Belfast Telegraph

UK jobless to hit 1.6m as cuts take toll

Cuts in public spending and a scheduled VAT rise will result in a loss of nearly 1.6 million jobs across the UK by 2015/16, according to estimates.

Austerity measures set out in the Comprehensive Spending Review (CSR) and the rise in the standard rate of VAT to 20% in January will hit the private sector harder than the public sector, it was claimed.

The Chartered Institute of Personnel and Development (CIPD) said an average of 320,000 private sector jobs a year would have to be created by 2015-16 just to keep unemployment steady at 2.5 million.

The full impact of the fiscal tightening announced by the Government has been understated, the professional body claimed, including the forecast of 490,000 public sector job losses.

According to its own estimates, the public sector will shed 725,000 jobs between 2009-10 and 2015-16.

The private sector will be hit even harder, according to the CIPD, with 650,000 jobs going because of the direct and indirect impact of public spending cuts and an additional 200,000 lost because of the VAT rise.

Dr John Philpott, CIPD chief economic adviser, said it estimated that 1.6 million more private sector jobs were needed by 2015-16 simply to offset the impact of the coalition Government's spending cuts and VAT rise.

He said: "The CIPD estimate, based on soundings from public sector managers, is that, from the end of 2009-10 to 2015-16, the public sector will shed a total of 725,000 jobs - a net reduction of 12.5%.

"The combined direct and indirect effect of public spending cuts will result in the loss of 650,000 private sector jobs.

"And the rise in the standard rate of VAT to 20% will result in the loss of a further 250,000 private sector jobs, as reduced demand for many goods and services hits company revenues and profits."

But Graeme Leach, chief economist and director of policy at the Institute of Directors, said the CIPD figures were "alarmist".

He claimed its analysis risked "talking" the nation into a double-dip recession.

"The UK economy faces a difficult period over the coming years, but if the Government holds firm with the implementation of the spending review, long-term growth and employment prospects will be significantly improved," he said.