The government has cautioned that reducing the public sector workforce would likely only increase unemployment benefit spending.
Responding to an Economic Policy Review Committee report on fiscal sustainability, the Council of Ministers said the Committee “does not account for the financial or social consequences of reductions in public-sector employment, including the likelihood that Government would need to fund increased unemployment benefits”.
The response challenges the Committee’s assertion that the public sector threatens or competes with private employers, stating there is no evidence to support claims of “crowding out”.
“The Report cites vacancies, unemployment, headcount and pay differentials, but does not isolate causation or consider alternative drivers,” the Council said.
It pointed to current recruitment challenges in specialist areas such as audit and tax, arguing these “indicate that the private sector may in fact benefit from mobility out of government, rather than being constrained by it”.
Chief Minister Alf Cannan welcomed the Committee’s scrutiny but noted “some of the headline observations would benefit from further supporting evidence and a fuller reflection of operational realities”.
However, ministers’ response does appear to show a lack of government confidence in the island’s economy by suggesting that if it were to cut civil service numbers, people would be unable to find jobs in the private sector.