Jump to content
House Price Crash Forum
Fudge

Budget Will Cost 1.3M Jobs

Recommended Posts

Budget will cost 1.3m jobs - Treasury

Exclusive: Leaked government data concerning next five years shows hidden costs of austerity drive

* Larry Elliott, economics editor

* guardian.co.uk, Tuesday 29 June 2010 21.02 BST

* Article history

Chancellor of the exchequer George Osborne holds Disraeli's original budget box Chancellor of the exchequer George Osborne holds Disraeli's original budget box. Photograph: Peter Macdiarmid/Getty Images

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Unpublished estimates of the impact of the biggest squeeze on public spending since the second world war show that the government is expecting between 500,000 and 600,000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 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.

A slide from the final version of a presentation for last week's budget – seen by the Guardian – says: "100-120,000 public sector jobs and 120-140,000 private sector jobs assumed to be lost per annum for five years through cuts".

The job losses in the public sector will result from the 25% inflation-adjusted reduction in Whitehall spending over the next five years, while the private sector will be affected both through the loss of government contracts and from the knock-on impact of lower public spending.

The Treasury is assuming that growth in the private sector will create 2.5m jobs in the next five years to compensate for the spending squeeze. Osborne said in last week's speech that tackling Britain's record peacetime budget deficit would help keep interest rates low and boost job creation. "Some have suggested that there is a choice between dealing with our debts and going for growth. That is a false choice".

However, investors are increasingly nervous about the lack of growth in the world economy. The FTSE-100 fell more than 3% today as fresh jitters hit confidence.

The opposition and trade unions said the unpublished Treasury forecasts backed up their argument that the unprecedented scale of the cuts in public spending would hamper Britain's recovery from the deepest and longest recession since the Great Depression.

Alistair Darling, the shadow chancellor, said: "Far from being open and honest, as George Osborne put it, he failed to tell the country there would be very substantial job losses as a result of his budget.

"The Tories did not have to take these measures. They chose to take them. They are not only a real risk to the recovery but hundreds of thousands of people will pay the price for the poor judgement of the Conservatives, fully supported by the Liberal Democrats. It shows the risks they are prepared to take. If they get it wrong, those people losing their jobs will not get back to work."

Osborne said last week that his newly appointed panel of outside experts – the Office for Budget Responsibility – believed the jobless rate would soon start to improve. "The unemployment rate is forecast by the Office for Budget Responsibility to peak this year at 8.1% and then fall for each of the next four years, to reach 6.1% in 2015."

This forecast was fleshed out in the Treasury's Red Book, which says: "The decline in employment appears to be coming to an end and we expect a modest recovery in employment in the second half of 2010."

From next year, officials believe stronger growth and a rising working population will lead to an acceleration in jobs growth. Over the five-year period from 2010 to 2015, the Treasury assumes that employment will rise from 28.8m this year to 30.1m in 2015, despite the loss of jobs caused by spending cuts.

The TUC general secretary, Brendan Barber, said: "With Treasury figures revealing that spending cuts will hit private sector jobs harder than those in the public sector, it is absurd to think that the private sector will create 2.5m new jobs over the next five years.

"This is not so much wishful thinking as a complete refusal to engage with reality. Much more likely are dole queues comparable to the 1980s, a new deep north-south divide and widespread poverty as the budget's benefit cuts start to bite. Many will find that a frightening prospect."

John Philpott, chief economist at the Chartered Institute for Personnel and Development, said: "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 …much less conducive economic environment than it was during the boom."

The CIPD has estimated that there will be 725,000 jobs lost in the public sector alone by 2015, although Philpott said the number could be lower if the government succeeded in pushing through pay cuts.

He added that Osborne was expecting a similar rise in employment over the next five years to that seen during 13 years of the last Labour government, when around a third of the employment growth came from the public sector. "This is a slower growth environment and there will be no contribution from the public sector."

Budget will cost 1.3m Jobs

Share this post


Link to post
Share on other sites

The arithmetic is quite simple.

If the cost to taxpayers of government jobs lost (net of the income returned to the Treasury in the form of taxes) minus the benefits that taxpayers assign to public services that are lost is less than the cost to taxpayers of benefits paid to those who have lost their jobs (net of less tax), taxpayers are better off.

If the reverse is true, taxpayers are worse off.

The fallacy of the arguments of the left is that taxpayers highly value all of the services provided by the state.

The fallacy of the arguments of the right is that taxpayers ascribe no value to the services provided by the state.

