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