CIPD estimates 1.6m private sector jobs needed to offset cuts

The CIPD has estimated that 1.6 million extra private sector jobs will be needed by 2015-16 to offset the Government’s spending cuts and the forthcoming rise in VAT.

According to the CIPD, the cuts announced in last month’s Comprehensive Spending Review (CSR) and the rise in VAT to 20% due in January will result in the loss of almost 1.6 million jobs across the UK economy by 2015-16, with the private sector hit harder than the public sector.

Dr John Philpott, chief economic adviser at the CIPD, claims that the coalition Government’s measures to bring about economic growth must help in increasing net private sector job creation overall by an average of 320,000 each year by 2015-16 simply to keep unemployment stable at around 2.5 million.

Philpott will be among a number of expert witnesses giving evidence today to the House of Commons Treasury Select Committee on the consequences of the CSR.

He says: “The full impact of the coalition Government’s planned fiscal tightening has been understated following publication of the CSR. The 490,000 public sector job losses cited in the CSR itself looks like an underestimate given what most public sector managers are telling the CIPD, but in any case excludes around 50,000 public sector job cuts likely to fall in the current financial year (2010-11) and 120,000 in 2015-16.

“Similarly, available independent estimates of the direct impact of public spending cuts on jobs in the private sector do not make sufficient allowance for the negative indirect demand effects on businesses. And, crucially, private sector jobs will also be adversely affected by the forthcoming sharp hike in the standard rate of VAT from 17.5% to 20%.

“The CIPD estimate, based on soundings from public sector managers, is that from the end of 2009-10 to 2015-16 the public sector will shed a total of 725,000 jobs. The combined direct and indirect effect of public spending cuts will result in the loss of 650,000 private sector jobs. And the rise in the standard rate of VAT to 20% will result in the loss of a further 250,000 private sector jobs, as reduced demand for many goods and services hits company revenues and profits.”

Adding up these estimates shows that the overall toll of job losses (1.6 million) set to result from the coalition Government’s austerity measures falls more heavily on the private sector (0.9 million) than on the public sector (0.7 million).

Philpott concludes: “The CIPD considers the private sector perfectly capable of adding more than 300,000 net new jobs per year by 2015-16 if the economy grows faster than 2.5% per year on average. But the question ‘where will the new jobs come from?’ is bound to be asked for quite some time yet.”

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