Anthony Painter

Though it seems like a likely excuse, the Greek crisis does actually focus minds on the sustainability of public debt- we are a safe haven now but if panic sets in, we could be caught. So self-serving as it may sound there is actually a good reason to start to demonstrate how the public deficit will be grappled with. Labour’s argument during the election that to cut too early would jeopardise the recovery was true in part. At the end of the day though we were talking about £6billion and a few months difference so the parties’ plans were not enormously apart.

However, if you are going to start cutting now- while the recovery is fragile- it makes sense to do so in a way that doesn’t have a large impact on that recovery. Just in the cuts to the Future Jobs Fund and the freeze of civil service recruitment alone these measures announced this morning could destroy 75,000 jobs. Jim Knight MP predicts that 44,000 jobs will go from the cut to Future Jobs Fund (a major reason why not as many jobs were destroyed in this recession as were in previous recessions with the beneficial impact on public balances that has.) And Laura Kuenssberg has tweeted that 31,000 civil service jobs were replaced last year with the implication being that a recruitment freeze actually is a loss of a similar number.

There will be other indirect job losses from these measures also.

The real question though is why are these £6billion cuts necessary? It isn’t actually to reduce the public debt over and above Labour’s plans at all as George Osborne seems to want us to believe. It is to reverse a planned rise in employers’ national insurance next year and reducing the impact for employees. So it is actually about replacing tax increases with public expenditure cuts- zero sum in other words. And actually, given the job losses that will come as a result of these measures, it could well leave the public finances in a worse state- lower growth and reduced tax revenues. If that is the case then these measures will prove to be negative sum. What this means is that the really deep cuts when they come- and they must- will have to be even deeper.

Of course, the Tories characterised Labour’s national insurance rise as a ‘jobs tax’ without really ever providing evidence that it was so. In fact the evidence is hotly contested as Chris Dillow has argued by drawing on the Swedish and Finnish cases. The argument is basically that if you increase- even marginally- the cost of employment then that destroys jobs. The same logic was applied by those who opposed the minimum wage. It is inconclusive at best and deeply unconvincing at worst.

So effectively, what the coalition has done is to replace potential though highly uncertain job losses with sure fire job losses with either no impact or negative impact on the public finances. This strikes me as a strange exchange.