Public sector pensions significantly better - for the higher paid

An estimated 20,000 fewer jobs will go in the public sector between now and 2015 than was previously estimated, according to the Office of Budget Responsibility (OBR).

Originally it was thought that 330,000 posts would be removed over the next four years but this has been whittled down to 310,000. The OBR has also said that over the same period 1m new jobs would be created and the total public sector workforce would be 5m.

The OBR feels that the biggest threat to public finances was that it could have overestimated the amount of ‘spare capacity’ in the economy. The so-called ‘output gap’ is estimated to be 3.9 per cent this year and 1.4 per cent in 2015 but if it was just 1.5 per cent smaller the government wouldn’t be able to meet its five-year public finance targets.

OBR head Robert Chote said: “Planning, it is reasonable to say, does have the potential to improve the productive capacity of the economy. But it will depend how it plays out. We need a strong evidence base to be confident that another number is more likely to be right. It doesn’t mean these policies aren’t worthwhile just because you can’t put a figure to them.”