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Austerity measures not yet taking effect, expert warns
General News |
06/09/2010
Higher levels of unemployment are likely to be seen in the UK as the government implements its spending reduction plan, it has been claimed.
Jonathan Loynes, chief European economist at Capital Economics, said we have "hardly felt the thin edge of the wedge" in terms of the coalition's austerity measures so far.
He explained that public spending has continued to rise during 2010 and it will not be until the next fiscal year that the cuts will start to have significant impacts.
Mr Loynes predicted that somewhere between half-a million and a million jobs are likely to go over the next couple of years as the impacts of the spending cuts are felt.
He was commenting after the British Chambers of Commerce (BCC) suggested that recent improvements have continued to mask worrying developments in the UK labour market.
The BCC noted that inactivity is a rising trend, with part-time workers helping to raise the total employment rate.
According to the organisation, total unemployment will rise from 2.46 million (7.8 per cent of the workforce) in April to June 2010, to a peak of 2.65 million (8.3 per cent of the workforce) in the first half of 2012.
This would see a net increase of just under 200,000 in the jobless total, the BCC added.
Mr Loynes claimed that businesses and consumers will notice the difference from next year onwards, especially as a number of tax measures are yet to be implemented.
Among these is the rise in VAT, which is due to go up by 2.5 per cent to 20 per cent in January 2011, he noted.
Mr Loynes said the 1.2 per cent gross domestic product growth witnessed during the second quarter of 2010 is unlikely to be repeated for some time to come.
Posted by Jon Aspinell
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