CIPD/IoD face off

IT’S handbags at dawn between the Chartered Institute of Personnel Development (CIPD) and the Institute of Directors (IoD). It’s hard to say how much the claims and counter claims are helping people understand what needs to be done to save the world, but it makes for interesting reading from the sidelines.

Doing its bit to add to the confusion, Peterborough Business is publishing the bickering unedited in the order it receives the statements, starting with an announcement from the CIPD on November 1, which was embargoed until November 2. Enjoy.

CIPD estimates 1.6 million extra private sector jobs needed by 2015-16 simply to offset full impact of Coalition Government’s spending cuts and VAT rise

Cuts in public spending announced in last month’s Comprehensive Spending Review (CSR) and the rise in the standard rate of VAT to 20% due in January 2011 will result in the loss of almost 1.6 million jobs across the UK economy by 2015-16, with the private sector hit harder than the public sector, according to estimates released today by the Chartered Institute of Personnel and Development (CIPD).

Dr John Philpott, Chief Economic Adviser at the Chartered Institute of Personnel and Development (CIPD)  – who will be among a number of expert witnesses giving oral evidence this morning to the House of Commons Treasury Select Committee on the consequences of the CSR – says that the coalition government’s overall policy measures to increase economic growth will have to help boost net private sector job creation overall by an average of 320,000 each year by 2015-16 simply to keep unemployment broadly stable at around 2.5 million.

Dr Philpott continues: “The full impact of the coalition government’s planned fiscal tightening has been understated following publication of the CSR. The 490,000 public sector job losses cited in the CSR (based on initial estimates by the Office for Budget Responsibility) itself looks like an underestimate given what most public sector managers are telling the CIPD but in any case excludes around 50,000 public sector job cuts likely to fall in the current financial year (2010-11) and 120,000 in 2015-16. Similarly, available independent estimates of the direct impact of public spending cuts on jobs in the private sector do not make sufficient allowance for the negative indirect demand effects on businesses. And, crucially, private sector jobs will also be adversely affected by the forthcoming sharp hike in the standard rate of VAT from 17.5% to 20%.

“The CIPD estimate, based on soundings from public sector managers, is that from the end of 2009-10 to 2015-16 the public sector will shed a total of 725,000 jobs (a net reduction of 12.5%). The combined direct and indirect effect of public spending cuts will result in the loss of 650,000 private sector jobs. And the rise in the standard rate of VAT to 20% will result in the loss of a further 250,000 private sector jobs, as reduced demand for many goods and services hits company revenues and profits. Ironically, the VAT hike will prove a far more significant ‘tax on jobs’ than the hike in employers’ National Insurance contributions the former Labour Government planned to introduce in April 2011 (which the CIPD estimates would have cost 75,000 jobs by 2015-16) but which was wisely abandoned by the coalition.”

Adding these separate estimates together shows that the overall toll of job losses (1.6 million) set to result from the coalition government’s austerity measures falls more heavily on the private sector (0.9 million) than on the public sector (0.7 million). Indeed, the estimated hit on private sector jobs due to the fiscal austerity is almost identical to the net fall in private sector employment during the recession between spring 2008 and winter 2009.

Dr Philpott comments further: “On these estimates 1.6 million lost jobs looks to be the total employment cost of the coalition government’s fiscal austerity measures. The test of the coalition’s overall strategy for balancing the public finances and restoring sustainable economic growth will be how quickly and by how much job loss on this scale is offset by net new job creation in the private sector as a whole. The CIPD considers the private sector perfectly capable of adding more than 300,000 net new jobs per year by 2015-16 if the economy grows faster than 2.5% per year on average.But given the headwinds facing both the global and UK economy this looks like a tall order, especially prior to 2013, and consequently unemployment is likely to rise throughout 2011 and much of 2012. If the coalition government completes its planned fiscal consolidation with unemployment no higher in 2015-16 than it is today it will have made a significant achievement. But the question ‘where will the new jobs come from?’ is bound to be asked for quite some time yet.”

The IoD responded with this on November 2:

CIPD gloom and doom is wrong, says IoD

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 Institute of Directors, 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 last 20 years. The spending squeeze under the first 2 years of the Coalition is actually less than under the first 2 years of New Labour! The CIPD’s analysis is alarmist and risks talking ourselves into a double-dip recession.

He added: “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.”

IoD members strongly support immediate public spending cut, and took this view before the general election.

In a survey of 1,500 IoD members (conducted from 26 February until 4 March 2010):

·       86 per cent said that current levels of public sector spending need to be reduced.
·       72 per cent said that significant cuts should start in 2010.
·       71 per cent 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

And by 3pm on November 2, the CIPD were back with this:

CIPD responds to IoD criticism of labour market predictions

In response to the Institute of Director’s (IoD) criticism of the Chartered Institute of Personnel and Development’s (CIPD) prediction that cuts in public spending and the rise in the standard rate of VAT to 20% will result in the loss of almost 1.6 million jobs across the UK economy by 2015-16, Dr John Philpott, Chief Economic Adviser says: “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 appear 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 are 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.”

At least we know the press officers are being kept busy – ed.