Rachel Reeves has been blamed for triggering a ‘jobs bloodbath’ – with workers being axed at a rate of 1,000 a day.
More than 180,000 people have been left on the workplace scrapheap in the UK in the past year, with 64,000 of those coming in the last two months, according to official figures.
In a damning indictment of Labour‘s economic policies, it is also the first time overall unemployment has hit 5 per cent since the Covid pandemic.
It comes amid a spike in the number of people on benefits who are not required to work at all – with four million now kicking their heels at home, half of the total number claiming Universal Credit.
On Tuesday, the Chancellor was accused of driving the decline with her punishing £25billion national insurance raid on businesses.
She also faced criticism for overseeing a soaring public sector wage bill, with pay hikes outstripping those being seen in the private sector, despite struggling to close a £30billion gap in the public finances.
Experts are now warning the ‘madness’ of Labour’s policies will only make matters worse as bosses hold back investing in staff amid fears of another tax grab in this month’s Budget.
They have urged Ms Reeves to consider stalling any increase to the National Minimum Wage and called for Labour’s new Employment Rights Bill to be halted.
Fears are growing that Rachel Reeves will announce a further tax grab in the upcoming budget
Prime Minster Keir Starmer and his Chancellor have been criticised ahead of the Budget
Tory shadow chancellor Sir Mel Stride said: ‘These figures confirm a jobs bloodbath under Labour – with 1,000 jobs lost every single day in the run-up to the Budget.
‘Keir Starmer and Rachel Reeves have taxed jobs, knocked business confidence and taken Britain back to pandemic-level unemployment. More tax rises loom.
‘More damage to come. Labour’s failure isn’t an accident – it’s the result of their choices.’
Tuesday’s dismal Office for National Statistics (ONS) figures revealed that as well as a drop in the number of people on payroll, unemployment also increased by 349,000, or 24 per cent since Labour came to power last summer. At the time, the unemployment rate stood at 4.1 per cent.
And there was evidence of worsening long-term youth unemployment. The proportion of jobless 18-24 year-olds who have been out of work for more than a year rose to 26 per cent, the highest since 2015.
And even for those in work, stubbornly high inflation is eating away at living standards, with pay growth in real terms – stripping out the impact of higher prices and housing costs – falling to just 0.5 per cent, the weakest since 2023.
Addressing the jobs crash, Alex Hall-Chen, Principal Policy Advisor for Employment at the Institute of Directors, said: ‘This fall is a direct result of the recent increase in employers’ National Insurance contributions and the upcoming Employment Rights Bill.’
He said the overall effect of the policies was ‘that hiring employees has become a costlier and riskier proposition for businesses’.
There are growing fears the declining jobs market will see Labour break its manifesto pledge by increasing income tax, despite the threat it would damage already-sluggish economic growth.
Tory shadow chancellor Sir Mel Stride (pictured) said the figures ‘confirm a jobs bloodbath’
And businesses face another blow if the Chancellor takes an axe to so-called ‘salary sacrifice’ schemes that allow them to reduce tax paid on contributions to workers’ pension pots.
Simon French, chief economist at City broker Panmure Liberum, said it was ‘madness to be pressing on with the rights bill and above inflation increases to the national living wage at a time when the labour market is cooling rapidly’.
Yael Selfin, chief economist at accountancy firm KPMG UK, said: ‘Hiring activity remains weak and survey evidence suggests that additional uncertainty from the Budget is keeping a lid on activity, as employers await the details of any fiscal measures.’
Former Bank of England rate-setter Andrew Sentance said the Chancellor was ‘warned last October that increasing employer NI – the ‘tax on jobs’ – would stifle job creation and raise unemployment’.
He added: ‘With the unemployment rate up to 5 per cent, this is exactly what has happened, and there is probably more bad job news to come as employers adjust to higher NI.’
Britain’s hospitality and retail sectors were worst hit by the national insurance raid and on Tuesday, Kate Nicholls, chair of trade body UK Hospitality, said the latest figures were ‘a shocking indictment of the damage caused’.
Liz McKeown, director of economic statistics at the ONS, said: ‘Taken together these figures point to a weakening labour market.’
Tory business spokesman Andrew Griffith said: ‘Labour ministers should hang their heads in shame.
‘The £25 billion NI hike, falling business confidence and threat of draconian union and worker rights have all contributed to today’s rise in unemployment to 5 per cent.
‘With young people most impacted, “generation jobless” is now happening on their watch.’
Work and pensions secretary Pat McFadden (pictured) said in response to the ONS numbers that the government was ‘stepping up our plan to get Britain working’
The ONS figures, which are likely to add to pressure for the Bank of England to cut interest rates next month, sent the pound lower against the dollar and the euro.
Work and Pensions Secretary Pat McFadden said in response to the ONS numbers that the government was ‘stepping up our plan to get Britain working’.
But the deteriorating jobs figure only adds to the catalogue of depressing economic numbers facing the Chancellor.
The Bank of England has predicted that unemployment will continue to rise, but had not expected it to hit 5 per cent until later this year.
Meanwhile, inflation has remained at a stubbornly high 3.8 per cent, nearly twice the 2 per cent level targeted by the Bank. That too has been blamed on Ms Reeves as her national insurance hikes were passed on to consumers in the form of higher prices.
At the same time, overall economic performance has been sluggish.
Official figures due on Thursday are expected to show a further slowdown in growth to 0.2 per cent in the third quarter of the year.