Rachel Reeves risks unemployment 'on scale not seen for years'

Rachel Reeves has been warned she risks destroying jobs and creating unemployment "on a scale we haven't seen for years". The Chancellor is being urged to scrap jobs-killing taxes as Britain's jobless rate hits its highest level for four years.Fears are mounting "worse is yet to come" as businesses struggle to pay higher National Insurance contributions and brace for further expenses linked to tougher rules on workers' rights.

The surprise increase in people out of work "spells trouble" for efforts to ignite economic growth, according to experts.

Professor Len Shackleton of the Institute of Economic Affairs said it was "not too late" for the Government to change course but warned of the level of threat to employment.

He said: "Today's disturbing labour market data, with falling payroll employment and vacancies coupled with rising unemployment, show the impact of the National Insurance hike and employers' anticipation of the costly effects of the Employment Rights Bill. Government cannot really create jobs, except for those directly taxpayer-funded - of which we have far too many in quangos, regulators and much of the civil service.

"But it can certainly destroy private sector jobs by making it more and more difficult to employ people cost-effectively. It is not too late for the government to recognise this and row back from some of the policies which are causing the labour market downturn before we face joblessness on a scale which we haven't seen for many years [but] governments are notoriously slow learners."

The latest figures show wage growth slowed and unemployment hit 4.7% in the three months to May - up from 4.6%.

Conservatives warned "worse is yet to come" with businesses already squeezed by higher National Insurance contributions now braced for tougher workers' rights.

Average earnings growth, excluding bonuses, slowed to 5% - the lowest level for almost three years.

Maxwell Marlow of the Adam Smith Institute said: "The rise in unemployment spells trouble for the government's effort to achieve growth. But it shouldn't come as a surprise.

"The ill-conceived National Insurance rise has put off employers from hiring."

Mr Marlow said workers have "taken the fall" as employers struggle with an "ever-growing tax burden" and "ever higher energy bills".

The grim employment figures come as concern mounts the Chancellor may hike taxes in the autumn Budget.

Mr Marlow warned raising taxes would "destroy" jobs and called for tax cuts.

Conservative Shadow Work and Pensions Secretary Helen Whately said: "Unemployment going up for the ninth month in a row on Labour's watch is a disgrace. It is the latest in a litany of dreadful economic news - coming off the back of stoked inflation and depressed growth stats."

She described every job loss as a "devastating blow to hardworking families across the country".

Jane Gratton of the British Chambers of Commerce said businesses described labour costs as the "biggest pressure".

She said: "This mounting financial pressure, alongside pervasive skills shortages, remains a massive challenge for business, presenting big risks to investment and productivity. The £5billion cost associated with the employment rights bill also poses a further threat to firms' investment plans.

Employment minister Alison McGovern said: "We are helping more people into work and putting more money in their pockets. With 384,000 more jobs added to the economy since last summer, real wages continuing to rise and - as these latest figures highlight - inactivity falling, we are all feeling the benefits.

"But we need to go further. Under our plan for change, Jobcentres everywhere are changing to end the tick box culture and serve employers and those who need work better."