The coalition Budget’s toll on jobs – part 2

Ben Chu
40932337 budget6 150x150 The coalition Budgets toll on jobs   part 2

Less painful?

The Office for Budget Responsibility has rather confounded my calculations yesterday about how much of the job losses in the pipeline can be attributed to George Osborne’s decision to cut further and faster than Labour would have.

I assumed that because the coalition intends to cut public spending by £32bn more than Labour by 2014-15 (an increase of 61%) the job losses would be 61% greater than under a hypothetical Labour government.  So for the purely public sector job losses I guessed an increase, attributable to Mr Osborne, of around 189,000 to 227,300.

But the OBR yesterday released a brief report forecasting the increase in public sector unemployment by 2014-15 thanks to the emergency Budget of just  30,000.

So why the disparity? The only explanation I can see is the OBR’s reference to “changes to the modelling assumptions for general government average earning growth…and revised public sector pay policy in the Budget”.

In other words, though the coalition is cutting more, it is also freezing public sector pay, which, under its model, results in fewer job losses.

This, of course, implies that Labour would not have imposed a pay freeze too. We will, of course, never know whether they would or would not have. But given a choice between pay restraint and additional job losses my guess is that they would have gone for pay restraint. Also, the OBR does not mention how the emergency Budget will increase projections of private sector job losses as government contracts are cancelled, which the leaked Treasury document puts at 600,000 to 700,000 over five years.

My conclusion is that while a question mark may hover over the precise numbers, it’s hard to see how  the coalition spending cuts on top of what Labour planned will not dramatically increase the number of public sector (and public sector-dependent) job losses over the next five years.

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