X marks the spot if you're looking to be unemployed
With all three major parties promising heavy spending cuts, it's public sector staff who face job losses whoever they vote for, says Mark Leftly
Sunday 18 April 2010
A vote for any of the three major parties at this general election is a vote for unemployment. Gordon Brown, David Cameron and Nick Clegg have all been jostling for the position of who is the most austere. They are promising heavy spending cuts to tackle the UK's £167bn debt burden, should they be elected.
The people of the UK, particularly in the regions, are incredibly reliant on the public sector for their wages. Nearly 6.1 million people have public sector jobs and in Scotland it accounts for one-quarter of all employment.
Those cutbacks threaten these jobs. Plaid Cymru has claimed that Labour's plans will result in the loss of 45,000 jobs between 2011 and 2014 in Wales alone, while 58 economists wrote an open letter this week saying that Conservative cuts would cause mass unemployment and tip the economy back into recession.
London and the South-east, with its far larger private sector and a central government civil service that seems particularly adept at keeping its own staffing levels up, are less at risk. As Gerald Ronson, the great property entrepreneur said at his annual lunch in The Dorchester Hotel last week: "Another big concern is what I see happening outside London. We are creating a two-tier country where I fear that the consequential effects of significant unemployment will be social unrest."
Where the 1980s saw miners in the Rhondda Valley join the dole queue after the pits were closed, this time back office workers at county councils could find themselves scanning the jobs pages. And the huge error of the Thatcher years – not retraining those miners so they could find alternative employment – looks to be repeated with the manifestos light on details of potential job cuts.
The pity of all this is that the rise in unemployment has finally been arrested. In March, unemployment was 7.8 per cent, down 0.1 per cent over the quarter, though the claimant count for key out-of-work benefits was up nearly 200,000 to 1.585 million.
However, be it Labour's much-delayed Comprehensive Spending Review (CSR) or the Conservative plans for an emergency Budget in the summer, the Government will start its cuts in the next six months.
The Conservatives have promised a brutal retrenchment of the public sphere, promising £27bn in so-called "efficiency savings" this year alone, nearly double Labour's plans.
Up to £2bn would be trimmed from the public payroll, with economists estimating that 20,000 to 40,000 jobs could go. In other cuts, many consultants would lose their contracts.
Labour's pledge is to make £26bn in savings over the next two years, though it is difficult to know where the axe will fall until the CSR takes place. There will be cuts to regeneration funding, key to lifting areas of deprivation to acceptable, modern living standards.
The manifesto also refers to trimming government overheads, with £11bn of "operational efficiencies" and "cross-cutting savings to streamline government". That would appear to suggest that back office operations, such as IT and human resources, could be merged with some roles lost to avoid duplication.
The Liberal Democrat manifesto stresses that its £15bn of cuts will be based on "an objective assessment of economic conditions", and that timing is crucial so that jobs are not lost. Clegg's team believes that the cuts could start in the 2011-12 financial year, when it believes that the economy will have the strength to take the strain.
On page 99 of the manifesto, however, the party admits that there will have to be cross-governmental cuts on pay, while the idea of a defence review could cast doubt over the near 30,000 people employed in that department's procurement division.
Major outsourcing firms, such as Serco and Capita, are expected to take up some of the slack. Local and central government will not be able to afford to run whole departments, like payroll, and certain services, such as building repairs, but they will still be needed.
That means a potential bonanza for these outsourcing firms, as well as the possibility of new jobs for those made redundant. VT Group, before Babcock International launched its takeover bid for the company, had been moving away from defence work to more outsourcing, anticipating the government cuts.
However, a leading support services banker warns that there are simply not enough firms in this sector to bridge the gap. "All of those big firms will be net beneficiaries of the cuts," he says. "But the wheels of government turn slowly, the work will take a couple of years to reach the market."
Scaling back the public sector will have knock-on effects for private companies. The UK Contractors Group (UKCG), a major voice for the construction industry, fears that capital projects will be delayed or cancelled.
Contributing 10 per cent of UK GDP and employing 3 million people, the impact on construction could be disastrous, as nearly half its business is generated from the public sector. UKCG's chief executive, Stephen Ratcliffe, says that if capital spending was halved to £20bn about 500,000 jobs would go "quite easily".
Paul Drechsler, the chief executive at construction group Wates, adds that the nature of construction, where projects can be mothballed in days, means that the speed of job losses would be shocking. "You can turn the tap off construction work very quickly. I don't think that there is any other industry that can deliver unemployment so quickly."
Ratcliffe and Drechsler lead a campaign to maintain capital spending, which has been followed up by industry journals Building magazine and Construction News. A report last year by consultant LEK concluded that for every £1 spent on construction, £2.84 is generated for the wider economy.
Their efforts have been recognised by the leading lights of the Conservative Party. Chris Chivers, the chief executive at 300-employee contractor Killby & Gayford, thrust a copy of LEK's research into the hands of David Cameron and Boris Johnson during the first week of the campaign. The Tory leader admitted to having seen the document before.
All of this paints a pretty gloomy picture just at the time when there seems to have been a slight boost in consumer confidence. Private sector workers have been badly hit since 2007, with pay cuts and job losses polluting nearly every major business.
But the public sector cuts could be even deeper. When the council cleaner and quango director stand, pencils in hand, in the polling booth on 6 May, wherever that "x" goes could easily result in a party being elected that will sack them.
Brown keen to restore Thatcher's golden shares
Gordon Brown is returning to his protectionist, socialist roots with suggestions that he could increase the use of so-called "golden shares".
These protect companies from unfavourable management decisions, hostile takeover bids and place limits on foreign ownership. In the wake of the takeover of UK confectioner Cadbury by Kraft, voters have become keener to see protection of British businesses and their employees.
The shares impose conditions on a company's articles of association and limit ownership of shares, in effect giving the Government a veto. The Government is also able to veto decisions which go against national employment interests. Only BAE Systems, Rolls-Royce and defence research agency Qinetic still have golden shares following privatisation.
The practice began during the premiership of Margaret Thatcher in response to criticisms of the rapid sale of previously state-owned industries. Despite this, the Conservative Party has expressed concerns. In October 1989, the Tory government waived its golden share in Jaguar, allowing its sale to Ford.
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