Spending Review: 100,000 public sector jobs will go by 2020, OBR predicts

Fiscal watchdog predicts 0.1m drop in public sector workforce by 2020, but says pay restraint will reduce need for cuts

By matt.foster

25 Nov 2015

One hundred thousand public sector jobs are likely to be shed during the period covered by the government-wide Spending Review, the UK's fiscal watchdog has predicted.

Chancellor George Osborne on Wednesday set out the government's spending plans up to 2019-20. While the Spending Review outlined cuts averaging 19% across unprotected government departments, it did not include details of the impact of those reductions on staff. 

But ministers are currently finalising new "Single Departmental Plans", which, when published in December, will aim to link departmental policy priorities more closely to the resources allocated at the Spending Review, and could include further detail on staffing requirements.

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In its latest fiscal outlook – timed to coincide with Osborne's statement – the Office for Budget Responsibility (OBR) said 0.1 million jobs in the public sector were likely to go over the next five years.

"Slow growth in cash spending and low annual wage growth imply that general government employment will fall by 0.1m between the first quarter of 2015 and the first quarter of 2020, leading to a total fall from early 2011 of 0.4m," the OBR said, while adding that some protection had been offered by the government's earlier decision to extend the cap on public sector payrises for another four years.

"This is 0.3m smaller than projected in July, following increases to spending plans and the government’s decision to limit public sector pay awards to 1% a year over the period (which was announced in the July Budget, but not included in our figures as the government did not inform us of that decision until after our forecast had been closed).

"We expect the fall to be more than offset by a rise in market sector employment, with general government employment broadly flat in the final year of the forecast period and market sector employment continuing to rise."

The OBR cautioned, however, that its predictions for general government employment had been carried out "in the absence of specific workforce plans", relying instead on "some simple and transparent assumptions". Cabinet secretary Jeremy Heywood has previously stressed that departments are not working towards a civil service-wide target for job cuts.

"We begin by assuming that the total paybill will grow in line with a measure of current government spending," the OBR said. "We also separately forecast government sector wage growth, taking into account recent data, stated government policy (such as limits on pay growth), historic rates of pay drift and whole economy earnings growth over the medium term. We then combine total and average pay growth to derive a projection of general government employment. "

The OBR also stopped short of giving a detailed breakdown of the likely distribution of those cuts between the civil service and the wider public sector workforce, which includes local government, NHS staff, the police, and teachers. 

Civil service headcount fell from 527,500 to 439,300 over the course of the last parliament, according to the latest figures. While departments have yet to outline detailed workforce plans, the Ministry of Defence on Monday announced a 30% cut to its civilian workforce by 2020, a move which has already been questioned by unions and defence academics as having the potential to undermine departmental capability.

Dave Penman, general secretary of the FDA union, said the scale of spending cuts announced by the chancellor on Wednesday was "eye watering", and warned of the impacts of further reductions to the civil service workforce.

He said: “The question has to be asked: how can the billions of pounds of capital investment announced by the chancellor be delivered efficiently by a civil service stripped of resources and people?”

The Treasury on Wednesday said it would consult on "further cross-public sector action on exit payment terms", promising "targeted reforms in areas where the public sector still has far more generous rights than the private sector". The government has already signalled its intention to cap public sector exit payouts at £95,000.

There will also be a review of sickness absence in public sector workforces, with the Spending Review document saying government will consult on "how to reduce its impact on public service delivery" and saying the Treasury will consider legislation "where necessary". Again,  the department argues that current public sector sickness absence terms are "more generous than typical private sector arrangements". 

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