The Employment minister Tony McNulty has admitted that he could not survive on the basic unemployment benefit paid to people made redundant. As dole queues surged to a 10-year high of 1.97 million, he acknowledged that it was "very, very difficult" to exist on jobseekers' allowance (JSA).

The benefit is worth £60.50 a week for people aged 25 and over, and £47.95 a week for younger claimants.

Mr McNulty is paid a salary of £104,050 – equivalent to £2,000 a week – as a minister of state.

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It takes him just over five hours to earn the equivalent of the weekly JSA payment. His salary is dwarfed by the income of his wife, Christine Gilbert. She was paid up to £230,000 last year as the chief inspector of education, children's services and skills.

Mr McNulty's admission came in a BBC Radio 5 Live interview when he was asked how he expected people to make ends meet on £60 a week.

He replied: "We just need to work with them to try and get them back into work at the earliest opportunity." Challenged about whether he could survive on that income, he conceded: "I don't think I could. I'd be the first to say that." The minister added: "I think it's very, very difficult and in most instances – not everybody – people will have other support from the state as well, through a range of other benefits."

Brendan Barber, the TUC general secretary, said the comments proved the need for an increase in jobseekers' allowance, adding: "Even government ministers admit they couldn't live on today's unemployment benefit of less than £10 a day – one of the lowest relative to wages in the developed world."

Steve Webb, the Liberal Democrat work and pensions spokesman, said: "The minister isn't telling people on benefit anything they don't already know. What is appalling is that he doesn't appear to want to do anything about it."

The jobless total reached 1.97 million at the end of December. It looks certain to pass two million next month following a spate of redundancies after Christmas, and business leaders forecast that three million people could be on the dole within a year.

The number of people claiming JSA stood last month at 1.23 million, a rise of 73,800 since December and the 12th consecutive increase. The size of the workforce dropped last year by 66,000 to 29.4 million.

The number of UK-born workers in employment fell by 278,000 to 25.6 million, while non-UK-born workers increased by 214,000 to 3.8 million.

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Theresa May, the shadow Work and Pensions Secretary, said: "These figures once again expose what a cynical piece of political spin the Prime Minister's claim of 'British jobs for British workers' was."

Further job losses announced yesterday included 380 at the cash-and-carry retailer Makro, which is closing superstores in Coventry, Wolverhampton and Swansea, while 65 posts are being axed by the newspaper group News International.

The Governor of the Bank of England, Mervyn King, delivered a grim prediction over the length and severity of the downturn. He warned Britain was in a "deep recession" and forecast a 4 per cent contraction in the economy between last summer and this summer.

That is far larger than previous projections. Mr King also feared that repairing the impact of the credit crunch on bank lending "will not be easy and will take time".

The Health Secretary, Alan Johnson, also suggests in an interview in The Spectator today that the downturn could last until the beginning of 2011. Contrasting the current economic slump with previous recessions, he told the magazine: "What happened in the Eighties and what happened to a certain extent in the Nineties is that whole areas, Hull for instance, were just left with no help at all.

"If we can get through this, a year, 18 months, even two years, with all the agencies focusing on how you give people skills to fill the vacancies, then you will have a completely different picture at the end of this than you did at the end of the Eighties."