This change in policy represents a major success for the Local Government Association's lobbying work.
Addressing the LGA's welfare to work conference on Tuesday, Mr Smith said it was right that public sector job opportunities should be included in the 'new deal', which was about boosting young people's employability.
'If the new deal is to reflect the realities of the labour market then it is important that the public sector is involved,' he said.
A limit of 25% has been signalled, but Mr Smith said no figure had been set and the ratio of public to private sector jobs would be determined by the balance within regional economies. 'We're likely to have overall national guidelines disaggregated to take account of those regional differences,' he said.
The announcement was foreshadowed by Sir John Harman, chair of the LGA's urban commission and a member of the new deal task force, who said local government could congratulate itself on the influence it had had on the programme's shape. 'The voice of the LGA has unquestionably been heard and the changes we've been arguing for have been incorporated,' he said.
Public sector employers were excluded from the draft framework, which specified private sector employment as one of the four options to be offered young people. The others were full-time training and work experience on an environmental task force or in the voluntary sector. Unison head of local government Keith Sonnet welcomed the news but said it was important to ensure the scheme provided real jobs and training.
'There can be no job substitution; the level of payment for trainees should be adequate and training should be high quality and linked to a recognised qualification,' he said.
-- Councils could play a key role in helping the government deliver its welfare to work programme, according to Labour peer Steve Bassam. Writing in LGC this week, Lord Bassam, leader of Brighton and Hove Council, argues that the policy's success will depend on building partnerships.
-- The full text of Andrew Smith's speech is available to LGCnet subscribers