UK jobless to rise above one million next year

Oct 03 2005 by Nic Paton Print This Article

The number of people out of work and claiming benefits in Britain will rise to above a million next year, an economic think-tank has predicted.

The Centre for Economics and Business Research has forecast unemployment going over the million mark (it is currently around 866,000) as growth in the UK turns distinctly sluggish.

The news follows Chancellor Gordon Brown's admission that his growth forecasts for the UK economy were over-optimistic.

The CEBR has predicted economic growth in the UK of 1.9 per cent this year and 2.1 per cent in 2006, substantially lower than the Chancellor's revised forecasts of 2.5 per cent or lower and certainly lower than his original 3-3.5 per cent prediction.

The gloomy prognosis meant that unemployment would break through the million mark in the second half of 2006, said the CEBR.

While the slow growth rate would not in itself mean the imposition of higher taxes, an underlying growth trend of 2.3 per cent would mean Brown would have little option but to impose a £5 billion tax hike in next year's Budget, it said.

Brown's options would include raising employers' National Insurance, limiting taxation personal allowances, extending the scope of VAT or putting a windfall tax on banking sector profits, the CEBR added.

CEBR managing director Mark Pragnall said the world economy would continue to suffer from high oil prices in 2006.

"One consequence is that unemployment is likely to continue to rise gradually, going through the one million mark on the claimant count measure in 2006 unless rules for inclusion on the claimant count list are changed," he added.