I think there were people who tho0ught I was pretty hawkish when predicting job losses as a result of ConDem cuts of between 1.5 million and 1.6 million. I’ve been saying so of their plans for a year now.
Now the Guardian has revealed that the Treasury thinks there will be at least 1.3 million job losses over the next five years:
George Osborne's austerity budget will result in the loss of up to 1.3m jobs across the economy over the next five years according to a private Treasury assessment of the planned spending cuts, the Guardian has learned.
Unpublished estimates of the impact of the biggest squeeze on public spending since the second world war show that the government is expecting between 500,000 and 600,000 jobs to go in the public sector and between 600,000 and 700,000 to disappear in the private sector by 2015.
The chancellor gave no hint last week about the likely effect of his emergency measures on the labour market, although he would have had access to the forecasts traditionally prepared for ministers and senior civil servants in the days leading up to a budget or pre-budget report.
This is an occasion when to be found to be so near enough right (all figures are estimates, after all) is not encouraging, except to prove that plain commo0n sense and a little analysis is all that is needed to predict such an inevitable outcome of the cuts programme.
The Treasury, of course, assumes that there will also be 2.5 million jobs created over the next five years. That’s more than 8% growth in employment from new jobs. I think that’s absurd. So do the Chartered Institute of Personnel and Development who told the Guardian:
There is not a hope in hell's chance of this happening [the creation of 2.5m new jobs]. There would have to be extraordinarily strong private sector employment growth in a ‚Ä¶ much less conducive economic environment than it was during the boom.
That’s not a bad summary.
So, let’s summarise what this means. First, unemployment will be higher than the Treasury forecasts because they assume that there will be growth and there will not be. I’ll stick with my belief that more than 1.6 million people will be losing their jobs and there will be NO net job gains. This morning’s evidence that cash is fleeing from the private sector to government bonds is sure evidence of that.
Second, this means we’re heading from a private sector crash, not private sector growth, as I’ve predicted.
Third, and perhaps most important of all, because of the cost of benefits we will see little or no fall in the deficit as a result.
In other words all this pain will be for nothing.
People and companies will rue the day they believed the claim that countries are like people and must cut spending when in a deficit. The truth is the exact opposite is true. Only spending can get us out of the mess we’re now in
That’s the choice the ConDems should have made. They didn’t. They will pay a high price for it. Mervyn King was right.