Jobs axe warning for public-sector workers

LARGE public-sector job cuts are inevitable if the UK is to prove that it is serious about balancing its books, according to a leading economist.

Roger Bootle, the economic adviser to professional services firm Deloitte, also predicted that sterling's weakness could be a blessing for Yorkshire's manufacturers.

Mr Bootle, who famously forecast that the UK would be forced out of the ERM in 1992, made his comments before speaking to business leaders in Oulton Hall, near Leeds.

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Mr Bootle's comments follow a report from the Centre for Economics and Business Research (CEBR) which suggested that parts of north-east England and Wales had become so dependent on public spending that they faced economic collapse if the next Government introduces cuts.

He told the Yorkshire Post: "It seems to me that there is so much adjustment to come from the public sector. I don't think that's going to be painless. Lots of people are going to lose their jobs."

Mr Bootle said the "big question" the new Government would have to face was what to do about the large public-sector deficit.

He added: "I don't think there should be an attempt to bring it down very quickly...it would take demand out of the economy and hit the economy when it's too weak.

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"However, I do think the existing plans aren't tight enough,'' he said. "The accent should be on the toughness and the credibility of the plans a few years into the future.

"If you've got a credible plan that builds up to something that really squeezes the deficit in three, four and five years time, which the markets can believe, then I think you can get away with not doing very much in the short-term.

"It's difficult to see how you can cut public spending without cutting jobs enormously.

"If you look at the record in the last few years, employment in the public sector has gone up nationally in leaps and bounds, without, in some cases, that much to show for it either."

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He said the new Government would have to cut public-sector employment, although steps to do this wouldn't necessarily be taken immediately.

Mr Bootle added: "There will be a great temptation to imagine that once we have been through the first difficult year, the pain's over. That's completely wrong. This is a five-year programme at least."

Although Mr Bootle said he wasn't "rabidly pessimistic" about the UK's economic prospect, he didn't believe the problems were over and "we are off to the races".

He added: "There's a favourable Yorkshire dimension to this. It is still the case that manufacturing is relatively more important up here.

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"My view is that we are going to see a bit of a manufacturing revival, thanks to the weak pound. We're going to see exports picking up.

"Over the next few years, we're going to see manufacturing doing a lot better, and if that's right, Yorkshire will probably do comparatively well compared to the rest of the UK.

"I think inflation is going to stay incredibly low. In fact, I'm more worried about deflation next year. On the back of that, I think interest rates are going to stay very, low."

Mr Bootle said he couldn't see any signs of wage inflation emerging over the next two years as unemployment continued to rise.

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He added: "There doesn't seem to be any reaction to the fact that headline inflation from the CPI has moved up to 3.4 per cent. There's no real sign of workers trying to claw that back. What's it going to be like in a few years' time after we've had a lot more job losses?"

Mr Bootle warned that big names in the financial services sector would find it hard to restore their reputation after the banking bail-out.

He added: "The flip-side to all this is that there may well be opportunities for newer, smaller outfits...we know that some of the supermarkets are expanding their operations and they haven't lost consumer trust.

"The banks have got their work cut out to restore consumer faith in them.

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"They've got a battle on their hands but this could be encouraging for newer outfits. That's a positive."

Roger Bootle: The Analyst

Roger Bootle, the managing director of Capital Economics, is probably best known for his book, the Death of Inflation, which was widely dismissed as extreme when it was published in 1996.

It became a bestseller and has been translated into nine languages.

He was also one of the first analysts to forecast the collapse of the dotcom boom.

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Speaking to the Yorkshire Post at Oulton Hall, near Leeds, Mr Bootle said Britain's tax rgime was uncompetitive, adding: "It's also extremely opaque and complicated and, in some ways, spiteful.

"Over the last year or two the measures that have been taken with regards to individuals, rather than companies, have created the impression that this is not a country that favours enterprise, entrepreneurship, and success. Too much of the squeeze has been directed towards higher earners."