The boss of the high street retailer Next has warned that government tax rises are fuelling a “crisis in youth unemployment”, prompting ministers to hit back by citing his £7 million pay packet. 

Lord Wolfson of Aspley Guise, chief executive of the FTSE 100 clothing and home chain, said a surge in applications at the retailer reflected a collapse in entry-level opportunities across retail and hospitality, as higher employment costs and sluggish growth bite into employers’ ability to recruit.

“You can really see a dramatic fall in entry-level opportunities,” he told the BBC’s Big Boss Interview. “In our stores just two years ago we had 10 applicants for every single job vacancy in our shops — that’s high. Today, that figure is at 19.

“I think that doubling of applicants for shop jobs is indicative of just how big the crisis is in youth unemployment at the moment.”

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Ministers rejected the criticism, pointing to Wolfson’s multimillion-pound pay deal and arguing that the reforms were vital to the financial security of working people.

The Department for Business and Trade said: “Lord Wolfson’s comments are neither new nor surprising. The budget allowed us to stabilise the economy and deliver support for families and businesses, and the UK is the fastest-growing economy in the G7 in the first quarter of this year.”

A spokesman added: “The Employment Rights Act gives people the security they need in their working lives. Lord Wolfson, who earned more than £7 million last year, will understand just how important our measures to make work pay are for the financial and job security of working people.”

Youth unemployment rose to its highest level for nearly 12 years this month, according to the Office for National Statistics. 

The jobless rate among those aged 18-24 stands at 14.7 per cent, a level not seen since late 2014. For the wider 16-24 age group it has risen to 16.2 per cent, the highest since early 2015.

John Caudwell, the billionaire founder of Phones 4u, told Times Radio that youth unemployment was “dreadful” and warned that it would be made worse by artificial intelligence.

Caudwell said the impact of AI would “hit like a tsunami” and “make more and more young people unemployable unless they’ve got skills like trade skills: plumber, electrician, those sorts of skills that are desperately needed”.

Retail and hospitality businesses, which typically provide large numbers of first jobs for young people, have been among the hardest hit by rising labour costs and weakening demand. 

Wolfson, who has been warning about rising youth unemployment for the past two years, said Labour’s increase in national insurance contributions and the rise in the minimum wage had effectively created a “tax on entry-level employment”, which he argued was reducing hiring and should be reversed.

The retail boss, a Conservative peer, criticised Labour’s Employment Rights Act, which strengthens workers’ rights to guaranteed hours and seeks to curb zero-hours contracts. He said it would reduce flexibility for employers.

He described the measures as “restrictions on flexible part-time working” and warned that Next would therefore only be able to offer “fewer hours and [fewer] extra hours at Christmas”, the crucial trading period for the industry. 

“That’s going to be bad news for our colleagues who want the extra hours, particularly students … and bad news for our customers because service won’t be as good.”

Wolfson urged the government to focus on restoring growth across the wider economy, which he previously described as “anaemic”. 

“If you’ve got fewer jobs, then the people who suffer the most are those with the least experience,” he said.

Alice Martin, head of research for the Work Foundation at Lancaster University, said: “Young people are entering one of the toughest labour markets in years, facing intense competition for a shrinking number of entry-level jobs.

“Retail and other sectors are changing rapidly, with more online sales and fewer staff needed on the shop floor. That has contributed to a sharp fall in vacancies, leaving many young people facing repeated rejection as they try to enter work.”

She added: “Young people are especially exposed to low-paid and insecure work, which only strengthens the case for improving job quality and ensuring work provides both security and stability.”