Cuts and tax hikes will push jobless to 3 million

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The Independent Online

A total of 1.6 million jobs will be lost across the economy as a result of the Government's deficit reduction programme – far more than so far admitted by ministers.

According to the Chartered Institute of Personal and Development (CIPD), a leading labour market think-tank, spending cuts will account for 725,000 of those losses, the hike in VAT a further 250,000, and knock-on redundancies in the private sector will see 625,000 more posts disappear. As a result, unemployment will approach 3 million by 2012, warns the CIPD, in the most comprehensive analysis so far of the effects of government policy on the labour market.

The CIPD, which numbers many public-sector human resources managers among its membership, says it believes that one in eight public-sector jobs will be cut by 2016 – some 725,000, rather than the Office for Budget Responsibility estimate of 610,000 by then, and 490,000 jobs cut by 2015.

Ministers argue that the restoration of business confidence as a result of the deficit reduction plan will boost the creation of jobs in the private sector.

In a good year, some 300,000 private-sector jobs are generated. However, these may not be the in the right places or demand the right skills. There are growing concerns about this mismatch. John Philpott, the chief economic adviser at the CIPD, said: "Public sector dependent regions will be hit relatively hard, while private sector gains will be easier to achieve in the south and east of England, which has a generally stronger economic base.

"Switching staff from public to private sectors may also be more difficult in regions with a strong public-sector profile, given that this will skew the skill profile of workers. As a result of these differences, dependent regions are likely to see a sharper rise in unemployment prior to 2012 and a slower improvement thereafter.

"The full impact of the Coalition Government's planned fiscal tightening has been understated."

The CIPD sees unemployment peaking at 2.9 million in 2012, and returning to its current level of around 2.5 million by the time of the next election, scheduled for 2015.