What will spending cuts mean for the West Midlands?

Tomorrow sees the long awaited publication of the government’s Comprehensive Spending Review. It will end months of speculation by setting up where the cuts in government spending will fall and how deep they will be. But what might it all mean for the West Midlands?

To try and answer this question, the Observatory has carried out a number of pieces of work over the last few weeks. These are summarised in a new report published today.  Amongst its findings are that:

  • An estimated £43 billion as spent on public services in the West Midlands in 2008-09 and the public sector employed nearly half a million people
  • More than 80,000 public service jobs could be lost in the West Midlands by 2016
  • Up to 300,000 private sector jobs are at risk due to spending cuts, although actual job losses will be lower than that
  • The places which will be hardest hit in the short term are those with concentrations of public sector jobs, such as Birmingham, Bromsgrove, Dudley, Shrewsbury, Stafford, Wolverhampton and Worcester
  • In the longer term, some of these places are likely to recover well, but others will continue to suffer because they have weaker economies. Places most vulnerable in the longer term include Birmingham, Dudley, Sandwell, Stoke-on-Trent, Walsall, Wolverhampton and Wyre Forest (Kidderminster)

The report draws on information from a number of other reports published by the Observatory in recent weeks. These include a briefing paper on the local impact of public sector job cuts, a series of projections based on our Policy Assessment Model and a report identifying locations vulnerable to cuts in public sector spending.

Local impact of public sector job cuts featured on BBC Politics Show

Andy Phillips interviewed for BBC Politics Show

In advance of the government’s spending review announcement on Wednesday 20 October, the BBC Politics Show West Midlands discussed the impact of public sector job losses in the West Midlands.

They interviewed Andy Phillips, Head of Skills Research at the Observatory, and featured our recent briefing paper which examines the local impact of public sector job cuts (pdf, 351kb).

The story is available to watch on the BBC iPlayer for the next six days.

West Midlands particularly vulnerable to public sector job cuts

Public sector employment has grown significantly in recent years across the UK and has been the key driver of the economy’s expansion. But proposals announced by the government to make £83bn worth of cuts in public sector spending are forecast to lead to the loss of up to 600,000 public sector jobs across the UK over the next 6 years, according to a study1 by Oxford Economics.

The West Midlands economy is particularly vulnerable to the impact of the cuts. Between 1998 and 2008 (latest available figures), the West Midlands saw the most significant increase in dependence on public sector employment in the country2.

The share of jobs accounted for by the public sector increased from 22% in 1998 to 27% in 2008, a rise of 5 percentage points, bringing total public sector employment to some 637,000.

We forecast that between 2010 and 2016 there will be a net loss of nearly 50,000 jobs across the West Midlands and, based on the ratio of the number of private sector jobs dependent on public sector spending and the associated supply chain nationally, a further 310,000 jobs are at risk at private sector firms directly or indirectly reliant on public sector spending3.

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Innovating in the public sector

Speaking at the Observatory’s innovation workshop, Prof. Adrian Cole from Birmingham City University outlined that the processes and drivers which enable innovation within the public and private (commercial) sectors have significant differences.

Adrian recognised that, while within the UK there has been a strong tradition of public sector innovation both at national and regional levels, some key challenges remain that need to be addressed in order to accelerate the innovation performance within the public sector.

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Growth in West Midlands public sector employment highlighted by report

FTIn recent days, the findings of a report by the Financial Times into the distribution of employment between the Public and Private Sectors, with particular reference to the West Midlands, has been further commented on in reports by a number of other national papers.

The primary findings of the report were that between 1998 and 2006, 1.3 million of the 2.2 million jobs created in the UK (hence approximately 60%) were in the Public Sector.

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