Budget could lead to 1.3m extra job losses

The Treasury expects austerity measures in last week's Budget to drive up unemployment by as much as 1.3 million, according to leaked figures. As many as 600,000 jobs could be lost from the public sector and 700,000 from the private sector within the next five years.

The predictions were made by the independent Office for Budget Responsibility, set up by the Chancellor George Osborne ahead of his first Budget to make forecasts free from political influence. "The OBR forecasts unemployment to fall in every year, and employment to rise," said a Treasury spokesman.

The figures stand in stark contrast to the OBR prediction that unemployment will peak this year at 8.1 per cent and then fall for each of the next four years to reach 6.1 per cent in 2015. And they contradict the Treasury's red book, which said: "The decline in employment appears to be coming to an end and we expect a modest recovery in employment in the second half of 2010."

Alistair Darling, the shadow Chancellor, said: "Far from being honest, George Osborne failed to tell the country there would be substantial job losses as a result of his Budget."