The North needs more private sector jobs, not less in the public sector

While cuts are inevitable, there are ways to rebalance cuts towards those with the broadest shoulders. Public sector jobs are not the problem.

Graeme Henderson is a research fellow at IPPR North

In 2010 there was one public sector job in the North West for every 10 people there, the exact same ratio as in London. But last week Nick Clegg reported his delight that “we are making this transition from an over reliance in the North West on public sector employment“.

It has been a key message of the government that there is an over reliance of certain regions on public sector jobs: the implication being that such regions, including those in the North of England, have far more than their fair share. Yet this is simply not true – the problem is a lack of private sector jobs.

Per person the North of England has a similar number of public sector jobs to London (both with approximately 9 per cent of the population in public sector employment jobs).

IPPR graph

Source: ONS 2013

This matters because recent reports suggest that the chancellor is facing considerable resistance from his cabinet colleagues in implementing his proposed £11.5 billion of additional cuts with them so far only being able to muster £2.5 billion – the ‘low-hanging fruit’ have gone.

The danger is that this will translate into further job cuts and office closures in the regions in the name of not just balancing the books but also rebalancing the geographic spread of the public sector.

Of course there is variation between regions in the proportion of the total workforce in public sector jobs (varying from 16.5 per cent in the South East to 23 per cent in the North East – still not a huge difference) but this is a result of differences in the number of private sector jobs per head. Public sector jobs per head are reasonably uniform across the English regions (varying between 8 per cent and 10 per cent).

The North would require well over a million additional jobs to get to London’s level of private sector jobs per head whereas London would only need around 32,000 public sector jobs to replicate the North’s per head level of public sector workforce.

This focus on proportion of the workforce within the public sector is unhelpful. Studies have persuasively argued that public sector employment has no identifiable effect on total private sector employment. It is near impossible for many of the less affluent areas in the UK to return to growth when so much of government activity is pulling them back, not least the uneven local authority cuts.

Disproportionately targeting public sector job cuts in these areas will just exacerbate the problem. IPPR North will be analysing the 2013 Spending Review’s regional impact and we await with bated breath that it will not all be doom and gloom.

The Forgotten North needs more private sector jobs, not less in the public sector. In an economic downturn, this can’t possible be helped by cutting back public sector jobs and the consumption they create but rather through investment in skills, transport links and innovation.

IPPR graph 2

Source: HM Treasury, PESA 2012

We should rebalance the economy away from the financial sector, and we should rebalance public spending between regions on economic accelerators such as infrastructure and innovation (see the graphs above). While cuts are inevitable, there are ways to rebalance cuts towards those with the broadest shoulders. But the spread of public sector jobs is just fine.

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