MPs have been told the UK will see higher levels of unemployment than forecast by the Office of Budget Responsibility.
The OBR says the total number of people unemp- loyed in the three months to the end of January hit 2.53 million. It forecasts that total will reach 2.6 million later this year and then fall back to 2.5 million next year and 2.1 million by 2015.
Giving evidence to the Treasury select committee as part its inquiry into the Budget last week, Capital Economics managing director Roger Bootle said: “One of the reasons why I think private sector job losses have not been greater is that we have not yet seen the full impact of the squeeze, not just the public sector squeeze but also the squeeze on consumer real incomes. This is a real vulnerability with the OBR’s forecasts.”
National Institute for Economic and Social Research director of macroeconomic research and forecasting Ray Barrell told MPs: “I suspect that unemployment will rise rather more than the OBR currently suggests.
“In the long term, unemployment is likely to be scarred by this recession and I would expect the sustained level of unemployment to lift above the number that the OBR has given.”