June 23, 2010 3:00 am

Huge jobs cull looms as services hit

Hundreds of thousands of public sector jobs look set to go as government departments other than health face their biggest and fastest spending reductions of modern times - a mighty 25 per cent reduction over four years.

Together with the two-year freeze in public sector pay for the majority of public sector employees, the Budget "signals that the battle for Britain's public services has begun with the government declaring war," Dave Prentis, general secretary of Unison, the biggest health union with a significant membership also in local government, declared.

The scale of cuts to government programmes - apparently from council services to the police, prisons, higher and further education, environmental protection, transport and much else - were reduced somewhat by the pay freeze, which the chancellor argued would save jobs, and by the decision to reduce spending on social security benefits and tax credits by £11bn a year compared to where it would otherwise have been by 2015.

Precise details of where the axe will fall will not be known until the autumn spending review, with George Osborne, the chancellor, hinting education and defence may receive a degree of protection.

Doing that, however, will only increase the size of spending cuts in other departments above the average 25 per cent reduction that they already face.

The last recession in the 1990s saw the public sector workforce fall by almost 600,000 over seven years at a time when public spending cuts were less sharp and less deep than those now planned.

In addition, far more government services are now outsourced than in the 1990s with more than 1.2m private sector jobs directly dependent on government contracts , many of which will undoubtedly be hit by the huge spending reductions.

The Budget announcements mean that "the long-awaited public sector recession has started with a bang", Jon Sibson, head of public sector at consultants PwC, said. "Inevitably, some services will be scrapped altogether."

Alan Downey, head of public sector at the consultants KPMG, said it was clear that pretty much everything outside health spending faces "years of extreme pain" and it was difficult to see how that could fail to result in the loss of hundreds of thousands of jobs. Unions warned that public services "will be decimated" by yesterday's announcement.

John Philpott, chief economic adviser to the Chartered Institute of Personnel and Development who has estimated that 500,000 jobs could go, warned that the coalition faced "an enormous management challenge" as it tries to deliver its manifesto commitments "through a workforce demoralised by redundancies, pay restraint and pension reform".

Ian Mulheirn, director of the Social Market Foundation, said the scale of the departmental spending cuts are such that they may be "unachievable".

Having protected universal benefits and "needlessly" ring fenced the NHS budget, while introducing an "unaffordable" formula for raising state pensions, cuts in departmental programmes are bigger than they would otherwise have had to be, Mr Mulheirn said.

And given that the less well-off are more reliant on public services than the better off, the "swingeing" cuts such services face could undo the governments efforts to protect the less well off by its other measures.

"The danger for the government is that the country simply won't swallow this level of cuts to public services," he said.

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