Budget cuts 'will push jobless total to 3 million'

Emergency moves to cut Britain's £156bn deficit will push unemployment to almost three million with the poorest areas being hit hardest, the Government will 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 reduction in their budgets.

The coalition government wants the bulk of savings to be made from spending cuts rather than higher taxes. But John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development (CIPD), will warn that the measures will snuff out any prospect of recovery this year in the jobs market. He will predict that 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 and job prospects". But he will add: "Reliance on cuts in public spending... makes the outlook especially bleak for individuals already suffering."

Coalition 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.

Dr Philpott will also point out that Canada faced a more favourable world economy, which enabled private companies to "ease the pain", while Britain is entering an "age of austerity". He will say: "This time around deficit reduction will slow an already anaemic recovery and in the short-run be bad for jobs in both the private and public sectors."

Dr Philpott casts doubt on the promise by Nick Clegg, the Deputy Prime Minister, in an interview with The Independent last week that Britain's poorest regions will not suffer disproportionately. Dr Philpott said: "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."

Brendan Barber, the TUC general secretary, said: "Stand by for a new north-south divide. Northern regions depend more on public sector jobs, and staff who lose their jobs will find it harder to get new ones."

In a letter to the Chancellor George Osborne, the CBI yesterday insisted that 80 per cent of the deficit reduction should come from efficiency savings.

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