E-Innovation
The Government's priority must be to encourage private-sector job creation
The Work Foundation has called for the new Government to construct a growth strategy based on expanding private-sector jobs in all regions and counties of the UK, in order to tackle the deficit.
The first requirement is that enough new jobs in the private sector are generated in order to bring unemployment down. Total employment in the private sector is still falling suggesting the Government should be wary of making big cuts in public-sector employment before the private sector is hiring in sufficient numbers to take up the slack.
In the recession in the 1990s the public sector shrunk by around 14%, shedding more than 800,000 jobs. If the same level of public-service reduction is repeated, job losses on the same scale could be expected over the next five years. Given that the current deficit is three times higher in this recession this is not an improbable outcome.
As well as cuts to the Civil Service and town hall staff, in the 1990s there were also big cuts in the nationalised industries, armed forces and local authority construction services. These cannot be relied on to reduce the public-sector headcount this time around. It will be harder to spare ‘ring-fenced' services such as health, education, social services and the police than in either the 1980s or 1990s cuts.
Much of the public debate and discussion has been on reducing the deficit through public-spending cuts and tax rises. However, any successful deficit reduction strategy must encourage growth and jobs and this has so far received little attention in the public debate. The new Government faces the challenge of tackling the UK's very high public-sector deficit while at the same time encouraging and supporting the fragile recovery by the private sector. The Government must focus on growth as well as cuts.