‘Real danger of a generation lost to life of unemployment’

UK-wide, the public-sector losses outweigh new private jobs by almost three to one.

Mr Salmond referred to talk of a coalition U-turn at his official Bute House residence in Edinburgh yesterday.

“What we need is not a decline in capital investment, what we need is an expansion,” he said. “There have been rumours – and I hope these rumours are true – that there is a rethink taking place in the Treasury at the present moment.”

He added: “We need action from the UK government – a Plan B – to protect Scotland’s economic recovery and jobs.

“This must focus on the areas where Scottish Government action has made a difference: increased capital expenditure, improved access to finance for medium and small-sized businesses, as well as the introduction of measures to boost consumer confidence and economic security.”

The number of people out of work fell by 3,000 over the three months to July in Scotland, according to official figures, taking the total to 204,000.

At the same time, the number of people in work increased by 23,000, to 2.49m. The UK, on the other hand, saw the unemployment figure jump by 80,000 to 2.51m – the biggest increase in nearly two years.

Scotland was the only part of the UK where unemployment fell over the quarter.

The unemployment rate in Scotland is 7.5 per cent, just below the UK rate of 7.9 per cent. The employment rate increased over the quarter to 71.6 per cent, above the UK average of 70.5 per cent.

But the number of young Scots aged 18-24 claiming Jobseeker’s Allowance has risen from 41,900 to 46,300 over the past 12 months, a rise of 10.6 per cent.

Sally Ann Kelly, head of children’s services at Barnardo’s Scotland, said: “There is a real danger of another generation lost to permanent unemployment.”

Mr Salmond’s calls for a U-turn were dismissed by the Scotland Office yesterday. “Our Plan A also has a wide range of support from economic bodies such as the International Monetary Fund,” a spokesman said.

“Scottish ministers have serious powers to invest in and support the Scottish economy. They should concentrate on using the powers they have to work for Scotland.”

The UK government’s drive to cut Britain’s annual deficit of £150 billion – the gap between taxes raised and spending – was backed by IMF chief Christine Lagarde last week.

The figures come as the Chancellor rolls out £81bn of spending cuts, including hundreds of thousands of job losses, amid warnings that unemployment could hit 2.7m next year.

The TUC said the figures were evidence that the recovery had been “choked off by a self-defeating rush to austerity”, while Unison called for the government to put forward a Plan B.

TUC general secretary Brendan Barber said: “The public sector is shedding jobs more than twice as fast as the private sector can create new ones.

“The outlook for jobs is as bad as at any time since the height of the recession.”

The Chancellor is banking on a healthy private sector to pick up the slack in the economy, but recent data, showing soft manufacturing growth, a contraction in the services sector and a stagnant trade deficit, have raised fears over the strength of the recovery.

Public-sector employment fell by 111,000 in the three months to June across the UK, with just 41,000 private-sector jobs created. Scotland, by contrast saw 57,700 jobs created in the private sector over the year – compared with the disappearance of 25,200 public sector jobs.

The number of people described as economically active in Scotland increased by 20,000 over the period. However, the number of people claiming Jobseeker’s Allowance was 145,700 in August – an increase of 1,200 over the month.

Scottish Secretary Michael Moore said: “Despite the difficult finances that this government has inherited, we are taking the decisions that create jobs and opportunities in the long term.”