‘Austerity measures bad for business’

The government's deficit reduction measures will stall recovery resulting in a post-recession peak of nearly 3 million unemployed, an industry body has warned.

In a speech later today John Philpott, chief economic adviser at the Chartered Institute for Personnel and Development (CIPD) will argue that deficit reduction will slow an already anaemic recovery: ‘In the short-run [it will] be bad for jobs in both the private and public sectors, stalling any hopes of a sustained improvement in job prospects this year and causing the labour market to relapse next year.’

Jonathan Straight, founder of eponymous recyclable bins company has grown his business using public sector contracts, but says the deficit reduction strategy will not affect him. ‘The cuts are about reducing waste and that’s something we are in favour of. Having dealt very closely with [the public sector] we are aware that it is not as efficient it could be.

‘I think the realisation that this is everyone’s problem is good. Tax increases are a necessary part of that. But it’s right that capital gains tax increases shouldn’t be applied to entrepreneurial business. If people haven’t taken a risk, then they should be taxed a reasonable amount.’

Howard Archer, chief UK & European economist at financial analysis firm IHS Global Insight, is predicting that consumer spending will remain limited for some time. He says consumer caution is ‘about to be intensified by the looming major fiscal squeeze which the government is making clear will affect everyone.’

The CIPD has revised its unemployment forecast to reach 2.95 million in the second half of 2012.

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