The public sector outside the NHS and schools faces a “very challenging” 40 per cent cut in its workforce over the next five years if those areas continue to be protected by Government, a new report by the Institute for Fiscal Studies has warned.
Independent forecasts released by the Office for Budget Responsibility in December predicted a 1.1 million reduction in general government employment between 2010/11 and 2018/19 as a result of austerity measures.
The IFS report found that this would be the biggest cut in the public sector workforce for more than half a century, “dwarfing” cuts of 350,000 seen in the early 1990s and “dramatically changing the nature of the UK labour market”. The increase of 600,000 in the public sector seen under the Labour governments of the first decade of this century would be more than reversed.
If health and schools continue to benefit from the “ring-fence” protection from cuts granted by the coalition since 2010, the rest of the general government workforce would have to shrink by 40 per cent – shedding 900,000 of its 2.2 million jobs – by 2018/19, said the IFS.
Under this scenario, health and education would swell from 42 per cent of the public sector workforce in 1991 and 57 per cent now to more than 70 per cent by 2018. The proportion of women in the public sector would also grow, as female workers are more likely to be in the areas most protected from cuts.
Even if the NHS and schools lost 200,000 posts – six per cent of the total – other areas would still need to cut around 30 per cent of their workers, said the IFS.
The impact of the decline in public sector employment will vary in different parts of the country, as the percentage of workforce in the public sector is largest in Wales, Scotland, Northern Ireland and the North East and smallest in London, the West Midlands and the South East.
The IFS found that a buoyant private sector labour market has so far seen private employment rise by more in every region since the start of the decade than public employment has fallen.
Jonathan Cribb, research economist at IFS and an author of the report, said: “The public sector workforce grew by over 600,000 over the 2000s. Even so the scale of the reductions expected over the next few years looks challenging.
“If delivered, the 1.1 million drop in general government employment forecast by the OBR between 2010/11 and 2018/19 would be almost three times larger than the previous drop during the early 1990s.”