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The public sector is having a good recession — but this is about to change as both Labour and the Tories sharpen the knife to slash the ballooning level of Government debt.
Figures published tomorrow will show that unemployment increased for a 19th consecutive month in September and reveal where the axe is falling.
And it will come as no surprise that the private sector is bearing the brunt of the pain while the public sector continues to expand.
The most recent figures last month showed that private sector employment has plunged by 889,000 to 22.9 million in the past year while the public sector workforce has grown by 289,000 to just over six million. Similarly, private sector pay excluding bonuses is up just 1.4% on a year ago while public sector pay is up 3%. Including bonuses, or a lack of them for many, despite the “business as usual” activities of some in the City, private sector pay is up just 0.6% while public sector pay is 2.5% higher. Tomorrow's figures are likely to show that trend continuing.
So even before gold-plated pensions are considered, public sector workers have had a good 12 months compared with their private sector counterparts.But they are about the start sharing the pain, whoever wins the general election. Chancellor Alistair Darling wants to freeze pay for 40,000 senior public servants including judges, senior NHS managers and GPs. About 700,000 middle-ranking public servants, including doctors, dentists and prison officers will get a rise of less than 1%.
Shadow chancellor George Osborne went even further. He said a Conservative Government would freeze the pay of five million public sector workers in 2011. All but the armed forces and the lowest paid one million (those earning under £18,000 a year) would be hit.
There will also be job cuts, and these could be particularly savage under the Tories. Shadow defence secretary Liam Fox is lining up 25% cuts at the Ministry of Defence and these will no doubt be replicated across other departments to the outrage of staff and unions. Public sector workers argue they should not pay the price for a crisis started by greedy bankers in the private sector and sabre rattling union leaders are warning of mass strikes.
But millions of workers in the private sector are already paying the price, even though they too have little connection with the City and played no part in the banking crisis. Firms across the country, from hotels to hairdressers, restaurants to publishers, car dealerships to airlines, are going bust, shedding staff, freezing or cutting pay. The jobs crisis is sweeping through the economy and the public sector is next in line.
But amid the threat of job cuts and pay freezes for civil servants, there is another potential crisis brewing.
Inflation is not falling as far or as fast as expected and economists are now warning that rising inflation rather than a bout of deflation is on the cards next year. Freezing or cutting pay is tough when inflation is falling, but it is even tougher when it is rising. Whichever party is in Government, the battle with the public sector could be bloody.
