Scotland’s Independent Budget Review forecasts greater job losses than the OBR
The findings of Scotland’s Independent Budget Review have been published. The full report states that the June Budget’s implications for Scotland will have “significant knock-on effects for output and employment across the Scottish economy, in both the public and private sectors”, an assertion that is based on economic forecasts that have been carried out by the Department of Economics in Strathclyde University.
The forecasts model two scenarios. In the first simulation there are:
up to 126,000 economy wide job losses by 2014-15 comprising up to 90,000 in the public sector and 37,000 private sector job losses
and in the second
the shock will reduce jobs in the public sector by the slightly lower number of just under 78,000 while private sector employment rises by nearly 14,000. The overall job loss is thus just above 64,000…there is a ‘crowding in’ effect on the private sector, but it is insufficient to offset the loss of activity in the public sector.
Interestingly, even the more optimistic forecast is at odds with the OBR – who, over the same period, project that nationally 2 million private sector jobs will be created. Of course, it is feasible that both forecasts are accurate – but in this case the level of private sector job creation across England, Wales and Northern Ireland would have to be even greater than the OBR’s existing 2 million jobs target. And the Strathclyde forecast does seem to be more comprehensive, modelling, for example, change by industrial sector not just top line job levels (as per the OBR).
Scotland’s forecasts therefore point to an unsettling picture of the economic recovery – where in five years areas of the country with a high dependence on public sector employment will still have failed to recover from the recession, will have even higher unemployment rates than they do at present and will have seen little new job creation.