The claim
“The private sector should be more than capable of generating additional jobs to replace those lost in the public sector.”
Letter to Daily Telegraph signed by 35 senior business leaders
The background
The business people, who run big companies including Marks & Spencer, BT and Asda, defend the Government’s approach to cutting the deficit.
On Wednesday, in his comprehensive spending review, the Chancellor George Osborne will set out plans to cut public spending by £83bn over the next four years.
The analysis
The business leaders’ letter is music to the ears of the Chancellor, but with the recovery uncertain, will the private sector really be capable of stepping in when the public sector sheds jobs?
In research released today, the employers’ body, the Confederation of British Industry, and the recruitment consultants, Harvey Nash, give some grounds for optimism.
Their survey of 330 employers finds that the number of businesses operating a recruitment freeze has fallen from a peak of 61 per cent in 2009 to 7 per cent.
The Office for Budget Responsibility (OBR), which was created by the Coalition Government and provides independent economic assessments, expects the number of people in work to rise over the next five years.
It believes there will be a net gain in employment of 1.3 million between 2010 and 2015.
The accountants PWC expect half a milllion public sector jobs to go in the same period, with a possibility of another 500,000 job losses in private sector companies that supply the public sector.
But PWC expects “at least some rise” in total private sector employment over the next five years.
Using figures from the OBR and PWC, John Philpott, chief economic adviser to the Chartered Institute of Personnel and Development, says up to 2.5 million job would have to be created if the OBR’s forecast is to be met.
He believes this is extremely unlikely – with total employment in 2015-16, “around 100,000 higher than in 2010, but far less than the 1.3 million extra jobs the Coalition Government is hoping for”.
And the scepticism doesn’t end there. The signatories to the letter in the Daily Telegraph run big firms.
In Britain, 42 per cent of private sector workers – 11 million people – work for companies with more than 50 employees, while 58 per cent – 13 million people – work for small firms.
Today, the Federation of Small Businesses released a survey showing that confidence in Britain’s economic prospects has been falling all year.
Chairman John Walker says small businesses are at a “tipping point” and want a growth strategy from the Government “to go alongside the inevitable pain from the comprehensive spending review”.
Mr Walker adds ominously: “The Government is looking to the private sector to create jobs and take on the people that will be made redundant as a result of the cuts. Evidence from this report shows that small firms do not have the confidence to do that yet … ”
The verdict
So is the private sector really “capable of generating additional jobs to replace those lost in the public sector”, as the Telegraph signatories say?
The OBR believes total employment will rise over the next five years by 1.3 million. PWC expects “at least some rise”.
The CIPD says total employment will be “around 100,000 higher than in 2010, but far less than the 1.3 million extra jobs the Coalition Government is hoping for”.
And the FSB warns that small businesses can’t be expected to provide the jobs that will be needed.
The truth is that no-one can be sure what will happen in the years ahead, but the 35 business people’s claim looks optimistic.
