The Victorian government is creating a redress scheme for victims of historical abuse and neglect in institutional care.

The state is allocating $2.9 million to co-designing the scheme and, if it is re-elected, will offer an official apology to Victorians who experienced physical, psychological or emotional abuse in orphanages, children's homes and missions.

The scheme is intended to cover the period between 1928 and 1990, during which time an estimated 90,000 children were placed in care.

The government says the scheme will include urgent hardship payments of up to $10,000 for Care Leavers in exceptional circumstances.

Premier Daniel Andrews has acknowledged that many who were institutionalised as children, sometimes known as “Forgotten Australians” or ‘Care Leavers’, were badly mistreated.

“Victorians who were subject to horrific abuse as vulnerable children have waited long enough for the respect and recognition of a redress scheme that has left them behind. Today, that changes,” he said.

“To these brave victim-survivors - we see you. We hear you. And we apologise for the profound trauma you have carried for too long.”

Consultation on the design of the scheme is set to begin in coming months.

The scheme comes after Care Leavers expressed concern that they were not included in two other redress schemes, covering Aboriginal Victorians taken from their families and people involved in forced adoptions.