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Headline CSR figures understate full impact of spending cuts on public sector jobs, says CIPD

The coalition government’s statement in the Comprehensive Spending Review (CSR) that planned real cuts in public expenditure will result in the loss of 490,000 public sector jobs by 2014-15 understates the full impact of public sector downsizing.

Dr John Philpott, Chief Economic Adviser at the Chartered Institute of Personnel and Development (CIPD), estimates that the final number of public sector jobs lost as a result of the coalition government’s fiscal deficit reduction measures will be around three quarters of a million rather than half a million as implied by HM Treasury.

Dr Philpott continues: “Even on the best case scenario the coalition government now accepts that an estimated 490,000 public sector jobs will go by 2014-15. This figure - derived from forecasts made by the independent Office for Budget Responsibility (OBR) at the time of the emergency budget in June – is obviously high, but sounds a lot lower than some independent estimates, including that of the CIPD, which put likely public sector job losses at 725,000 as a result of the austerity drive.

“What the CSR conveniently fails to mention is that the OBR’s complete forecast suggests a loss of 660,000 public sector jobs between 2010-11 and 2015-16. Unless the Chancellor decides to reverse spending cuts pencilled in for 2015-16 he should admit this will be the outcome, at least until the OBR publishes its next forecast on 29 November.

“Moreover, the CSR does not acknowledge the likelihood that very large percentage cuts in the cost of administration across Whitehall, local authorities and even ostensibly ring-fenced areas of spending such as the NHS, will have a disproportionately negative impact on some of the most labour intensive parts of the public sector. As a result,
the CIPD estimates that the public sector jobs impact of the CSR to 2014-15 will be above 500,000, with total job losses rising close to three quarters of a million by 2015-16 if the coalition sticks to its existing longer term spending plans.

“It is possible that this jobs toll could be reduced if, as the CSR recommends, public sector employers were to explore voluntary deals on pay restraint or reduced hours of work in order to cut payroll costs with less need for redundancies. This suggestion, which is an attempt to match successful efforts by many private sector employers and workforces to save jobs during the recession, is obviously laudable in principle. However, it is necessary to distinguish between the role of pay restraint in the face of a cyclical downturn in demand and what makes sense when an organisation, or entire sector, is engaged in fundamental restructuring and long-term downsizing.

“Were public sector organisations expecting to maintain current levels of provision and staffing in the long-term, and thus simply looking for short-run cost savings for a couple of years, it would make perfect sense to look at all possible alternatives to job cuts. But the objective of the coalition government is not only to cut costs but also, and primarily, to completely restructure the role of public sector provision in the UK. There is no suggestion in the CSR that expected public sector job downsizing will at some future point be reversed. In circumstances where public sector organisations are expecting to shed jobs on a permanent basis, which probably describes the vast majority of the intended impact of the CSR, it makes little sense to expect pay restraint or changes to working hours to lessen the blow, which also makes it unlikely that workers will be prepared to make sacrifices since they can expect nothing in return.”

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