The fundamental issue here is the very nature of a democracy. Some will argue that rights exist independantly of contribution. Others will argue that rights are dependant on contribution.

Share this post


Link to post
Share on other sites

The Treasury is forecasting that the budget will cause 1.3m jobs to be lost (cost), and 2.5m jobs to be created (benefit). Net 1.2m extra jobs (benefit exceeds costs).

You may disagree with the forecasts, but to describe the Treasury's prediction simply as a loss of 1.3m jobs is very misleading.

Share this post


Link to post
Share on other sites

Budget will cost 1.3m jobs - Treasury

Exclusive: Leaked government data concerning next five years shows hidden costs of austerity drive

* Larry Elliott, economics editor

* guardian.co.uk, Tuesday 29 June 2010 21.02 BST

* Article history

Chancellor of the exchequer George Osborne holds Disraeli's original budget box Chancellor of the exchequer George Osborne holds Disraeli's original budget box. Photograph: Peter Macdiarmid/Getty Images

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 go in the public sector and between 600,000 and 700,000 to disappear in the private sector by 2015./url]

Whilst I cannot see any alternative to cutting public spending, I don't believe the private sector will create 2.5 m jobs in the next 4 years. IT WILL TAKE THAT TIME TO RECOVER FROM THE GATHERING STORM. Darling cannot carp. He and Brown left a staggering deficit and eyewatering structural deficit, despite any credit crunch. Labour ran the economy into 'scorched earth territory'. Only vile and painful measures will resolve it. No easy way out. Those that continue to borrow and try to inflate their way out will come off worst.

Share this post


Link to post
Share on other sites

The arithmetic is quite simple.

If the cost to taxpayers of government jobs lost (net of the income returned to the Treasury in the form of taxes) minus the benefits that taxpayers assign to public services that are lost is less than the cost to taxpayers of benefits paid to those who have lost their jobs (net of less tax), taxpayers are better off.

If the reverse is true, taxpayers are worse off.

The fallacy of the arguments of the left is that taxpayers highly value all of the services provided by the state.

The fallacy of the arguments of the right is that taxpayers ascribe no value to the services provided by the state.

The fundamental issue here is the very nature of a democracy. Some will argue that rights exist independantly of contribution. Others will argue that rights are dependant on contribution.

All well and good if the taxpayers were paying the costs of these services. But they're not; a huge chunk of UK demand is debt-fuelled, both in the public and private sectors. Debt-fuelled demand = demand that is brought forward from the future. There is no way to get past the fact that the demand has already been used up: cut spending->less demand; raise taxes-> less demand. Economic contraction and job losses await no matter which route you choose.

A debt-fueled economy feels great while you're living through the period of boosted demand (and extra jobs). The trouble is that eventually, the future arrives. In fact, it seems to be here :ph34r:

Share this post


Link to post
Share on other sites

Budget will cost 1.3m jobs - Treasury

Exclusive: Leaked government data concerning next five years shows hidden costs of austerity drive

You're making the mistake of thinking they had any real choice.

In fact the choice was:

1. Cut now and face the risk to jobs and the economy.

2. Don't cut and:

  • allow the capital markets to conclude that no UK government of whatever colour would be able to make the necessary cuts;

  • face inevitable bond market crisis in very short order, a la Greece, Portugal, Spain etc;

  • be forced into even harder cuts than already proposed against a background of rising interest rates or:

  • await the IMF and yet worse cuts.

Sadly all the labour apologists can see the risks of option 1 clearly but are utterly blind to the consequences of option 2.

Edited by Goat

Share this post


Link to post
Share on other sites

It is a price well worth paying to protect the continued affluence of the well heeled.

The cynicism of Libcon is as I feared, total.

Share this post


Link to post
Share on other sites

All well and good if the taxpayers were paying the costs of these services. But they're not; a huge chunk of UK demand is debt-fuelled, both in the public and private sectors. Debt-fuelled demand = demand that is brought forward from the future. There is no way to get past the fact that the demand has already been used up: cut spending->less demand; raise taxes-> less demand. Economic contraction and job losses await no matter which route you choose.

A debt-fueled economy feels great while you're living through the period of boosted demand (and extra jobs). The trouble is that eventually, the future arrives. In fact, it seems to be here :ph34r:

I agree completely. I over simplified the problem by impicitly assuming a "pay as you go" system.

