Public Sector Job Cuts Forecast Drops by a Third

Public sector job cuts will be less than the 490,000 forecasted. A pigeon flew passed a Job Centre sign in Westminster on October 21, 2010, the day the OBC made its initial prediction on the spending review. (Dan Kitwood/Getty Images)

The public sector will have a third fewer jobs cut than previously forecast, the nation’s official financial forecaster said on Monday.

The Office for Budget Responsibility (OBR) also announced that the annual growth forecast is higher than previously calculated.

The announcement was welcomed by the chancellor as proof of the effectiveness of the austerity measures currently being meted out.

The head of the OBR, Robert Chote, said on Monday, “The bottom line from all this is that on current evidence we believe that the government’s planned fiscal consolidation is consistent with the medium term target that it has set itself.”

Before the coalition government came to power, such financial predictions were made by the Treasury itself, drawing criticism of political interference in the figures and analysis. One of the first acts of Chancellor George Osbourne in office was to create the Office for Budget Responsibility, saying that in doing so, he was “making a rod for his own back”.

But, speaking to Parliament on Monday, he used the OBR report to justify the government’s swift and deep cuts, designed to reduce the national debt.

“And at a time when markets are gripped by fears about government finances across Europe, today we see that the government was absolutely right to take the decisive action to take Britain out of the financial danger zone,” Mr Osbourne said.

“It is clear that our decisive actions have proved to the world that Britain can live within her means.

“This government has taken Britain out of the financial danger zone and set our economy on the path to recovery.”
The OBR revised its growth forecast for 2010 from 1.2 per cent to 1.8 per cent, but lowered the forecast for next year from 2.3 per cent to 2.1 per cent, and for 2012, from 2.8 per cent to 2.6 per cent.

The estimate of the number of public sector job cuts was changed from 490,000 to 330,000. Within the reduction of job cuts, 130,000 have been saved by deeper cuts to welfare by the government, and 30,000 are accounted for by an adjustment in the OBR’s method of analysis.

The OBR says its central forecast is: “The economy will continue to recover from recession, but at a slower pace than in the recoveries of the 1970s, 1980s, and 1990s".

In a speech on Tuesday, Labour’s shadow work and pensions secretary Douglas Alexander warned that the OBR report still left the door open for a “jobless recession”.

In a speech to the think-tank Demos, published on their website, he said: “A central point risks being lost in this debate: the international and historical evidence is that you can return to growth without creating enough jobs, just as you can even go into recession without succumbing to mass unemployment.

“But the wider jobs gap is an issue that the government doesn’t seem to have recognised. In the end, some of the media speculation over the possibility of two quarters of negative growth has obscured the real risk of too slow employment growth in the years ahead.

“We are seeing in the US and in many other industrialised countries, a painfully slow return to pre-crisis levels of employment.”