Spending cuts threaten ‘double-quick double dip' recession

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date: 13 September 2009

embargo: 12 noon Sunday 13 September 2009

If the Government and Bank of England's stimulus programme was to be replaced by public expenditure cuts to reduce the deficit, the result would be a 'double-quick double dip' recession, TUC General Secretary Brendan Barber said today (Sunday) at a press conference on the eve of TUC Congress in Liverpool.

Brendan Barber warned that the effects would be felt in both the public and private sectors. Public services would inevitably suffer, but the private sector effect would also be severe. He warned that not only would jobless public sector staff have less money to spend, indirectly hitting the private sector, but public spending on the private sector would also face cuts.

The state currently spends more on goods and services from the private sector than it does on the public sector. In 2007/8 the public sector wage bill was £151 billion while the amount spent directly with the private sector was £167 billion. A ten per cent cut in spending would take one per cent of GDP out of the private sector.

Brendan Barber spoke as the TUC launched a new report Public Sector Employment in Local Government. The report analyses the effects of possible public spending cuts on the 25 local authorities with the highest levels of unemployment. It finds that towns such as Liverpool, Middlesbrough and Leicester would see unemployment levels increase by more than 40 per cent.

The report also found that a ten per cent cut in public sector staff would result in more than 700,000 employees losing their jobs across the UK, as the public sector now employs seven million people. This would result in 2.9 per cent of the workforce losing their jobs. If they all signed on, the number of people claiming the dole would increase by 45 per cent, while ILO unemployment would be pushed over three million (an increase of 29 per cent).

Merseyside would be the hardest hit area as it has the highest proportion of public sector jobs of any UK region. A ten per cent cut in public sector jobs would result in 3.58 per cent of the Merseyside workforce losing their jobs. Wales would be the second worst hit, losing 3.56 per cent of its jobs, while inner London would be the least affected losing 2.51 per cent of jobs.

TUC General Secretary Brendan Barber said: 'Public spending cuts would provoke a double-quick double-dip recession. Unemployment could exceed four million and it would take many years before there was any chance of returning to anything like full employment. That would scar for life a while generation of young people.

'Spending cuts will hit both public and private sectors. Areas such as Merseyside, in particular Liverpool, which have a high proportion of public sector jobs would be right in the unemployment firing line.

'A double-dip recession would not just be deeper - but also longer. Prolonged mass unemployment would not just do economic damage, but would have terrible social effects. I don't think that Britain is broken, but this would be one way to break it.

'Last time we suffered slash and burn economics we had riots in the streets here in Liverpool. I make no prediction that this would happen again, but it would take us back to the days of a deep North South divide and once again hollow out whole areas of the economy.'

NOTES TO EDITORS:

- The full text of Brendan's speech is available at www.tucftp.org.uk/eveofcongress.pdf

- The TUC report Public Sector Employment in Local Government is available at www.tuc.org.uk/extras/localauthorityemployment.pdf

25 local authorities with highest JSA claimant count rates

Local authority (Great Britain)

Per cent of total employee jobs

Ten per cent cut in jobs

Claimant rates (proportion working age population)

Proportional increase in claimant count if public sector workers who lost their posts claimed JSA

Blaenau Gwent

30.6

590

7.9

18%

Wolverhampton

30.1

3250

7.9

29%

Kingston upon Hull

29.6

3490

7.9

27%

Birmingham

31.2

14980

7.8

30%

Liverpool

39.1

8850

7.6

41%

Sandwell

22.7

2890

7.4

22%

Middlesbrough

39.7

2620

7.2

42%

Walsall

26

2690

7.2

25%

Merthyr Tydfil

36.9

840

7.1

35%

South Tyneside

33.8

1400

6.9

22%

Tower Hamlets

16.6

3300

6.9

31%

Knowsley

34.2

1930

6.8

30%

Hartlepool

33.5

1060

6.7

28%

Hackney

27.3

2230

6.7

23%

Leicester City

34.1

5520

6.5

44%

Corby

11

330

6.4

15%

North Ayrshire

30

1220

6.3

23%

Wansbeck

45.9

690

6.2

29%

Wear Valley

35.3

710

6.2

30%

Newham

36.1

2620

6.1

26%

North East Lincolnshire

30.2

2050

6.1

35%

Haringey

29.1

1790

6.1

19%

Halton

19.7

1070

6.1

23%

West Dunbartonshire

42.1

1420

6.0

42%

Redcar and Cleveland

32.6

1330

6.0

26%

The impact of a ten per cent cut in public sector employment by sub-region:

UK sub-region

Private sector workforce

Private sector % of workforce

Public sector workforce

Total workforce

10% of public sector workforce as % of total workforce

Merseyside

341,421

64.2

190,603

532,024

3.58%

Wales

716,931

64.3

398,249

1,115,180

3.57%

Northern Ireland

402,988

64.4

222,895

625,883

3.56%

Tyne & Wear

281,075

65.7

146,882

427,957

3.43%

Strathclyde

607,823

65.8

316,339

924,162

3.42%

West Midlands

647,993

68.4

299,294

947,287

3.16%

Rest of Scotland

873,468

68.5

401,852

1,275,320

3.15%

South Yorkshire

333,841

69.1

148,971

482,812

3.09%

Rest of Yorks & Humberside

483,075

69.7

210,450

693,525

3.03%

East Anglia

700,105

70.1

297,953

998,058

2.99%

Rest of Northern region

535,199

70.2

227,417

762,616

2.98%

South West

1,483,760

70.7

616,363

2,100,123

2.93%

Rest of North West

715,758

71.3

288,343

1,004,101

2.87%

Greater Manchester

728,498

71.9

285,093

1,013,591

2.81%

West Yorkshire

640,774

71.9

250,742

891,516

2.81%

Outer London

1,324,127

72.7

497,346

1,821,473

2.73%

Rest of West Midlands

844,778

72.8

315,726

1,160,504

2.72%

East Midlands

1,371,829

72.8

512,234

1,884,063

2.72%

Rest of South East

3,676,913

74.5

1,255,658

4,932,571

2.55%

Inner London

906,426

74.9

303,827

1,210,253

2.51%

UK

17,616,782

71.0

7,186,237

24,803,019

2.90%

- In July 2009 the claimant count was 1,582,700. If 718,624 public sector workers were to sign on this would bring claimant levels to 2,301,324 - an increase of 45 per cent. In the period April-June 2009 ILO unemployment was 2,435,000. Were 718,624 public sector workers to become ILO unemployed the level would rise to 3,151,350, an increase of 29 per cent.

- Data for local authorities is taken from the Annual Business Inquiry (ABI), an employer survey conducted in December of each year. The ABI records the total number of jobs held by employees (a measure which excludes self-employed, government-supported trainees and HM Forces). The ABI is the only means to provide estimates of public sector employment at a local authority level. However, it provides estimates of jobs by industry rather than public sector - some private sector workers who are contracted to provide service to the public sector are included. We do not consider this a problem for this analysis, as the jobs of both directly employed and contracted workers would be at risk from job cuts. The ABI provides data for Great Britain but not for Northern Ireland.

- Local authority claimant rates given here are not comparable with the national claimant count rate that the Office of National Statistics (ONS) provides in its monthly labour market releases. The claimant rates used in our analysis show the number of claimants as a proportion of the total resident population of working age, and are the only rates that are available at a local level. The national rate published by ONS shows the number of claimants as a proportion of the economically active population (calculated by considering the number of claimants as a proportion total workforce jobs plus total claimant count).

- Regional and sub-regional figures are from the Labour Force Survey (LFS) Spring 2009, and cover the whole of the UK. They are based on the self-reported occupations of respondents. LFS estimates of public sector employment are higher than those in the ONS' public sector employment release (which is based on the reported number of employees across all public sector organisations). This is because LFS respondents may identify themselves as public sector employees when they are not directly employed by the public sector although they work in public sector organisations, for example privately contracted or agency workers providing services to the public sector. In addition, the ONS public sector employment figures do not include GPs or some further education staff, who are normally considered as private sector workers. The LFS figures therefore provide a better indication of the total number of staff working within public sector organisations who could be affected by large scale job cuts. In addition, LFS data are available by region for the most recent quarter whereas the most recent ONS data on public sector employment by region are for 2007.

Contacts:

Media enquiries:
Liverpool press office T: 0151 239 6039 / 6040

Liz Chinchen M: 07778 158175 E: [email protected]
Rob Holdsworth M: 07717 531150 E: [email protected]
Elly Brenchley M: 07900 910624 E: [email protected]

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