Adding in the comparative and absolute advantage that public sector borrowing "enjoys" over private sector borrowing only makes the situation even worse.

Share this post


Link to post
Share on other sites

It is a price well worth paying to protect the continued affluence of the well heeled.

The cynicism of Libcon is as I feared, total.

The assumed affluence is an illusion I am afraid.

Share this post


Link to post
Share on other sites

Any jobs dependent on government profligacy are non-jobs anyway.

I'm quite at a loss to understand where you think, Fudge, the resources are coming from to force these non-jobs into existence.

Share this post


Link to post
Share on other sites

Any jobs dependent on government profligacy are non-jobs anyway.

I'm quite at a loss to understand where you think, Fudge, the resources are coming from to force these non-jobs into existence.

The Labour party discovered a perpetual money making machine.

In a churlish act, they chose not to disclose its whereabouts to their successors when the electorate threw them out.

Share this post


Link to post
Share on other sites

1.3 million is way under the reality of what the cuts mean. Well be lucky to have 15 million in work by the time this government has finished. Companies have already started sacking people......

Share this post


Link to post
Share on other sites

1.3 million is way under the reality of what the cuts mean. Well be lucky to have 15 million in work by the time this government has finished. Companies have already started sacking people......

I'll repeat my earlier post:

You're making the mistake of thinking they had any real choice.

In fact the choice was:

1. Cut now and face the risk to jobs and the economy.

2. Don't cut and:

  • allow the capital markets to conclude that no UK government of whatever colour would be able to make the necessary cuts;

  • face inevitable bond market crisis in very short order, a la Greece, Portugal, Spain etc;

  • be forced into even harder cuts than already proposed against a background of rising interest rates or:

  • await the IMF and yet worse cuts.

Sadly all the labour apologists can see the risks of option 1 clearly but are utterly blind to the consequences of option 2.

Share this post


Link to post
Share on other sites

1.3 million is way under the reality of what the cuts mean. Well be lucky to have 15 million in work by the time this government has finished. Companies have already started sacking people......

Sacking, going broke, etc are all signs of business working well.

The problem is that some think everything must always be preserved and nothing bad ever happen to anything, oh and somehow that will result in vibrancy and improvement.

Evolution needs stuff to fail and die, business should always be in turmoil. The alternative is state-based death of wealth creation.

Share this post


Link to post
Share on other sites

You're making the mistake of thinking they had any real choice.

In fact the choice was:

1. Cut now and face the risk to jobs and the economy.

2. Don't cut and:

  • allow the capital markets to conclude that no UK government of whatever colour would be able to make the necessary cuts;

  • face inevitable bond market crisis in very short order, a la Greece, Portugal, Spain etc;

  • be forced into even harder cuts than already proposed against a background of rising interest rates or:

  • await the IMF and yet worse cuts.

Sadly all the labour apologists can see the risks of option 1 clearly but are utterly blind to the consequences of option 2.

You and I see the world in a similar way.

The Labour political class will always choose 2. and hope that the crisis point won't be reached during the time that they are facing re-election.

If Cameron and friends are true to their ideals and will do what is best for Britain rather than what is best for their chances of being re-elected, they will choose 1.

I am cynical enough to accept that 2. is a less risky strategy than 1. as election cycles only last for about 10% of the life of governments.

Share this post


Link to post
Share on other sites

Sacking, going broke, etc are all signs of business working well.

The problem is that some think everything must always be preserved and nothing bad ever happen to anything, oh and somehow that will result in vibrancy and improvement.

Evolution needs stuff to fail and die, business should always be in turmoil. The alternative is state-based death of wealth creation.

I am on your side too.

Creative destruction is a concept abhorred by theoreticians and embraced by practioners.

Share this post


Link to post
Share on other sites
Guest spp

I thought this was a jobless recovery though? Green shoots and all that!?

Or so a certain helicopter pilot over in the U.S was telling us.

Goat - I'm torn between option 1 and 2. I fear GB threw us into the debt death pit when he bailed out the banks and fired up all that QE.

Option 1 is not going to work, unless you are happy to be a debt slave for the rest of your life (including your children).

May I bring forward OPTION 3 - Fiat paper money collapse!

Share this post


Link to post
Share on other sites

Any jobs dependent on government profligacy are non-jobs anyway.

I'm quite at a loss to understand where you think, Fudge, the resources are coming from to force these non-jobs into existence.

+1 How many of these are actual jobs and how many are well connected 'benefit scroungers' who have been found out ?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 144 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.