Unemployment set to hit 10-year high

Chancellor to declare she has ‘right economic plan’ in Spring Statement as joblessness figure expected to near 1.9 million Daily Telegraph 02 March 2026 9:43pm GMT Unemployment is set to hit a 10-year high, the public finance watchdog will forecast on Tuesday, as Rachel Reeves declares she has the “right economic plan” for Britain. The Chancellor will use her Spring Statement to the House of Commons to highlight reductions in borrowing costs, inflation and interest rates.

However, estimates from the Office for Budget Responsibility (OBR), the independent forecaster, will reveal a rise in joblessness as Ms Reeves’s tax raids on employers bite. Unemployment had been forecast to hit 1.8 million in 2026, according to the OBR’s predictions in November 2025. But the watchdog is now set to revise its figures for 2026 to closer to 1.9 million looking for work – the highest jobless rate since 2015. It comes after the Treasury increased the National Insurance (NI) rate paid by employers and raised the youth minimum wage. The OBR’s forecast on Tuesday will not include an assessment of new employment laws championed by Angela Rayner, the former deputy prime minister. Surging energy prices also threaten Ms Reeves’s ability to balance the books in the autumn. The economic impact of a possible protracted conflict in the Middle East will not be reflected in the OBR forecasts. Official figures show the unemployment rate hit 5.2 per cent at the end of last year, already above the OBR’s November forecast of 4.9 per cent for the final quarter of 2025. Most economists expect the unemployment rate to remain above 5 per cent for the next two years. Analysts at Barclays have warned the OBR will probably push up its jobless forecasts for the next four years as employers count the cost of NI rises and Labour’s workers’ rights reforms. Treasury figures are expected to argue that the increase in unemployment could be explained in part by people previously inactive in the workplace now actively seeking work. ‘Working people are better off’ In her Spring Statement, Ms Reeves will argue that after two difficult tax-raising Budgets, the conditions are now emerging for stronger economic growth. The Chancellor will tell MPs: “This Government has the right economic plan for our country… in a world that has become yet more uncertain. “Stability in the public finances, investment in infrastructure and reform to our economy. “Building growth not on the contribution of a few people or a few parts of the country, but in every part of Britain with a state that doesn’t stand back, but steps up.” She will add: “Because of the decisions we have already taken, we have a stronger and more secure economy. Inflation and interest rates falling. And in every part of Britain, working people are better off.” The Chancellor has deliberately taken a decision not to announce any major taxation and spending policies at the Spring Statement, according to Treasury insiders. The move matches her approach to hold only one so-called “fiscal statement” a year, meaning any major taxation and spending changes will be delivered in the autumn Budget. Different approach It is a marked difference in approach to the intense period of speculation ahead of the November 2025 Budget, which some economists have argued damaged consumer and business confidence. It means that Whitehall sources are insisting there will be no change to student loan repayment plans announced on Tuesday, despite Tory criticism of the current approach. Bridget Phillipson, the Education Secretary, is considering changes, but the policy rethinking is in its early stages, and no overhaul is expected to be unveiled by Ms Reeves. The Chancellor is not expected to announce an increase in defence spending, despite indications that Downing Street is keen on moving more quickly to raise military budgets. The Prime Minister hinted he was considering an increase in the Commons on Monday when talking about the UK’s stance on America and Israel’s military strike on Iran. Sir Jeremy Hunt, the Tory former foreign secretary, said defence spending increase plans were “widely thought to be too little, taking too long”. He asked if Sir Keir would “unblock” a stand-off between the Treasury and the Ministry of Defence to ensure UK military might remained “formidable”.