Public sector cuts and economic recovery

One thing is clear: if we are to be successful in addressing public sector retrenchment, we need to adopt clear economic and business principles that, in turn, will reduce the UK’s financial deficit. This is a matter of economics and strategic business planning, rather than politics.

The PPMA considers a crucial point to be that, while the UK is beginning to witness signs of economic recovery, that recovery remains frail – demonstrated by 0.2% growth in the first quarter of 2010. Given that the UK’s economic recovery will be based significantly on the export market – and the European economy in particular – current events in Greece and other weakened economies in the eurozone may make for a slow period of growth.

Calculated cuts

While we know it’s necessary to make cuts in the public sector, the economic recovery could be endangered if these cuts are not thought through properly, and major reductions end up being forced over the next six months. If this happens, there is the risk that precipitate action resulting in unplanned cuts in the public sector will have a profound impact on jobs and business; the corollary of which could send the UK back into recession.

Public sector HR leaders do not shrink from our responsibilities to tackle the challenges ahead to rationalise and transform public sector services. However, we urge that this is undertaken in a planned, strategic manner, taking account of complex economic, employment and societal issues. Such issues include the inter-dependencies between private sector small and medium-sized enterprises (SMEs) and their economic dependence on the public sector. Cut public sector services in a haphazard fashion, and that could result in the collapse of those SMEs.

The PPMA supports the concept of the local investment cycle, where there is stimulation of new jobs (via the economic recovery) leading to lower unemployment, savings in the payment of welfare benefits and the generation of increased taxation from employment. These ‘rewards’ should be re-invested into the local economy to stimulate further recovery and growth. Unplanned cuts to public sector employment will not support the realisation of successful local investment plans in our communities that, in turn, will not support national economic recovery.

Skills development

If the UK is to emerge successfully from recession, the country must be able to compete in the hyper-competitive global economy. The development of workforce skills is essential to providing competitive advantage for the private sector, as well as ensuring an agile and skilled workforce in the public sector that is able to respond to the manifestations from public sector reductions.

The PPMA wholeheartedly supports the skills development of the UK workforce to ensure those currently unemployed can secure employment – reducing the burden of benefit payments and stimulating taxable payments to the exchequer. Furthermore, we support the skills development of public sector workers to enable them to possess transferable skills to work successfully in other sectors, either providing public sector services from a different service and employment relationship, or to avoid long-term unemployment that would cause further economic and societal problems.

Let us learn from other countries. Look at the impact of long-term unemployment currently experienced in the US, where parts of the labour market do not possess sufficient skills to fulfil the requirements of new jobs stimulated by early economic recovery – measured by the Beveridge curve (the correlation between workforce skills, new jobs and long-term unemployment). When significant elements of the workforce do not hold such skills, this leads to long-term unemployment. This in turn will lead to further economic burden, as well as exclusion from meaningful community life.

The key to sustained economic recovery is to improve workforce skills in tandem with the stimulus of jobs, so that the UK can compete with other economies to avoid spiralling unemployment from the possibility of ill-thought through public sector cuts.

by Dean Shoesmith, president, Public Sector People Managers’ Association

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