Unemployment 'will soar to 3m' as 725,000 public sector workers lose their jobs

Spending cuts will push up unemployment to almost three million as vast numbers of public sector workers lose their jobs, experts warn today.

The respected Chartered Institute of Personnel and Development claims a massive 725,000 state jobs - nearly one in eight - will be axed.

Chief economic adviser Dr John Philpott says state workers, who currently account for one in five of the workforce, should brace themselves for compulsory redundancies, vacancies left unfilled and recruitment freezes.

Many, he says, face little prospect of finding another job with a bleak prediction that unemployment will soar to 2.95million.

Falling axe: 725,000 public sector workers will lose their jobs over the next five years, according to the Chartered Institute of Personnel and Development (file picture)

The CIPD had earlier suggested the jobless total would hit 2.65million this year - rising from its current 2.51million.

It has now revised its forecast to predict unemployment will rise to 2.95million towards the end of 2012 and stay there until 2015.

LORD MYNERS TURNS ON 'FLAWED' LABOUR

Former City minister Lord Myners has launched an extraordinary attack on the Labour government in which he served.

The peer said he had been frustrated by his ex-colleagues' 'flawed thinking' on the economy.

He also insisted there was ' nothing progressive' about running up huge public debt, and urged the new Government to crack down on 'considerable waste' in spending.

Lord Myners, in office until the Tory-Liberal Democrat Coalition took over last month, told peers during a debate: 'I found it very frustrating to sit in meetings with some of my fellow ministers talking about creating jobs in the green economy, creating jobs in biotechnology.

The Government can't create jobs. The Government can create the environment which is conducive to the creation of jobs but it cannot create jobs and we mislead ourselves if we believe it can.'

He added: 'There is nothing progressive about a government that consistently spends more than it can raise in taxation and certainly nothing progressive that endows generations to come with the liabilities-incurred, with respect to the current generation.'

Lord Myners said that though there would have to be considerable spending cuts, there was 'considerable waste in public expenditure'.

Mark Hoban, the new City minister, said: 'Lord Myners has let the cat out of the bag and admitted what we have been arguing all along. Coming after (ex-Chief Secretary to the Treasury) Liam Byrne's admission that there is no money left, this is yet another shocking indictment of the previous government's record and the legacy it has left behind that we are now having to deal with.'

Dr Philpott will use a speech in London today to warn that unemployment will be high for the next five years.

Tough fiscal medicine is 'unavoidable', he will say, but will insist tax rises, not spending cuts, should be the focus.

'Deficit reduction will slow an already anaemic recovery and, in the short run, be bad for jobs in both the private and public sectors,' he will say. 'UK public sector job losses of around 725,000 are expected.'

State workers can also expect to be hit by pay cuts, or paltry pay rises at best. And private sector workers also face five years of pain, with little or no chance of a pay rise to keep up with the rising cost of living.

Treasury sources rejected the CIPD's warnings. A spokesman said: 'Unemployment is currently rising. It is clear that if we do not reduce the deficit we cannot secure the recovery which will undermine job creation.'

Meanwhile, business leaders have backed the Coalition's aim of tackling the UK's unprecedented deficit with £4 in spending cuts for every £1 in tax hikes.

In a letter to Chancellor George Osborne ahead of the emergency Budget on June 22, the Confederation of British Industry agreed money had to be saved through job cuts and shared back office functions in the public sector.

CBI deputy director-general John Cridland said: 'A radical re-engineering of public services is a must if damaging tax rises are to be avoided. Only an effective cost reduction strategy can safeguard future growth.'

But the group reiterated 'major concerns' over Government proposals to hike capital gains tax to levels similar to income tax.

In the Commons, the Prime Minister, who this week said public sector workers had been unfairly 'insulated' from the impact of the recession, insisted tough measures were vital.

He said: 'If we do not take action to deal with the deficit, we will pay over £70billion, not repaying the debt, but just on debt interest in five years' time.

'Think about it like this: all the revenue gleaned from corporation tax - all the tax on every company making a profit in our country - does not even pay for half the debt interest bill.

'That is the mess that we have been left in, but this Government has the courage to deal with it.'