Public sector cuts in 2010 with unemployment and debt problems rising

Experts predict that public sector budgets will be cut and that the rate of unemployment will continue to rise throughout 2010, resulting in further debt problems for those affected.

Public sector budgets expected to be cut in 2010

According to a report by the Chartered Institute of Personnel and Development (CIPD), unemployment will carry on increasing for the first few months of the New Year, rising to around 2.8 million in the summer.

The group warned that companies are set to raise productivity and reduce labour costs, leading to “tough times” ahead for UK workplaces.

The report also estimated that around a quarter of a million more people will be out of work by the end of June 2010.

Forecasting a continued squeeze on pay rises next year, the CIPD’s chief economic adviser, Dr John Philpott, said: “This could be difficult to deliver following a recession during which many private sector employees have experienced pay freezes or pay cuts.

“A slower than expected recovery or stronger earnings growth would threaten to raise peak unemployment to at least three million.

“The impact on jobs of planned cuts in public spending and tax increases, especially the 1% hike in employers’ National Insurance Contributions from April 2011, is expected to be felt after the peak in unemployment.

“However, if employers were to anticipate the rise in NICs when making staffing decisions and/or there was a more immediate cut in public spending, which could be the case if the Conservatives gain power at the general election due in the first half of 2010, unemployment might peak at a higher rate than we currently forecast.”

Ivan Cooper, Chairman at debt management experts Chiltern, said: “As the number of public sector departments experience budget cuts and job down-sizing, more people could be affected by a reduction in their overall income – causing further strain on already overstretched household budgets.

“This could mean more people in need of impartial debt advice to ensure that they can maintain debt repayments throughout any period without working or with lower pay.”

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