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UK 300,000 Public Sector Job Cuts, Many Quangos to be Axed

Economics / UK Economy May 23, 2010 - 07:47 AM GMT

By: Mike_Shedlock

Economics

Best Financial Markets Analysis ArticleCheers to Austerity in the UK. Here is something the US needs to see twentyfold minimum: 300,000 jobs in public sector face the axe


AT least 300,000 Whitehall and other public sector workers may lose their jobs as the coalition government sets to work cutting the £156 billion budget deficit.

As George Osborne, the chancellor, prepares to unveil the first £6 billion of cuts tomorrow, the full scale of the job losses that will follow has begun to emerge.

The initial savings to be announced will target such items as civil servants’ perks, which include taxis, flights and hotel accommodation.

The package will also include a £513m cut in the budgets for quangos, with some being abolished altogether.

“The outgoing chief secretary [Liam Byrne] said it all, there is no money,” said a Treasury source. “There is no time either.”

Some estimates suggest that the number of job losses could reach 700,000. These will include tens of thousands of health service managers as well as many thousands of doctors and nurses, according to internal documents from the National Health Service.

Three out of the 10 strategic health authorities have disclosed that they will reduce their headcounts by a total of 30,132, an average of 8.7%. If these cuts were replicated nationwide, the total job losses would amount to 120,000.

A similar analysis of 75 local authorities suggests that at least 100,000 council workers across the country will lose their jobs.

Thousands of police officers and their civilian support staff will lose their posts, with the Metropolitan police alone forecasting 445 job cuts.

About 20,000 jobs will be lost at the Ministry of Defence as the department faces a demand to reduce its administrative costs by 25%. Ministry insiders say the cuts are set to hit military personnel, including some frontline soldiers.

Ministers have tried to insist that any public sector job losses would be mainly among the “penpushing” bureaucrats, but answers received under freedom of information requests suggest that a wide variety of different professions will be hit.

No Sacred Cows

The Times Online also stipulates No sacred cows as the cuts begin

Tomorrow George Osborne, the chancellor, will announce £6 billion of Whitehall efficiency savings, a taster for the draconian cuts that will come in the emergency budget on June 22 and the three-year spending review in the autumn. Only then will it start to become clear whether this government can go the full five years.

LAST week a succession of cabinet ministers trooped through the doors of the Treasury to meet David Laws, the Lib Dem chief secretary and the man in charge of overseeing the cuts to come. As they sat down in Laws’s first-floor office overlooking St James’s Park, the ministers were each given the first indication of the size of the reductions they would have to make in their budgets.

Some ministers emerged relieved from their talks with Laws, who yesterday described the choice facing the government as between “the unpalatable and the disastrous”.

Michael Gove’s schools budget is likely to be almost unscathed, although cuts will have to be made to other areas of spending under his control such as the SureStart centres for toddlers. Laws is a former Lib Dem education spokesman and is sympathetic to Gove’s goal of creating “free schools” run by parents, voluntary organisations or businesses.

Other ministers came out of their Treasury meetings crestfallen. Eric Pickles has been told that the £12 billion annual budget of his Department for Communities and Local Government will have to be cut by up to 20% in real terms over three years. For Pickles this will mean taking a lot of heat from angry local authority leaders, many of them Tories, who will have to prune services to stay within their budgets.

Also facing some tough choices will be Jeremy Hunt, the culture secretary. His department’s budget is one of the smallest in Whitehall, at about £5 billion, but it is likely to take a huge hit in percentage terms.

The Sunday Times has learnt that large IT suppliers such as IBM and Hewlett-Packard have been put on notice that they might be expected to reduce the value of their contracts by 20-30%.

Across all areas, 70 big suppliers to the government will be asked to renegotiate deals to find cost reductions.

Other areas that are likely to be cut are property costs and travel and consultancy budgets. There will also be a freeze on public sector recruitment.

A particular target will be quangos, which mushroomed under Labour. Ministers have been told to scrutinise those relating to their department and more than £500m in savings are expected to be identified this year. “Ones that are functional are okay, while ones that are bloated aren’t,” said one minister.

The Equality and Human Rights Commission, headed by Trevor Phillips, and the Environment Agency are expected to be told to slim down, as will the quangos that administer the national lottery.

In the longer term, there will be a Treasury purge of civil servants’ and ministers’ perks. Officials have found the government spends £125m a year on taxis, more than £320m on hotels and more than £70m on flights. On top of this is the £580m spent on office furniture, £1 billion on advertising and a further £700m on other marketing and media. All will be pruned back.

IBM and HP on Notice

Astute observers were particularly interested to learn "IT suppliers such as IBM and Hewlett-Packard have been put on notice that they might be expected to reduce the value of their contracts by 20-30%."

I find that excellent news. Wages and prices both need to drop so rampant outsourcing can stop.

What the Hell are Quangos?

Many inquiring minds noticed the word quango for the first time ever. They are asking What the hell are quangos? It's a good question. Wikipedia defines Quanago as follows.

Quango or qango is an acronym (variously spelt out as quasi non-governmental organisation, quasi-autonomous non-governmental organisation, and quasi-autonomous national government organisation) used notably in the United Kingdom, Ireland, Australia and elsewhere to label colloquially an organisation to which government has devolved power. In the United Kingdom the official term is "non-departmental public body" or NDPB.

The term has its origin in a humorous shortening of quasi-autonomous NGO, an ostensibly non-governmental organisation performing governmental functions, often in receipt of funding or other support from government,[1] while mainstream NGOs mostly get their donations or funds from the public and other organizations that support their cause. Numerous quangos were created from the 1980s onwards. Examples in the United Kingdom include those engaged in the regulation of various commercial and service sectors, such as the Water Services Regulation Authority.

That sounds surprisingly similar to US Government Sponsored Enterprises (GSEs) like Fannie Mae and Freddie Mac.

I commend the idea of eliminating all quangos. We need to do the same with GSEs.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2010 Mike Shedlock, All Rights Reserved.


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