Dramatic rise in long-term unemployed

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In a huge blow to Labour's boast to have slashed long-term joblessness, new figures will show that the rise is so dramatic that private contractors for welfare programmes are having to radically revise their tenders.

Only last August, the Department for Work and Pensions told private bidders for a flagship new £1.2 billion welfare-to-work programme that they expected fewer than 100,000 people to be out of work for more than 12 months.

But in a letter to the bidders, department officials have now admitted: "It is possible that customer volumes... could be up to 300 per cent higher."

Work and Pensions Secretary James Purnell is determined to use private firms to improve the state's performance in getting the "hard core" of long-term unemployed into work.

But unemployment is now becoming one of the single biggest threats to Labour's hold on power and Gordon Brown's poll ratings have plummeted in the past month as jobless figures showed that the official number could top three million by next year.

This month tens of thousands of jobs have been lost in the retail and manufacturing sectors but these redundancies have yet to show up in official figures.