Saturday, 12 February 2011

Office Budget Responsibility forecasts massive job losses

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Birmingham City Council faces 7,000 job losses
The Office of Budget Responsibility (OBR) was introduced by the Coalition Government in May 2010 to project impartial figures that the public could trust. Given the past public suspicions that politicians have ‘fiddled the figures’ and used different sets of statistics to present the best gloss on their own policies and the worst picture for their opponents, there was a warm reception for the OBR when it was first created.
Its remit was to:-
1. The OBR will make independent assessments of the economy,  public finances and fiscal sustainability.
2. The OBR will act objectively, transparently and impartially. 
3. The OBR will examine the impact of decisions made by the Government on the sustainability of the public finances. The OBR should not comment on the merits of individual policies, or examine alternative policy scenarios.
Slightly, defensively it even inserted the word ‘independent’ into its website name ( as if desperate to try and show that it really would be aloof from political interference. Nevertheless, the OBR Panel is chosen and effectively hand-picked by the Conservative Chancellor.
In June 2010, the OBR got off to a fraught start with the Prime Minister exalting that unemployment over the next six years would fall. However, the OBR was forecasting 610,000 jobs would be lost over those six years casting doubt on his confident prediction (given the weak economy and the failure to accurately predict growth rates that would show new jobs being created).
To confuse matters even more the Chartered Institute of Personnel and Development (CIPD) predicted that in fact they thought the job losses would amount to 725,000.
In July, it was revealed that the OBR had used a sleight of hand to restrict the number of job losses to Government jobs and not the public sector. Confused? Did you think that working for the Royal Mail, London Underground and the nationalised banks had some vague connection to the Government? Apparently not, said the OBR. The Office of National Statistics (ONS) thought that 6.09 million worked for the Government. Within a few weeks of being created the OBR had reworked this figure to 5.53 million suggesting (if its other figures are true) that it was hiding around another 50,000 job losses over the next five years.
In September 2010, MPs on the Treasury Select Committee were given the rare power to approve and a veto the dismissal of the Chairman of the OBR, strengthening the power of parliament.
The OBR (after a careless Danny Alexander showed the report to a photographer) had forecast that a staggering 490,000 public sector jobs will be lost over five years (keep up at the back) by the end of the financial year 2014-15. This was later in October 2010, wound down to ‘only’ 330,000 over the same time period. However, after the dramatic and apparent forecast reduction within the space of three months, the OBR admitted that another 80,000 would still be lost if welfare expenditure.
When the Chairman of the OBR, Robert Chote suggested that Opposition parties’ forecasts could be checked by the OBR, the Chancellor George Osborne waded in and slapped down his ‘independent’ Chairman.
All in all, the murky forecasts that had been the forte of the Treasury for generations have been maintained with the OBR. It hardly helps that the OBR has adopted a particularly bureaucratic language for discussing day to day issues. Employment has been renamed ‘Labour market participation rate’. ‘Participation’ gives the aura of someone choosing to take part and suggests that those who have jobs have chosen to take employment. The inference then is that those without jobs have chosen not to take part. Of course, its not what the OBR intend but it demonstrates that using dry, arid officialese does not fill the general public with hope that forecasts are transparent.
Likewise its first Briefing Paper (No. 1) in January 2011, did not disappoint in being stuffed full of incomprehensive jargon such as:-
‘1.13 Forecasts for specific receipts components do not take into account the revenue consequences of tax litigation cases until HMRC have decided to make payments to the litigants, at which point the best central estimate of repayments is incorporated into the forecast.’
The OBR forecasts have been called into question with an announcement that it expects a growth rate of 2.1% whilst the OECD predicts just 1.7% for the UK in 2011. With the trade gap widening, it suggests that the Government cannot rely on the accuracy of its growth figures.
In short, whilst the principle of independent and trustworthy forecasts are to be welcomed, the OBR has hardly got off to a flying start in demonstrating that very independence that it craves.
Over the next six years tax receipts will rocket from £490bn to £699bn providing the exchequer with £209bn of increased revenue to pay down the deficit. On the other hand public sector expenditure will rise from £669bn to £752bn, an uplift of just £83bn. This sound like a lot of money but given the real rate of inflation within the NHS and local Government to provide care services to the elderly, it has one effect: cuts.
It has been suggested that in England and Wales alone, 37,000 Council jobs will be axed including 6,000 in Lancashire, 3,000 in Leeds, 2,400 in Shropshire and 2,000 in Sheffield. But this pales into comparison of the running total of ‘at risk’ council jobs which now total 150,000.
Fears of 2,400 Shropshire Council jobs axe
Shropshire County Council - Shropshire Star
Time will tell as to exactly how savage the job losses in the public and private sector will be over the next few years but it is clear that the Government is absolutely determined to bring down the deficit rapidly and it will be the those in the public sector and those on benefits who will bear the brunt of the biggest savings. The pain is coming thick and fast and Cameron admits it will a ‘difficult year’ in 2011.  
David Cameron warns 2011 will be a 'difficult year' (Reuters)
After the demonstrations and riots over tuition fees last year, the job cuts will start to seriously bite this year. No amount of excuses and crocodile tears from the Tory Prime Minister and his Lib Dem fan club will assuage the devastating consequences to men and women losing their jobs.

1 comment:

  1. I’ve been visiting your blog for a while now and I always find a gem in your new posts. Thanks for sharing!


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