Wednesday 5 December 2012

Autumn Statement: the Octopus strikes back

I’m getting old. Set piece parliamentary events like today’s Autumn Statement only serve to bring out the cynic in me. The current Chancellor of the Exchequer seems even more adept than most of his recent predecessors at pulling the smoke and mirrors trick in order to make the fiscal arithmetic look better. And listening to him address the House of Commons this lunchtime one might even think the Office for Budget Responsibility (OBR) had painted a fairly rosy outlook for jobs. However, a closer look at what the OBR actually published today offers a rather different perspective.   

Although, as the Chancellor stated, the OBR has lowered its forecast for the peak in unemployment from 8.7% to 8.3%, it nonetheless paints a very bleak outlook for the UK labour market in 2013. The number of people in work is forecast to be unchanged between Q4 2012 and Q4 2013, the employment rate is forecast to fall from 58.4% to 58.1%, the number of people unemployed is forecast to rise by 100,000 with the unemployment rate increasing from 7.9% to 8.3%. Whatever the medium term employment impact of the policy measures contained in the Autumn Statement, the OBR clearly does not expect these to help the jobless in the short term.

The picture for the public sector is even bleaker. Again, the Chancellor stated that the OBR is forecasting that two additional private sector jobs will be created for each job lost from the public sector. What he didn’t mention was the scale of projected public sector job cuts. The OBR is now projecting that the coalition’s spending plans will eventually result in the loss of 1.1 million public sector jobs, including 700,000 in the current Parliament. Assuming the OBR is correct in forecasting 2.4 million additional private sector jobs in the coming years, the share of public sector employment in total employment is heading toward a record post war low.

When I predicted public sector job losses on this scale in 2010 I was ridiculed in many quarters, most notably by Conservative MP Michael Fallon who verbally attacked me during an oral evidence session before the Commons Treasury Select Committee suggesting that I had the professional “credibility of a dead octopus”. Mr Fallon, now a minister in the Business Department, has been doing the post Autumn Statement media round this afternoon defending the Chancellor’s policy record. He was wrong in 2010 and didn’t sound very credible today either. I suggest Mr Fallon consult the seaweed, it might offer him a way forward.   

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