A traumatic but necessary cutback

 
Allister Heath
IT WILL be grim. The Ministry of Justice will lose 14,000 jobs over the next four years. Close to 10,000 will go in the prison and probation system. There will be 42,000 job losses in the military. These form only part of the 490,000 net public sector jobs set to go over the next four years as a result of the Comprehensive Spending Review, to be unveiled today by George Osborne. Some of these will take place via natural wastage; some departments will be asking staff if they want to cut hours and pay. But there will also be involuntary redundancies, inflicting much trauma. Everybody with a heart will be feeling for those about to be chopped.

The trouble is that the coalition has no choice but to act; the pain of the next few years would turn into a far greater disaster otherwise. Years of over-spending under Labour, combined with the recession, mean that the public sector is facing its day of reckoning. Government spending is too large for a shrunken private sector to support. There is nothing anybody can do about this reality: the spending cuts are the minimum required to eliminate the structural deficit over the next few years and are being accompanied by painful tax hikes. The situation is precarious: there is no way the UK government could now cope with a secondary crisis, caused for example by a sovereign bankruptcy.


But while the overall reduction in public spending is absolutely right, many of the individual policies are much more debatable. This is especially true of the decision to increase foreign aid, sacrificing the military and prisons. Governments should be concentrating on core functions; yet the reverse seems to be happening in Britain, where we will soon have aircraft carriers devoid of planes. A better restructuring of the way services are delivered could preserve value- adding, frontline jobs while reducing back-office, administrative functions. Unfortunately, producer interests continue to dominate departmental thinking; and the easiest cuts are being made, rather the right ones.



There is one key way in which the job losses should be put into context. Private firms were forced to go through a nasty process of shrinkage during the recession; and even in these slightly better times thousands of people are being made redundant weekly. No fewer than 143,000 people were made redundant in the three months to August, nearly all in the private sector. The redundancy rate was 5.8 per 1,000 employees, down 2.7 from a year earlier. These sorts of rates have long been the norm in the private sector – yet while some of the bigger layoffs are reported, we don’t see these aggregates splashed on front pages every quarter when they are published by the Office for National Statistics. This is for good reason: even more jobs tend to be created than are destroyed. That is how capitalism works; the public sector is now being confronted with a much harsher and precarious reality that the rest of us have had to face all of our lives.

The good news is that total employment is growing again, reaching 29.158m in June-August, up 315,000 from a trough of 28,843m in December-February. Private sector jobs grew at an even faster rate of 361,000, compensating for 46,000 public sector job cuts. As long as this continues, most of the public sector workers who will lose their jobs ought to be able to find alternative work. That, at least, is what we must all hope ahead of today’s traumatic announcements.