'Massive spending cuts lead to massive job cuts' shock

But is the Government right that the private sector can create 2.5m jobs to make up for the 1.3m lost?

Last Updated: 31 Aug 2010

A huge furore has erupted this morning, after the Guardian published leaked Treasury data suggesting that the Government is expecting 1.3m job losses over the next five years as a result of its swingeing cuts. Now on the face of it, the fact that massive public spending cuts will result in massive job losses is hardly revelatory. But the supposed scale of the cull is undoubtedly shocking, and will only encourage union nutcases like Bob Crow to ramp up the rhetoric. The effect on the private sector is also interesting: the Government supposedly thinks it will actually bear the brunt of the cuts - but at the same time will more than compensate by creating millions of extra jobs over the period. We'd love that to be true, but it sounds extremely optimistic...

According to the Guardian, the Government believes its imminent cuts will result in as many as 120,000 public sector and 140,000 private sector jobs being lost every year for the next five years - a total of about 1.3m jobs over the period. Now admittedly this is all hearsay at the moment – and it may be a worst case scenario rather than an actual prediction. But the basic story sounds plausible enough: everyone knows that you can't cut departmental budgets by a quarter without lots of civil servants losing their jobs (some might argue this is no bad thing, given how bloated the public sector became under the last Government) or without lots of private sector suppliers and partners suffering too (unfortunately, public and private don't exist in isolation).

However, talking about theoretical job cuts is one thing; quantifying the extent of them is quite another (hence why September's spending review is likely to cause far more angst than the recent Budget). It's undoubtedly a huge number and it will be grist to the mill for the unions, which are already gearing up for a major fight with the Government. The ever-temperate RMT boss Bob Crow issued a 'call to arms' to his members yesterday, saying: 'We have a government of millionaire public school boys who are determined to rule by fear... They started this fight with the working class and we are up for it.' Just the kind of measured, grown-up approach we need.

Perhaps the more interesting point is that the same slide apparently also predicts that the private sector will create 2.5m new jobs over the period (so 1.2m net new jobs in total). Without wishing to be too pessimistic, that sounds an awful lot: that’s as many jobs created in five years as under the previous Government – but without any help from the public sector, and at a time when the global economy will be sluggish at best. Good luck with that…

In today's bulletin:

'Massive spending cuts lead to massive job cuts' shock
HMV sees profits jump after mixing it up
Tesco slammed over advertising - and accounting
Well-oiled rogue trader gets £72,000 fine from FSA
The Sharp End: High on his own supply

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