Responding to the CIPD’s claim of 1.6 million job losses on the horizon, Graeme Leach, chief economist and director of policy at the IoD, said: "The CIPD’s gloom and doom about the spending review ignores key facts. Taking ‘soundings from public sector managers’ is not a substitute for economic research.
"The Lamont-Clarke fiscal squeeze in the 1990s resulted in 600,000 public- sector job losses but this did not prevent the longest expansion on record from becoming established. The Brown spending squeeze at the end of the 1990s coincided with one of the fastest periods of GDP growth in the past 20 years. The spending squeeze under the first two years of the coalition is actually less than under the first two years of New Labour. The CIPD’s analysis is alarmist and risks talking ourselves into a double-dip recession.
"The UK economy faces a difficult period over the coming years, but if the Government holds firm with the implementation of the spending review, long-term growth and employment prospects will be significantly improved. However, if the coalition wobbles and the spending review begins to unravel, long-term economic prospects will be very poor.
"This is why it is so dangerous for the CIPD to make headline-grabbing forecasts which are based on little more than a guess. Nobody can be sure what the future holds, but recent economic history suggests projections of 1.6 million job losses are hopelessly inaccurate. We should remember that the private sector was able to create 300,000 jobs in the latest quarter alone."
In a recent survey of 1,500 IoD members, 86% said that current levels of public-sector spending need to be reduced, 72% said that significant cuts should start in 2010, and 71% said that addressing the deficit was the top priority of the new Government in its first 100 days.
In a survey of 640 IoD members conducted immediately after the June emergency Budget, which set the Government’s overall deficit reduction strategy, 83% felt that the emergency Budget would have a positive impact on the UK economy
But in response to the criticism, John Philpott, chief economic adviser at the CIPD, said: "Our labour market predictions are based on analysis of the experiences and detailed predictions of our 135,000 members, drawn in particular from our respected Labour Market Outlook quarterly survey, extensive analysis of published data, and a good measure of experience. The IoD appears to be relying instead on a hope that the past, when economic circumstances were very different, may repeat itself in the future.
"We can all agree that we hope job creation will outstrip job losses in the coming years. But hope is not sufficient if it is your P45 or your unsuccessful job search we are talking about. Our analysis of real world data from organisations operating across the private and public sectors is intended to give policymakers a fighting chance of preparing the policy responses necessary to maximise growth and minimise the impact of rising unemployment on individuals and communities. The IoD is entitled to disagree and correct to conclude that no one knows for sure what the future holds. But it is in the interests of employers and jobseekers alike that we all work together, taking care to ensure our opinions do not get in the way of our collective efforts to assist policymakers in making the right decisions."
