Government plans to focus on spending cuts rather than tax increases will stall any recovery in the jobs market later this year and cause unemployment to hit three million by the second half of 2012.
This is the stark warning that John Philpott, chief economic advisor for the Chartered Institute of Personnel and Development will issue at a forum in London today. Philpott will indicate that attempts to reduce public spending by £6.2 million are now expected to lead to job losses of 725,000 over the next five years, up from previous estimates of 500,000, which were made before the general election.
This means that unemployment, which currently stands at 2.5 million or 8% of the workforce, will increase to 2.95 million in the second half of 2012 and remain fairly constant until 2015. Philpott had formerly predicted that unemployment would peak at just over 2.65 million this year.
The HR body’s previous forecast for public sector job losses was based on expectations that the government would balance spending cuts more evenly with tax rises, leading to a 60:40 split. The split now looks more likely to be 80:20.
“Although tough fiscal medicine is unavoidable and may boost the UK’s long-run economic growth and job prospects, reliance on cuts in public spending rather than tax increases as the primary means of cutting the deficit makes the short-term outlook bleak for those individuals and communities already suffering the greatest hardship in society,” Philpott will say.
Such a situation will present major challenges to a government that “aims to reduce the deficit, while also alleviating poverty, enhancing social mobility and mending a broken society”, he will add.
The bulk of jobs are forecast to go in the public sector, with 350,000 town hall jobs expected to be axed. Another 175,000 NHS management and administration posts are anticipated to go, while a further 200,000 teaching support staff, civil servants and quango workers are predicted to end up on the dole queue.
But while job creation in the private sector during the 1990s recession offset public sector job cuts of about 800,000, such conditions simply “do not exist as we enter the current age of austerity”, Philpott will warn.
“This time around, deficit reduction will slow an already anaemic recovery and in the short-run be bad for jobs in both the private and public sectors, stalling any hopes of a sustained improvement in job prospects this year and causing the labour market to relapse next year,” Philpott will say.
