An additional 100,000 public sector job cuts are expected to be predicted by the independent tax and spending watchdog, according to a key forecasting group, in another blow to the UK labour market.
The Office for Budget Responsibility (OBR) will up its March forecast of 400,000 job losses to 500,000 when it delivers its Economic and Fiscal Outlook report on Tuesday, the Ernst & Young ITEM Club said.
The OBR's forecast, used by the Treasury in determining its fiscal policy, was too conservative with its predictions for the number of job losses required to achieve the Chancellor's spending cuts.
The surge in the outlook over job losses will come as the OBR slashes its forecast for growth for the UK economy over the next few years.
The OBR had forecast that only 20,000 general government jobs would be lost in 2011/12, Ernst & Young said, but just one quarter into the new financial year, the number of job losses already stands at 147,000.
Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club comments: "The economic outlook has darkened considerably since the OBR's last forecast in March, and so next week's statement is likely to bring little festive cheer to the Government.
"The UK's unemployment rate is already at 8.3%, but there's worse still to come. As the public sector spending cuts start to feed through towards the end of this Parliament, the axe is inevitably going to fall on the labour market.
"The OBR have been fairly conservative in their estimates of job losses, but the latest data on public sector employment suggests that the causalities could easily be as high as half a million."
The ITEM Club has forecast the OBR to reduce its UK GDP forecasts for 2011 and 2012 from 1.7% and 2.5% respectively, to 0.9% and below 1.0%, as the eurozone debt crisis escalates and consumer demand falters.
The ITEM Club said there should be some leeway for the Government to adjust its plans and called on the coalition to use additional funds to prop up the housing market and to temporarily reverse the recent increase in employers' National Insurance Contributions.