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Comprehensive Spending Review: Job cuts 'will create new North/South divide'

The Government says that the private sector will be able to pick up the slack created by the 490,000 job cuts that George Osborne announced yesterday, but the measures will have a disproportionate impact on those cities and regions, such as Blackpool, Liverpool, Doncaster and Plymouth, that have the weakest private sectors, according to The Work Foundation.

Neil Lee, senior economist at The Work Foundation, said: "The public sector is not just an employer - it provides services and is an important customer for local businesses. Cutting public spending will have knock-on effects on private sector employment, and this will be worse in areas with weaker economies."

Ed Cox, director of the Institute of Public Policy Research North, agreed: "The severity and speed of the cuts threatens the recovery in Northern England which was hardest hit by the recession and is still struggling to recover," he said. With so many jobs in the North reliant on the public sector, fast and deep cuts risk a sudden surge in unemployment and a leap in the welfare bill."

TUC general secretary Brendan Barber added: "Public sector job losses are likely to occur in some of the UK's more depressed regions where private sector job creation is already extremely poor. Job losses will depress local economies even further - and the cycle of decline has a good chance of bringing back the deep North/South divides of the 1980s."

The warnings echo the findings of a report published by thinktank Centre for Cities in June, which warned that there are not enough private sector job opportunities to cushion the blow of the cutback on public sector employment.

To ensure areas dependent on public sector jobs can survive, The Work Foundation says:

•Access to capital must be strengthened in public-sector-dependent regions - particularly less successful cities.
•Welfare to work programmes need to be locally intelligent.
•Barriers to movement from less successful cities need to be removed, taking on board the implications for those left behind.
•Connections between successful and less successful cities need to be made, ensuring labour market policies are locally appropriate, and recognising that sustainable growth is about building up and not circulating talent.