Budget axe will push jobless total up to 3m, Govt warned

Emergency moves to cut Britain's £156 billion ($336 billion) deficit will push unemployment to almost three million with the poorest areas being hit hardest, the Government was to be warned today.

The bleak assessment comes as ministers began the hunt for wide-ranging cuts in public spending, with some Whitehall departments facing a 20 per cent budget reduction.

The coalition Government wants savings to be made from spending cuts rather than higher taxes. But Dr John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development, warned the measures would snuff out any prospect of recovery this year in the jobs market.

He was to predict unemployment will reach 2.95 million in 2012 - and stay high for many years. He said it was possible before the financial squeeze that joblessness would peak at 2.65 million.

He will acknowledge that "tough fiscal medicine is unavoidable and may boost the UK's long-run economic growth". But "reliance on cuts in public spending ... makes the outlook especially bleak for individuals already suffering".

Ministers are drawing their inspiration from Canada's Liberal Government in the 1990s. It axed almost 10 per cent of the public sector workforce, which according to the CIPD would translate into 500,000 job losses in Britain. But Britain's even higher emphasis on cutting spending could result in 725,000 redundancies.

Philpott believes Canada faced a more favourable world economy, which enabled private companies to "ease the pain", while Britain is entering an "age of austerity". "The prospects for the most disadvantaged seem particularly bleak. This will present a major challenge to a Government that aims to reduce the deficit while alleviating poverty, enhancing social mobility and mending a broken society."

But a Treasury spokesman said: "It is clear that if we do not reduce the deficit we cannot secure the recovery. Britain has over-spent, and not been under-taxed."

Meanwhile, aides to David Miliband fear his battle to win the Labour leadership may have been damaged by his refusal to join attempts to oust former Prime Minister Gordon Brown before the election. The former Foreign Secretary is the frontrunner to win September's leadership contest, which has five candidates. His allies realise he will be repeatedly asked about his refusal to back the coups designed to bring down Brown and install him as leader - an apparent lack of ruthlessness that could cost him dear.

He will be joined on the ballot paper by Ed Miliband, Ed Balls, Andy Burnham and Diane Abbott, who will undertake a gruelling round of hustings over the northern summer. Abbott was a surprise addition after a late flurry of support from David Miliband's allies helped her to secure enough nominations from MPs. Her presence ends the prospect of it being fought out by four Oxbridge-educated male former Cabinet ministers.

David Miliband ended the race for nominations with the backing of 81 Commons colleagues, a lead of 18 over his brother, Ed. Miliband is still associated by many with Tony Blair, but he will use the contest to reveal policies he believes demonstrate social democratic instincts to the left of the former Prime Minster.

Ed Miliband, who has positioned himself to the left of his older brother, is thought to be his closest rival. His allies believe he has a wider appeal to party activists and trade unionists, which each comprise one-third of Labour's electoral college, with MPs and MEPs.

- Independent