Double nightmare for Rachel Reeves as unemployment rises and wage growth flops

The rate of UK unemployment rose to 4.8% in the three months to August, up from 4.7% in the three months to July, the Office for National Statistics said. The announcement of yet another increase in unemployment is another blow to Chancellor Rachel Reeves as she works on her Budget statement, due on November 26.

It means 1.74 million people are now unemployed - up from 1.4 million 12 a year previously. The number of people suffering the misery of unemployment is up by 300,000 over the course of one year. And the new figures out today show UK average earnings growth fell slightly to 4.7%, or just 0.9% once inflation is taken into account.

Conservatives and many business leaders have accused the Chancellor of making it harder to employ staff by pushing up the rate of national insurance paid by employers. Labour is also introducing a new Employment Rights Bill, which is designed to ensure staff have more rights in the workplace as soon as they start a job. But critics say this makes it harder for firms to "take a chance" on new staff, with young people hit particularly hard.

As she prepared for her make-or-break Budget, Ns Reeves is to lead a cross-Government drive to slash red tape and build more housing and transport projects as she attempts to grow the economy.

But she has warned Labour colleagues she will not abandon her “fiscal rules” which prohibit extra borrowing to pay for day-to-day spending, even though this could force her to increase taxes or cut spending in her November 26 Budget.

A Treasury source said: “Ahead of Budget, the Chancellor is clear that tough decisions will need to be taken and there are no quick fixes.”

The source added: “Britain is facing a once in a generation challenge, after years of underinvestment and global headwinds have put stability at risk.

“Borrowing more would put our public finances in jeopardy, saddling future generations with more debt while a return to austerity would condemn the country to decline.

“That’s why the Chancellor is laser focused on pulling every lever to stimulate growth across the country and get our economy firing again.”

Further measures to slash regulation that the Chancellor believes is holding back businesses will follow changes already introduced to the planning system with the Planning and Infrastructure Bill, currently passing through Parliament. Schemes on the drawing board include the Sizewell C nuclear power station in Suffolk, local transport projects and the Lower Thames Crossing, a new road that will connect Kent and Essex through a tunnel beneath the River Thames.