Spending cuts and VAT rise to cost 1.6m jobs

Published on Tuesday, 02 November 2010 09:30
Posted by Scott Buckler

The government's spending cuts and the rise in VAT to 20% in January will result in more than 1.6 million job losses across the public and private sectors, research suggests

The figure from the Chartered Institute of Personnel and Development (CIPD) is far higher than previous estimates.It said the full impact of the government's Spending Review had been "understated".

The government has estimated around 500,000 public sector jobs will go.The Treasury defended its spending cuts, saying: "The independent Office for Budget Responsibility has set out its forecast showing sustained economic growth in the years ahead, with employment rising and unemployment falling."

Some business groups, including the CBI, have said that job creation in the private sector will be able to compensate for losses in the public sector.However, the CIPD said that the private sector would be hit harder than the public sector.An average of 320,000 private sector jobs a year would have to be created by 2015-16 just to keep unemployment steady at 2.5 million, it said."The full impact of the coalition government's planned fiscal tightening has been understated," said Dr John Philpott, chief economic adviser to the CIPD."The 490,000 public sector job losses cited in the Spending Review looks like an underestimate, given what most public sector managers are telling [us]."

He put the total number of jobs to be lost in the public sector between 2009-10 and 2015-16 at 725,000.The number of jobs lost in the private sector due directly and indirectly from the cuts would be 650,000, with an additional 250,000 jobs to go due to the VAT increase, he estimated.

Source: ©CIPD

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