Public sector 'facing loss of 30,000 jobs'

• Finance Secretary John Swinney said the report underlined the need for Scotland to have control over taxation and spending

In the bleakest forecast yet for public sector employees north of the Border, the Ernst & Young Scottish Item Club said the Scottish Government will have no choice but to wield an axe over tens of thousands of posts as it faces up to some of the toughest spending reductions for decades.

The club says that while the cuts are "inevitable", they will seriously damage the Scottish economy because of the "disproportionate" number of the country's state sector employees. The 30,000 figure represents about 5 per cent of the public sector workforce, which in turn accounts for a quarter of total employment north of the Border. Labour-intensive front-line services such as health and education are expected to account for two-thirds of the reduction, while the rest will come from "back-office" administrative areas.

The report, published today, says: "While the extent of any budgetary cuts remains unclear, recent forecasts suggest that Scotland won't see a return to 2009 levels of public sector spending before 2020, such is the scale of the retrenchment.

"This will inevitably have a knock-on impact on jobs. Scottish Item Club predicts that public sector employment in Scotland will decline by around 30,000 over the next four years."

The forecast brought calls from opposition politicians and union leaders for frontline services to be protected, while the Scottish Government said the report underlined the need for the Scottish Parliament to have full control of tax and spending.

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Dougie Adams, the senior economic adviser to the Item Club, said the group expects the Scots economy to substantially underperform that of the rest of the UK over the next three years due to its heavy reliance on the civil service and failure to build up export markets for manufactured products.

Adams said: "Although there is scope for productivity and efficiency improvements to be made to Scotland's public sector, which may help to mitigate some of the impact of future spending cuts, a decline or slowdown in public sector output will significantly hamper Scotland's economic performance over the next few years."

In the first wave of cutbacks, the Scottish government has already revealed that more than 4,000 NHS jobs are to go, including doctors and nurses. On Friday, Fife Council announced 1,800 job losses in what is expected to be a major cost-cutting exercise by all Scottish local authorities.

Responding to the report, a spokesman for Finance Secretary John Swinney said: "The SNP Government is already dealing with a 500 million cut by Westminster in this year's budget, and we are planning to defer further cuts being imposed upon us until the following year so that we can protect economic recovery.

"The Item Club report underlines the need for the Scottish Government and Parliament having full control of tax and spending and the case for independence – so that we are no longer left having to deal with the consequences of the mishandling of the UK finances."

Derek Brownlee, finance spokesman for the Conservatives, said last night that he was "not surprised" by the Item Club's stark warning. "It's impossible to think that there won't be public sector job losses given the scale of the reductions we are facing," he said. "The important thing is to make sure that the jobs which are lost are not in frontline services. We also need to do what we can to keep the rest of the economy going to make sure the opportunities are there outside of the public sector."

Andy Kerr, Scottish Labour's finance spokesman, said the forecast was "very concerning". "The SNP's fiscal irresponsibility is adding to the jobs threat in Scotland. They have blown all the money in reserves and we have already seen teacher numbers plummet by 2,500. Furthermore, the SNP last week confirmed 1,500 nurses would be cut from the NHS. This government is failing Scotland."

Union spokesmen warned job losses would have a "devastating" impact on the Scottish economy. Dave Watson, Scottish organiser for Unison, said: "For every 1 a public sector worker earns, they spend nearly 70p locally. The Scottish economy does rely on public sector workers and job losses on this scale would be devastating."

Last night, the Prime Minister also foreshadowed the "pain" to come as the Government curbs welfare and public sector pay bills .

David Cameron said areas that need to be addressed include "the bureaucracy that has built up over the past decade. Otherwise you will have to make reductions across the board which you don't want to do. We need to address the areas where we have been living beyond our means."