Hundreds of thousand of public sector workers face the axe after leaked papers revealed George Osborne's emergency Budget will cost 1.3 million jobs over the next six years.
Job losses in the public sector are expected by the Office of Budget Responsibility (OBR) to total more than 600,000 by 2016 as massive spending cuts are imposed in a bid to cut the UK's record deficit.
The OBR rushed out its calculations a day early after leaked figures appeared to show the Treasury expected unemployment to rise by over a million because of the austerity measures.
The unpublished papers also predict that the cuts will lead to the loss of another 700,000 positions in the private sector by 2015 as the cutbacks bite, robbing private firms of Government contracts and the knock on effects of higher spending.
Clashes over the impact on jobs dominated exchanges at Commons question time, where acting Labour leader Harriet Harman warned of 'abject misery' in the jobs market.
The good news for the Chancellor is that the Treasury estimate that by tackling Britain’s record budget deficit, the Government will reassure the financial markets, keep interests rates low and enable the private sector to create 2.5 million jobs over the next five years.
That will more than outweigh the loss of jobs caused by the spending cuts – allowing the number of people in work to rise from 28.8 million this year to 20.1 million in 2015.
But if more than a million posts are lost in the meantime, it is likely to fuel public discontent and union militancy against the Government.
The major danger for the coalition is that the job losses will be most severe in areas of the country, in the North, which are most reliant on the state for jobs and investment – and that private sector firms in those areas will be hard hit as well.
One slide from an internal Budget presentation leaked to the left-wing Guardian newspaper reads: ‘100-120,000 public sector jobs and 120-140,000 private sector jobs assumed to be lost per annum for five years through cuts’.
The estimates suggest at least 2,000 jobs a week are to go from the public sector and up to 2,800 a week from the private sector as a direct result of what the Government admits is the toughest tightening since the Second World War.
The Chancellor has stressed that the Government will reduce the number of public sector workers as far as possible by not filling vacant posts, rather than laying off workers.
But the internal documents may explain Mr Osborne’s reluctance last week to detail the likely effects of his Budget on employment.
The leaking of such an explosive document will be of great concern to the Chancellor since it suggests Labour sympathisers in the civil service want to sabotage the coalition’s economic policies and drive a wedge between Tories and Liberal Democrats.
Senior Labour figures are already trying to persuade Lib Dem left-wingers – uneasy at the rise in VAT and Tory plans to slash benefits – to rebel against their leader Nick Clegg or switch parties.
Shadow Chancellor Alistair Darling leapt on the findings in the Treasury documents.
He said: 'Far from being open and honest, as George Osborne put it, he failed to tell the country there would be very substantial job losses as a result of his budget'.
‘The Tories did not have to take these measures. They chose to take them. They are not only a real risk to the recovery but hundreds of thousands of people will pay the price for the poor judgement of the Conservatives, fully supported by the Liberal Democrats’.
With union bosses already predicting nationwide strikes, The TUC general secretary, Brendan Barber, warned of ‘dole queues comparable to the 1980s, a new deep north-south divide and widespread poverty’.
He said: ‘With Treasury figures revealing that spending cuts will hit private sector jobs harder than those in the public sector, it is absurd to think that the private sector will create 2.5m new jobs over the next five years’.
Sources close to Mr Osborne stressed that the leaked document only presented one side of the argument, by emphasising the jobs that would be lost and not the greater number that will be created.
Treasury officials pointed to estimates by the new independent Office of Budget Responsibility, which now draws up estimates for use by the Chancellor, which predict that unemployment will start to come down.
A spokesman said: ‘The OBR forecast unemployment to fall in every year and employment to rise’.
A Treasury source added: ‘The OBR is independent and has access to everything. Jobs are lost and created all the time. What matters is the total numbers.
‘Before the election all three major parties agreed that fewer people will be employed by the state. Alistair Darling is on record saying that there will be a reduction in public sector headcount’.
The Treasury figures are consistent with some already issued by industry groups. The Chartered Institute for Personnel and Development has estimated that there will be 725,000 jobs lost in the public sector alone by 2015.
But the group’s chief economist John Philpott last night questioned Mr Osborne’s hopes of achieving 2.5 million extra jobs in the private sector.
He said: ‘There is not a hope in hell's chance of this happening.
‘There would have to be extraordinarily strong private sector employment growth in a much less conducive economic environment than it was during the boom’.
