Britain to Lose 610,000 Government Jobs by 2016 in Deepest Postwar Squeeze

Britain will shed 610,000 public- sector workers over the next five years as the coalition government implements the deepest spending squeeze since World War II, the country’s new fiscal watchdog said.

The state will employ 4.92 million people by April 2016 compared with 5.53 million in the current fiscal year, according to figures released today by the Office for Budget Responsibility. Total employment in the economy is forecast to rise by 1.34 million to 30.23 million.

“There will be reductions in public-sector employment but growth in the private sector more than makes up for that,” Prime Minister David Cameron told lawmakers in Parliament today.

Labour Party acting leader Harriet Harman accused Cameron of making ideologically motivated cuts after the Guardian newspaper reported that Treasury officials privately forecast last week’s budget would cost 1.3 million jobs across the economy.

The budget office brought forward publication of the data by one day, Cameron’s spokesman, Steve Field, told reporters in London today. He denied that its head, former Bank of England policy maker Alan Budd, had come under pressure from ministers to publish the figures in time for Cameron’s weekly questions session in Parliament.

“It was their decision and they are independent,” Field said.

Labour Policies

Cameron said the budget office figures show the policies of the previous Labour government would have led to public-sector jobs being lost at a faster rate and that unemployment is forecast to fall in each of the next five years.

Cameron, whose Conservative Party took power with the Liberal Democrats after the May 6 election, is proposing spending cuts and tax rises totaling 113 billion pounds ($170 billion) to slash a deficit of 11 percent of economic output.

Chancellor of the Exchequer George Osborne is due to set budgets for each department in a spending review in October, with most facing inflation-adjusted cuts of 25 percent by 2015.

The Treasury said a public-sector pay freeze over two years would help safeguard 150,000 jobs.

The Guardian reported that unpublished estimates seen by the newspaper project that as many as 600,000 public-sector jobs may go by 2015, which is in line with the watchdog’s forecasts although they reflect both Labour and the coalition government plans.

The Treasury said the Guardian’s report of as many as 700,000 private-sector job losses are wrong and probably based on the extrapolation of one year’s figures over the whole five- year period.

Economist Skepticism

The Treasury also said the Guardian’s figures came from an early-June forecast and fails to reflect the OBR’s view of the impact of the budget on the economy.

The OBR figures suggest that the private sector will create about 2 million jobs. With countries across Europe slashing budgets deficits, the Labour opposition and some economists say companies may struggle to take over as the engine of growth.

“There is no way on God’s green earth” that the private sector is going to create the jobs the OBR assumes, said David Blanchflower, professor of economics at Dartmouth College and a former member of the Bank of England’s rate-setting committee.

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To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

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