Our general government employment (GGE) forecast is based on projections of the growth of the total government paybill and paybill per head, which is in turn based on the Government's latest spending plans. In this box we compared our GGE forecast against the outturn data since the start of the 2010 Spending Review period. This allowed some assessment of how public sector employers were progressing with their intended workforce reduction and how much adjustment would still be required.
Our projection of general government employment (GGE) is built up from projections of the growth of total government paybill and paybill per head. We use these projections to estimate the total decline in GGE over the forecast horizon and then make a stylized assumption that employment falls at a constant rate to that end-point from the latest outturn data. We have taken the same approach here as we did in our November EFO.
Our latest projection takes on board expenditure projections and new data on average earnings and workforce reductions to date in 2011-12:
- In November we projected a 710,000 fall in general government employment between the start of 2011 and the start of 2017.
- Our latest forecast suggests that there will be slightly less departmental spending and therefore less money available to pay government employees at the start of 2017 than we thought in November. Other things being equal, this would reduce GGE by a further 30,000 in 2017 relative to our projection in November.
- This revision is partially offset by the fact that government employees are expected to be slightly cheaper in 2017 than we thought in November. The latest data suggest that average earnings have grown by only around 1.4 per cent a year so far in 2011-12, compared to an estimate of 1.6 per cent at the time of our November forecast. So we have revised down our estimate of paybill per head growth this year from 2 to 1.8 per cent. Other things being equal, the resulting downward revision to the expected level of paybill per head in 2017 would increase GGE by around 10,000;a
- The net effect of these two changes is that we have increased the projected fall in GGE between the start of 2011 and the start of 2017 to around 730,000. The latest outturn data imply that GGE fell at an average rate of just over 80,000 per quarter between the first and third quarters of 2011, which implies an average fall of just under 30,000 per quarter over the remainder of the period. This is consistent with anecdotal evidence that many public sector employers are attempting to frontload employment reductions.
This box was originally published in Economic and fiscal outlook – March 2012