The cost of cuts: 3 million will be out of work

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A total of 1.6 million jobs will be lost across the economy as a result of the government’s spending cuts and the rise in VAT to 20% in January.

According to the Chartered Institute of Personal and Development (CIPD) spending cuts will account for 725,000 of those losses, the hike in VAT a further 250,000, and knock-on losses in the private sector will see 625,000 more jobs vanish.

As a consequence, unemployment will approach 3 million by 2012, warns the CIPD.

Back in 1972, under Edward Heath, hitting 1 million unemployed represented less than 2% of the total population but was enough to cause a nation to rise up in anger and dismay. If the CIPD’s estimates are correct, nearly 5 out of every 100 people in the UK will be jobless by 2012!

The CIPD, which numbers many public-sector human resources managers among its membership, says it believes that one in eight public-sector jobs will be cut by 2016 – some 725,000, rather than the Office for Budget Responsibility estimate of 610,000 by then, and 490,000 jobs cut by 2015.

The Treasury defended its spending cuts, saying: “The independent Office for Budget Responsibility has set out its forecast showing sustained economic growth in the years ahead, with employment rising and unemployment falling.”

Some business groups, including the CBI, have said that job creation in the private sector will be able to compensate for losses in the public sector.
However, the CIPD said that the private sector would be hit harder than the public sector.

In a good year, some 300,000 private-sector jobs are generated. However, these may not be the in the right places or demand the right skills. There are growing concerns about this mismatch. John Philpott, the chief economic adviser at the CIPD, said: “Public sector dependent regions will be hit relatively hard, while private sector gains will be easier to achieve in the south and east of England, which has a generally stronger economic base.

“Switching staff from public to private sectors may also be more difficult in regions with a strong public-sector profile, given that this will skew the skill profile of workers. As a result of these differences, dependent regions are likely to see a sharper rise in unemployment prior to 2012 and a slower improvement thereafter.
“The full impact of the Coalition Government’s planned fiscal tightening has been understated.”

The CIPD sees unemployment peaking at 2.9 million in 2012, and returning to its current level of around 2.5 million by the time of the next election, scheduled for 2015.



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