From the TUC

OECD’s backing of UK cuts is ill-advised and inconsistent

29 Oct 2010, by in International

Last week, the OECD’s Secretary General, Angel Gurría, issued a statement on the UK’s Comprehensive Spending Review, calling it “courageous”, “a necessary step to achieving long-term  fiscal stability” and “the best way to secure better public finances and bolster future growth”. At TUAC, we think his quotes are both ill-advised and inconsistent with the OECD’s stated objective of prioritizing job growth coming out of the crisis.

TUAC (the Trade Union Advisory Committee to the Organisation for Economic Co-operation and Development to use our full name) is an international union organisation, with consultative status to the OECD and its different committees. We exist to help the OECD balance the interests of global markets with an effective social dimension, and we think this is one of those occasions where the balance is distinctly off.

Supporting the UK cuts is inconsistent for the OECD, as only last month, the Organisation was warning that interim growth forecasts for the G7 economies for the end of 2010 had fallen from a projected 2.5% in May to 1.5% in September and that, if continued, this trend could provide grounds for postponing fiscal consolidation.

In the UK, the estimates of faster-than-expected GDP growth for the second and third quarters of 2010 are more due to the previous government’s stimulus measures, rather than the current government’s austerity programmes.

In June, the OECD’s Employment Outlook suggested the UK would need to create 780,000 new jobs to get back to pre-crisis employment rates. Taking account of expected labour force growth, this would mean more than 2 million new jobs over the next five years.

The UK Office of Budget Responsibility estimates 490,000 public sector job will be list through cuts over the next five years, and estimates from PwC forecast a further half million jobs lost in the private sector through knock-on effects.

Looking back to the 1993-1999 recovery, the UK created 1.2 million private sector jobs – but three quarters of these were in financial and business services. In the context of austerity measures in a post-crisis economy, any expectation that the UK can expand the number of jobs in the private sector on the required scale over the next five years is simply illusory.

And OECD support for UK cuts is ill-advised, as the cuts also risk exacerbating the growing levels of inequality. We share the TUC’s concerns that the UK government’s strategy of massive cuts in public expenditure will in all likelihood leave unemployment at unacceptably high levels, lead to increased inequality, and in turn will risk tipping the economy back into recession.

TUAC believes that the UK should tackle its deficit by attempting to create self-sustaining growth and raising alternative revenues, including a Financial Transaction Tax.

And we believe the OECD should direct its efforts at the pressing task of developing a post crisis model of growth that puts “quality employment at the heart of the recovery” as called for by the G20 Leaders at the Pittsburgh Summit a year ago.

GUEST POST: John Evans is General Secretary of the Paris-based Trade Union Advisory Committee to the OECD (TUAC). Prior to joining TUAC, John has worked as Research Officer at the European Trade Union Institute (ETUI), Industry Secretary at the International Federation of Commercial, Clerical and Technical Employees (FIET) and Economist in the Economic Department of the TUC. He is currently a member of the Board of the Global Reporting Initiative, and member of the Helsinki Group.

TUAC was founded in 1948, and following the creation of the OECD, it was recognised as an independent body entitled to represent the views of trade unions with the OECD. It comprises 56 national trade union centres in OECD Member countries.

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