Unemployment is set to rise to a peak of 7.5 per cent in the second quarter of next year, according to Office for Budget Responsibility forecasts revealed in the chancellor’s spending review speech today.

Rishi Sunak set out the grim news that up to 2.6m people are likely to find themselves out of work next year, reiterating his warning that the government “cannot protect every job”.

After peaking in Q2 of 2021, unemployment is then expected to fall in every year reaching 4.4 per cent in 2024, he said.

Sunak said that the “economic emergency” facing the country has “only just begun”, but claimed that without the government’s Covid interventions the UK’s predicament would be far worse and more jobs would have been lost.

He announced £3bn in spending to support those looking for work.

Sunak said the government could not justify a pay rise for all public sector workers and claimed that the pandemic has increased the pay gap between public and private sector employees.

Instead the 2.1m public workers who earn less than the median wage of £24,000 will get a pay rise of at least £250.

He cited OBR figures showing the perilous state of the UK’s finances.

They show that the economy is set to contract by 11.3 per cent this year, which Sunak said is the largest fall in output for more than 300 years.

The chancellor warned of the “scarring” impact of the pandemic beyond next year.

He said: “Even with growth returning, our economic output is not expected to return to pre-crisis levels until the fourth quarter of 2022.”