Coalition’s cuts to cost ‘half a million’ public sector jobs

By Alex Stevenson

The coalition's austerity drive could result in 100,000 more public sector job cuts than previously thought, a report has claimed.

The Ernst and Young Item Club, which uses the government's forecasting methods in its calculations, said the total number of job reductions as a result of spending cuts could total 500,000 – not the 400,000 predicted by the Office of Budget Responsibility.

Its 2011/12 forecast for 20,000 general government job losses has already been significantly exceeded, with a total of 147,000 cut after just the first quarter of the financial year.

"Given that the worst of the spending cuts are still to come in the latter years of the current parliament, we think that the OBR has under-estimated the level of job cuts required to achieve the desired degree of spending cuts," the Item Club report stated.

"We would expect to see the OBR increase its estimates of general government job losses between 2010/11 and 2015/16 from around 400,000 to closer to 500,000."

The report offered a bleak outlook for the UK economy, predicting downgraded growth forecasts of 0.9% and one per cent for 2011 and 2012, cut from 1.7% and 2.5%.

Borrowing has been revised upwards to £109 billion in 2012/13, £8 billion higher than in the March forecast, but the chancellor is not expected to miss his borrowing targets.

George Osborne is seeking to eliminate the structural budget deficit within the next five years and see public sector net debt as a percentage of GDP fall by 2015/16.

"The chancellor had given himself a margin for error by basing his plans on meeting these objectives a year early, so the revisions should merely see him making use of this buffer," the report noted.

Mr Osborne told BBC1's The Andrew Marr Show this morning: "We have got a deficit reduction plan that has brought us record low interest rates, earned us that triple-A credit rating.

"We are absolutely going to stick to that plan, because that is what is helping Britain weather this international debt storm and is helping us lay the foundations of a stronger economy."