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The number of people unemployed in the UK rose by 80,000 – the largest increase in almost two years,the latest figures show.

According to the Office for National Statistics (ONS), the jobless rate stands at 7.9% of the working-age population, as unemployment went on an incline between May and July, leaving 2.51 million people unemployed.

The ONS reports that this is the first time growth in the private sector has not compensated the decrease in public sector employment on a quarterly basis since autumn 2010.

The number employed in the public sector fell by 111,000 between March and June to reach 6.04 million, the largest fall since records began in 1999. In June, the public sector accounted for 20.7% of all people in employment, the lowest level since September 2008.

The rise in unemployment could also be attributed to the build-up in the number of jobless young people - youth unemployment rose sharply by 78,000 to 973,000 in the three months to July, as school leavers and graduates struggled to find work.

The TUC's general Secretary Brendan Barber labelled the figures from the ONS as “terrible”.

“They are further evidence that the recovery has been choked off by a self-defeating rush to austerity. Government policies are hurting, but they aren't working,” he said.

“The public sector is shedding jobs more than twice as fast as the private sector can create new ones, and with the increasingly gloomy outlook for the economy as a whole the outlook for jobs is as bad as at any time since the height of the recession.”

However, the prime minister insisted the government was taking action, by creating 300,000 new apprenticeships, starting the regional growth fund, cutting corporation tax, increasing capital spending and rolling out its Work Programme.

“These unemployment figures are disappointing,” Mr Cameron conceded during Prime Minister's Questions session yesterday, “I don't want to hide from that, every lost job is a tragedy for that family and I want to do everything I can and this government will do everything it can to help those people back into work.”

Ed Miliband accused the prime Minister of believing that “unemployment is a price worth paying,”

“The message to all those people who have lost their jobs is that the Prime Minister is not going to change course,” the Labour party leader said.

“Youth unemployment is at its highest level for 19 years and women’s unemployment is at its highest level for 23 years.”

But Mr Cameron argued that despite the bad employment figures, the need to reduce the biggest budget deficit in Europe - a “golden inheritance” from the former government - continues to stand as the utmost priority, in order to prevent Britain from the snares of bankruptcy that currently threatens Greece.

 Reform of the workforce is an essential means of improving public services

An influential think-tank Reform says that the Government is right to reduce the number of jobs in the public sector and should remain committed to its strategy despite increasing pressure from the trade unions and some in the opposing party.

In its report Reformers and Wreckers, it claims the 400,000 job cuts would not harm public service delivery and highlights examples where “visionary” public service leaders have reduced head count while improving service delivery.

It also highlighted that several public services are run inefficiently due to an old-fashioned employment culture which rewards length of service rather than performance levels, tolerating under-performance and leaving good performances unheeded.

Only 8 per cent of private sector organisations pay by length of service, compared to 57 per cent of public sector organisations, while 38 per cent of public sector organisations offer bonus and incentive schemes, compared to 81 per cent of private sector service organisations, according to the report.

Andrew Haldenby, director of Reform, said: “The best public sector managers change the way they employ people to make their services better and cheaper. A smaller, high quality public sector workforce will mean better public services.”