Parties compete in public sector job cuts

Eurfyl ap Gwilym asks what exactly is the size of the spending cuts being planned for Wales following the election

In his BBC interview with Jeremy Paxman last Friday the Conservative leader David Cameron said he would axe public spending in areas of the country that had become over-dependent on state spending, singling out Northern Ireland and the English north east as examples of problem areas. “It’s quite clear the size of the state has got too big,” he he said. The question is, does Cameron have similar plans for Wales?

Targeting spending in Northern Ireland for above-average cuts implies that the Conservatives are ready to override the current funding arrangements for the devolved administrations and make the cuts there even deeper than across the UK as a whole. Table 1 gives comparable spending per head in 2008-09 doe the devolved nations, the north east, England and the UK.

Table 1: Identifiable public expenditure per head in 2008-09.

£’s per head Indexed
UK £8,206 100
England £7,960 97
North east England £8,930 109
Northern Ireland £10,127 123
Scotland £9,412 115
Wales £9,209 112
London £9,464 115

Source: Public Expenditure Statistical Analysis 2010. HM Treasury 22 April 2010.

We already know that under Labour’s plans the Welsh Government faces deep cuts in funding totalling £2.8 billion over the coming three years. This would lead to cuts in public sector employment and in public services. Peter Hain, Secretary of State for Wales,  described my estimate that these cuts will lead to the loss of up to 45,000 public sector jobs as “irresponsible scaremongering”. Last week the Chartered Institute of Personnel estimated that up to 600,000 public sector jobs were at risk across the UK. This would imply losses in Wales of 30,000. What is Labour’s estimate?

It would appear that if David Cameron has his way the cuts in Wales could be even more severe. If the Conservatives win the election does this mean Wales faces a double whammy – Labour’s planned cuts plus Cameron’s additional cuts? If so where will the cuts be made? Sixty per cent of the Welsh Government’s budget is spent on health and education. Even under Labour’s plans it will be difficult to avoid cuts in these budgets. With additional Conservative cuts it will be impossible to avoid cutting them.

For years London-based parties have concentrated on the interests of the south east of England and the City of London. Westminster put all its eggs into the financial services basket and neglected other industries such as manufacturing and construction, as shown in Tables 2 and 3.

Table 2: Proportion of GVA Generated by Financial Services (%)

2007 1999
London 18.1 11.4
England 8.9 6.3
Scotland 7.7 5.2
Wales 4.4 3.4

Table 3: Proportion of GVA Generated by Manufacturing (%)

2007 1999
London 5.9 10.1
England 12.4 18.3
Scotland 13.7 19.4
Wales 17.9 24.9

Source: Office of National Statistics, 9 December 2009.

The result has been that other nations and regions of the UK have suffered economically. Now that financial services have precipitated a fiscal crisis in the UK the Conservatives plan to penalise the other nations and regions of the UK by singling them out for additional cuts in public spending.

Another key question is the timing of any such cuts. If, as the Conservatives advocate, the cuts in public sector jobs come before the economy is growing again there will be few new private sector jobs available to take the place of those lost in the public sector. It is for this reason that there is a strong case to see a clear indication of sustainable and accelerating GDP growth over three sequential quarters before we can be reasonably confident that the private sector is creating additional jobs. The provisional GDP growth figures for the last quarter, which were released last week, indicated GDP growth of 0.2 per cent. This underlines how fragile the recovery is. These figures follow a revised estimate of GDP growth of 0.4 per cent in the last quarter of 2009.

Eurfyl ap Gwilym serves on the boards of a number of companies, and is an economic adviser to Plaid Cymru

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