Rishi Sunak warned the UK faces a “long and difficult” recovery from Covid-19 but insisted it is “beyond doubt” the Government’s economic plans are working.

The Chancellor told MPs that people losing their jobs is the thing which “weighs most heavily on me”, adding he cannot guarantee there will not be more job losses in the coming months.

But Mr Sunak said figures suggest almost two million fewer people will lose their jobs than previously feared and his “plan for jobs” is aiding the recovery.

Speaking on day two of the Queen’s Speech debate, Mr Sunak sought to strike an upbeat tone about the road ahead while recognising the setbacks faced by people and businesses.

He told MPs: “When the furlough scheme ends in September we will have helped to pay people’s wages for a year and a half supporting at its peak the jobs of almost nine million people.

“We have protected the incomes of more than 2.7 million self-employed people, backed businesses to keep people in work with tens of billions of pounds of loans, grants and tax cuts and supported the most vulnerable through the crisis with a strengthened safety net, increased funding for local authorities and public services and help for the charity sector.”

On businesses, Mr Sunak said he believed they are “beginning to feel more confident” despite many being hit hard by the pandemic – pointing to a fall in the number of firms becoming insolvent and the build-up of corporate deposits.

Mr Sunak went on: “It is going to take this country and the whole world a long time to recover fully from the shock that saw the largest fall in output in 300 years.

“But while our recovery will be long and difficult, it is beyond doubt now that our plan is working.

“But we will never be complacent – 800,000 people have lost their jobs through this crisis and no chancellor could guarantee there will not be more jobs lost, and people losing their jobs is the thing that weighs most heavily on me.”

Mr Sunak insisted jobs are the Government’s “highest economic priority”.

For Labour, newly appointed shadow chancellor Rachel Reeves said: “This really is not the time for just wallpapering over the cracks, instead we must match the scale of the moment that faces our people and also our planet.”

She added: “We must end the insecurity and the lack of opportunity in our economy for far too many.”

Ms Reeves went on: “After a decade of Conservative Government our public services were underfunded and underprepared for the pandemic that came.”

She criticised the process which resulted in some Covid-19 contracts being awarded to companies with links to the Conservative Party, adding: “Now we’re led to believe that this is all one… it’s a massive coincidence that they got those contracts, how did it happen, who knows?

“The Government they’re taking the public for fools.

“Taxpayers deserve that their money is used to best effect, not squandered on contracts that don’t deliver or line the pockets of friends and donors of the Conservative Party.

“The Government says it wants value for money, but it has failed to claw back the millions wasted on contracts that didn’t deliver for the NHS and didn’t deliver for taxpayers either.”

Ms Reeves added key workers should be “rewarded with a pay rise”.