offer at a time when they need that help most urgently."

Since the economic downturn led to a sharp rise in unemployment last year, Brown has repeatedly sought to contrast Labour's determination to boost investment in training with what he claims is a Tory agenda of cuts that would prolong the downturn.

In a speech in January, Brown said: "Now more than ever is the time to invest in our young people, their skills and their talents in training them for the future."

However, with tax revenues devastated by the deepest recession in a generation and the deficit expected to hit £175bn this year, departments have been instructed to scour their budgets for savings, to help deliver a modest reduction, to £173bn in 2010-11.

Darling is expected to spell out in his pre-budget report, expected later this month or in early December, which policy areas will be protected from the axe in future years. "It's about identifying what is 'front-line'," said a Whitehall source. The Treasury insists that no decision has yet been made about whether the chancellor will spell out where proposed cuts will fall by publishing a full spending review before the election.

A BIS spokesman insisted last night that the need for savings had been made clear in the budget and that ministers were trying to protect services. "It remains our commitment to protect front-line services and identify savings through efficiency measures and improving value for money wherever possible.

"The skills sector has received record investment in recent years and we will shortly be publishing the skills strategy setting out our long-term plans for investment in skills to contribute to the future growth and success of the UK economy."

David Frost, director-general of the British Chambers of Commerce, said companies that had been urged by government to train people would be infuriated that state funding to help them do so was being cut. "This is the latest in a series of funding fiascos that have hit the skills budget. Companies were actively encouraged to train their employees and they have done this. It will be business that gets the country out of this recession and to do this it will need highly skilled employees."

Mark Serwotka, the general secretary of the Public and Commercial Services Union, said funding for the Learning and Skills Council, which is distributing the training budget, had already been "cut to the bone".

"Further cuts will undermine the skills agenda and restrict opportunities for learners at a time when we should be investing to aid the country's economic recovery. Rather than drawing up cuts, the government should be looking at collecting the billions worth of tax that is uncollected, avoided or evaded."