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28.11.11

Public sector cuts underestimated

Job cuts in the public sector are expected to be higher than originally predicted, the Ernst and Young ITEM club suggests.

The Office for Budget Responsibility (OBR) is set to increase its prediction from 400,000 in March to 500,000 when it delivers its Economic and Fiscal Outlook report on Tuesday. The number of general Government jobs lost in 2011/12 is already at 147,000, much higher than the predicted 20,000.

The Ernst and Young ITEM club uses the same economic model to make predictions as the OBR and the Treasury. The forecaster said this means it is “in an unrivalled position to test whether Government claims are consistent and whether its forecasts are credible”.

Andrew Goodwin, senior economic adviser to the Ernst and Young ITEM Club, said: “With the OBR set to deliver one of their gloomiest forecasts to date, and the eurozone crisis adding to the economic instability, we're unlikely to see any big giveaways on Tuesday.”

He added that “the pressure will be on for the chancellor to use any wiggle room available to help boost the UK's economic prospects”.

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