By Maximilian Clarke
The government’s tough fiscal stance has helped maintain low costs of borrowing, allowing the Bank of England to support the UK economy through increase quantitative easing.
But this has come at the expense of rapid job losses from the public sector, resulting in an acute labour crisis with employment insecurity severely affecting consumer confidence. These are the main findings from PwC’s Spending Review: One year on report.
Until June 2011, job growth in the private sector- at 600,000- far outstripped public sector losses- at 290,000. This pattern, however, has since been reversed as the rate of public sector losses accelerates.
“This year has seen considerable turmoil in the world economy and in financial markets, leading to significantly slower UK growth than had been expected a year ago. This may have been amplified by public sector job cuts coming through much more quickly than projected, particularly in the English local authorities. On the other hand, the government’s tough fiscal stance has helped to keep the UK cost of borrowing very low and has left room for the Bank of England to announce another £75 billion of additional quantitative easing to help support the economy.
"Another piece of good news is that private sector employment, at least until March 2011, had risen to more than offset public sector job losses. However, it should be noted that the Labour Force Survey data on private sector job gains shows these to have been disproportionately in part-time employment since 2009, with average hours worked in the economy having gone down to only just over 31 hours a week in the second quarter of 2011, the lowest level since the series began in 1995. Trends in full-time equivalent employment have therefore been less favourable during the last couple of years than suggested by the total employment numbers.
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