The Chartered Institute of Personnel & Development, a body which represents HR executives, has weighed into the debate on the Spending Review on Tuesday with the claim that steps taken by the Government to reduce the deficit will result in 1.6 million job losses over the next five years.
John Philpott at the CIPD has suggested that the private sector will need to create over 300,000 new jobs a year to offset these losses, and added:
“If the coalition government completes its planned fiscal consolidation with unemployment no higher in 2015-16 than it is today it will have made a significant achievement.”
Economic forecasting is a notoriously tricky art, even more so when you have limited data to work with. And yet Philpott seems very sure of his data. So sure, it’s worrying. He confidently predicts that 725,000 jobs will be lost in the public sector, and 650,000 in the private sector, as a result of spending cuts, with a further 250,000 going because of next year’s VAT rise. Is he right to be so certain? We don’t think so. As he admits himself, his estimates in part are ‘based on soundings from public sector managers’. This doesn’t sound like a great methodology. And no report on his findings was published so we don’t know exactly who these managers were, or how many he consulted.
We’re not the only ones to question Philpott’s figures. Michael Fallon MP, chair of the Treasury select committee, which Philpott appeared in front of on Tuesday, seemed to think that gathering evidence in this way was ‘not data’. He even went on to say that Philpott’s information was ‘less reliable than a dead octopus’, which is doing Paul, the World Cup predicting octopus a disservice; the octopus actually got many things right.
Differences of opinion over economic strategy are inevitable. But the IoD thinks that by looking at previous recessions we can see that the private sector is perfectly capable of offsetting job losses from the public sector. The Office for Budget Responsibility forecasts that around 600,000 public sector jobs will go between now and 2015 as a result of the Government’s plan, although of course the OBR could be wrong too. But the key is that public sector job losses and cuts will not necessarily lead, as some commentators claim, to little or no growth, or even a double-dip recession. Indeed between 1991 and 1997 public sector employment fell by around this same amount, but this did not prevent a sustained upturn in economic growth.
We cannot predict that growth over the next few years will be the same as in the nineties, nor can we say exactly which sectors will provide the jobs. IoD members, however, think the private sector is capable of creating the employment, and they are supported by the hard data we do have. The private sector created 300,000 jobs in the latest quarter, making Philpott’s claim at the beginning of this blog look to be at best pessimistic, and at worst baseless doom mongering.