Cameron clashes with Harman over effect of public spending cuts on unemployment

Economics Editor,Sean O'Grady
Thursday 01 July 2010 00:00
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David Cameron and Labour's acting leader, Harriet Harman, clashed sharply at Prime Ministers' Questions yesterday over the extent to which cutbacks in public spending will increase unemployment.

Figures released by the interim Office for Budget Responsibility (OBR) predicted that 538,000 public sector posts would disappear by 2016, but that the number of people in work will be 210,000 higher than under Labour's plans. A Treasury leak earlier in the week suggested that 1.3 million jobs would go.

Ms Harman told Mr Cameron: "I know you've published some figures today but it's the figures you haven't published that I'm asking about – the figures that say that 1.3 million jobs will be lost. Why won't you publish these Treasury documents? Why are you keeping them hidden?"

Mr Cameron replied that the OBR forecast was independent of the Government, adding that before the election Labour's Chancellor, Alistair Darling, had admitted that public sector job losses were inevitable.

The timing of the OBR's release of fresh data, apparently in response to newspaper reports about the Treasury leak, raised questions about how truly "independent" the OBR is.

Repeating the claim she made during her reply to the Chancellor's Budget statement, Ms Harman pointed out that the OBR's forecast indicated that "unemployment will be higher than it would otherwise have been".

She demanded: "Can you confirm that secret Treasury analysis shows that under your Budget half a million jobs will be lost in the public sector [and even more] in the private sector?"

Mr Cameron, referring again to the OBR figures, said they showed two million more private sector jobs and "unemployment falling every year".

The OBR numbers do indeed show falling unemployment, from a peak of 8.1 per cent of the workforce this year to 6.1 per cent in 2014, and the number of people in work rising from 28.9 million now to 30.2 million in 2016. However, before the emergency Budget – that is, under Labour's plans – the OBR thought unemployment would also fall and would be lower over the next few years by around 100,000, or 0.2 per cent of the workforce.

On the other hand, the number of people in work would be higher than under Labour's plans, by about 200,000 by 2016. The relatively small difference is accounted for by the continually shifting size of the workforce.

Meanwhile, MPs threatened to refuse to sign off the budget of the parliamentary expenses watchdog, the Independent Parliamentary Standards Authority, as they condemned their new allowances system as bureaucratic and a waste of public money.

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