Public sector job losses are taking place much faster than expected, leading to reduced demand in the economy. Ministers will have to use reforms set out in the Open public services white paper to mitigate the effects of further cuts
One year on from the Spending Review, there is both good news and bad news. According to PwC’s analysis of official employment figures across regions and industries, there was a net fall in public sector employment of around 290,000 between December 2009 and June 2011, which was offset by around 600,000 private sector job gains over this period.
However, in the second quarter of 2011 when the public spending cuts started in earnest, this pattern was reversed, with public sector job losses of 111,000 outweighing private sector job gains of around 41,000.
Local government has suffered the most over the past year with around 145,000 job losses out of around 240,000 in the public sector as a whole between Q2 2010 and Q2 2011. A recent PwC survey of local authority chief executives shows that councils are achieving savings through changing support services or the ‘back office’, improving service delivery processes and/or restructuring management. The focus has therefore been largely around ‘doing things differently’ and more efficiently.
The public sector job losses have come much faster than anticipated. After only one quarter of data for this financial year, the job losses in the public sector have already exceeded the Office for Budget Responsibility forecast for the whole of the 2011-12 financial year.
The total number of job cuts over the Spending Review period to 2015 will not necessarily be that much greater than forecast as job losses may be lower in later years, but earlier than expected job cuts have sapped demand at a time when the economy is already relatively weak due to a series of global economic shocks this year.
Rising demand for public services, reduced government spending and the need for a leaner and more efficient public sector mean that public service reform is central to the coalition’s agenda. The challenge now for government is not only how to do things differently, but how to do different things and mitigate the impact of further cuts in spending on services.
Reforms set out in the Open public services white paper will be key to achieving this goal, although there are real challenges in engaging the public and making change happen across substantial parts of the public sector.
Paul Cleal is PwC’s government and public sector leader
