Unemployment will hit 2.6MILLION people in the spring as the furlough scheme ends

Unemployment will surge to 7.5 per cent, putting 2.6million people out of work, when the furlough scheme ends in the spring, Rishi Sunak was warned today.

The Office for Budget Responsibility said that the tens of billions spent on the job retention scheme and billions more spent on business loans and grants had fended off a catastrophe this year.

But it warned of a potential cliff edge when they come to an end in the spring, with the Chancellor in his spending review today offering no suggestion that the schemes would be extended. UK unemployment is currently 4.8 per cent.

Boris Johnson has previously said he wants to UK to be on its way back to normal by Easter, armed with millions of doses of new Covid vaccines. 

It its economic forecast, published today, the OBR said:  ‘The support provided to households and businesses has prevented an even more dramatic fall in output and attenuated the likely longer-term adverse effects of the pandemic on the economy’s supply capacity. 

‘And the Government’s furlough scheme has prevented a larger rise in unemployment. 

‘Grants, loans, and tax holidays and reliefs to businesses have helped them to hold onto workers, keep up to date with their taxes, and avoid insolvencies. 

Nonetheless, we anticipate a significant rise in unemployment – to 7.5 per cent in our central forecast – as this support is withdrawn in the spring.

‘The economic outlook remains highly uncertain and depends upon the future path of the virus, the stringency of public health restrictions, the timing and effectiveness of vaccines, and the reactions of households and businesses to all of these.

‘It also depends on the outcome of the continuing Brexit negotiations. In such circumstances, the value of a single ”central” forecast is limited.’

Mr Sunak told the Commons today that the peak in unemployment would be stark but sharp, adding:  ‘Unemployment is then forecast to fall in every year, reaching 4.4 per cent by the end of 2024.’ 

Mr Sunak also used his spending review today to say nearly £3 billion would be provided to Work and Pensions Secretary Therese Coffey to deliver a new three-year ‘restart programme’.

This will have the aim of helping more than one million people who have been unemployed for more than 12 months to find new work. 

Shadow chancellor Anneliese Dodds said: ‘To recover jobs, Labour called for £30 billion of capital spending accelerated into the next 18 months, focused on green initiatives, supporting 400,000 jobs and bringing us in line with countries like France and Germany. This government’s ambition is for half that number of new jobs.

‘To retrain workers, we needed an emergency programme to support people back into work. But Kickstart has been slow to get started and the skills offer for those over 25 won’t start until April.

‘The Chancellor said at the beginning of his speech that our economic emergency ”has only just begun”. Try telling that to people who’ve been out of work since March.

‘And Restart announced today, must meet three key tests to be effective: it should help people who need it most, not cherry pick. It should be up and running as soon as possible – yet it appears only a fraction of Restart funding will be available next year. And Restart must involve local actors who know their communities, not be imposed from Whitehall.

‘And of course job search support ultimately only works if sufficient new jobs actually exist. That’s why we needed ambitious action to boost our economy and to support our businesses.’