Treasury puts spin on jobs cull

SOME City economists are cheekily asking about Gordon Brown's provisions for redundancy payments.

The Chancellor last week promised to axe 40,000 civil service jobs. The Centre for Economics and Business Research, a think tank, notes a private company would have to set aside perhaps £1.2bn to pay for such layoffs.

The Treasury protests that the cuts are expected from (uncertain) 'natural wastage' and from 'redeployment'. The latter may improve public services but is not really a cut.

Some in the Square Mile suspect the promised headcount reduction may resemble British Airways' old policy before 2001. The airline annually promised job cuts, only then to report rising headcount.

Its explanation? Staff numbers would have risen even further, but for the 'cuts'.

Some state jobs can appear to vanish through contracting out. Beneficiaries include recruitment agency PRG, which hires out 5,500 temporary teachers and 10,700 doctors to the public sector.

It plans to float on Aim valued at £30m, raising £10m. Profits should rise 120% this year to £2m pretax. Gross margins are 20%.

The ITEM Club think tank fears the Chancellor may have to raise taxes over the next two years. This echoes the analysis from the rival Institute for Fiscal Studies.

ITEM also sees interest rates topping 5% within a year.