350,000 jobs to go in public sector recession?

The markets are up, but the public sector may be about to face a huge downturn of its very own.

Last Updated: 31 Aug 2010

That’s the gloomy view of Dr John Philpott, chief economist of the Chartered Institute of Personnel and Development, who thinks that talk of green shoots has started far too early.  ‘Predictions of reduced pain in the jobs market are premature’ he says. 'The public sector has yet to feel the full impact of the recession, and the resultant bloodbath in the public services.’

Based on widely expected cuts of up to 10% in public spending in the pipeline (whoever wins the next election), Philpott reckons that this new public sector recession will cost as many as 350,000 jobs in health, education and local authorities over the next five years. Such will be the savagery and extent of the cuts that it could lead, says the excited Dr, to ‘Guerilla war’ in the job market, with more strikes, action and general unrest than we have seen since the 1970s.

Now while there’s a definite whiff of headline-grabbing by the CIPD about all this – albeit adroitly handled – the gloom and doom does have some substance behind it, unfortunately.

For a start it’s undeniably true that this government has tried to spend its way out of the recession, and as well as propping up all those banks, building societies and foreign car manufacturers, it has maintained pre-recession levels of public finance.

Consequently, jobs in the health service and education have actually risen by 2% in the last year, despite the carnage in pretty much every other area of employment and the economy. So it’s hard to argue with Philpott’s assertion that the recession has so far passed the public sector by.

And with the national finances in their worst state for decades, it’s also clear that public spending is going to have to come down, and pretty quickly, in the next few years. That will inevitably lead to job cuts. 

But exactly how severe those job losses will be – and how the workforce will react to them – seem to us to be rather less readily quantifiable. As many private sector firms have discovered recently, provided you approach the task methodically and with your strategic goals firmly in mind, it’s not too difficult to cut 10% or more from budgets without damaging the service you provide. The shake-up involved in doing so can even be good for organisational health in the longer run by boosting efficiency.

If – and we realise it’s a big if - managers in the health and education services are allowed to do their jobs, then the impact of these spending cuts could be much less severe than the CIPD predicts. After all, it’s only in the Whitehall worldview, where the assumption is that bureaucracy is perfect and thus that all cuts in budget have to be proportionately reflected in job losses – that efficiency savings can’t be made.

What's called for now is good, pragmatic and careful management in the public sector, so let's hope the Sir Humphreys don't prevail this time.

In today's bulletin:
Poor old Tesco makes do with 10% jump in sales
350,000 jobs to go in public sector recession?
Long wait for superfast internet
Beware the bargain-basement takeover
No sign of green shoots for owner-managers

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