Are four fifths of the private sector jobs created since the election based in London?

Published: 1st Jul 2014

This post has been updated.

"Independent experts say four fifths of all the new private sector jobs created since 2010 are in London."

Ed Miliband, 1 July 2014

"That statistic is over two years out of date... The most recent figures from the Office for National Statistics say the exact opposite: Four-fifths of new private sector jobs have come from outside London in the past year."

Conservative Party, 1 July 2014

Labour Leader Ed Miliband made his own pledge to create "regional economic powerhouses" in a speech in Leeds today a week after Chancellor George Osborne argued for a "Northern powerhouse" when speaking in Manchester.

According to remarks attributed to Mr Miliband, 80% of private sector jobs created since the election are to be found in the capital, a claim that was hotly disputed by the Conservatives. Business Minister Matthew Hancock has reportedly written to the UK Statistics Authority to complain about the Labour Leader's "misleading" figures.

Both claims have problems, but the Office for National Statistics (ONS) has told Full Fact that the data used by the Conservatives gives a fuller picture of changes in regional private sector employment.

Contentious and out-of-date

Full Fact contacted Labour to ask which "independent experts" Ed Miliband was referring to, and were directed to a Centre for Cities report from earlier this year.

This claimed that "since 2010, 79 per cent of private sector jobs growth has occurred in London."

As the Conservatives pointed out, the data used in this comparison - the Business Register and Employment Survey - is only available to 2012, so can't give a full account of the changes in private sector employment over the past 18 months.

How current the claim is is not the only problem with it: as the ONS explained to Full Fact, the definition of public and private sector employment used by the Centre for Cities is different to the one used by the ONS itself.

Whereas the ONS looks at the ownership of each business to decide whether it is publicly or privately controlled, the Centre for Cities assigned jobs to the public or private sector based upon the sector they were located in.

For example, while the Centre for Cities counts all jobs in education as public sector jobs, the ONS told us that in fact around 40% of them were actually in the private sector - according to the official definition. The ONS repeated the analysis done by the Centre for Cities using the same data but its own definitions of public and private sector employment, and found that London accounted for 42% of the rise in private sector employment between 2010 and 2012.

The data set used for these comparisons is also incomplete, as it doesn't cover smaller businesses which aren't registered for VAT or PAYE.

Alternative measures

The ONS told us that a better measure of regional changes in private sector employment could be found in the estimates derived from its Labour Force Survey (LFS).

These are the figures used by the Conservatives to claim that four fifths of new jobs in the past year have been created outside of London.

The data does show that London accounted for 18% of the rise in employment since the start of 2013, but the figures don't take into account the fact that employment at Royal Mail, Direct Line and Lloyds bank was reclassified into the public sector last year.

The latest comparable figures only go up to April to June 2013 however, so they're far from ideal. They show London accounted for 41% of the yearly rise in employment across the UK, and 32% of the rise since the election.

We won't get a better idea until the ONS updates its regional jobs estimates to take this into account. They're planning to do this "as soon as possible".

Change in employment, not 'new jobs'

Another problem with the figures used by both parties is that they measure changes in overall employment, not the number of 'new jobs' created.

This creates a problem when, for instance, the number of people employed in the private sector in a local area falls, but nationally the number rises. It doesn't make sense to say that area accounted for a negative percentage of 'new jobs'.

We've discussed the issue is more depth in our spotlight on jobs for foreign workers.

Why the different sources?

The Centre for Cities explained to Full Fact why they preferred a different definition - based on sectors of work - of public and private sector to that used by the ONS. For instance, the official figures count universities as private sector bodies and GPs as private sector jobs, which the organisation says are linked to public policy decisions and so are better understood as 'public sector' bodies.

They acknowledge this doesn't produce a perfect measure either, as it still takes a broad brush across different sectors, but argue it "gives the clearest possible picture of how commercial, private sector-led decisions are affecting employment in UK cities".

In addition, as jobs in sixth-form colleges were moved from the public to the private sector in 2012 (affecting around 200,000 employees), the Centre for Cities says it prefers to filter this effect out using a sector-based approach. ONS figures that adjust for these changes are available in their public sector employment release, although they aren't fully up-to-date.

Their response is in full below:

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Centre for Cities uses the ONS' BRES survey because it is the only publicly available data source that allows us to look at jobs by sector in cities. No other official dataset provides jobs estimates at the local authority level.

This creates a number of constraints on how we can use the data:

Time series: As noted in the article, the latest available data using the BRES dataset is 2012. Centre for Cities has always been clear when using the dataset that it is for the period 2010-12.

Public sector definition: The way the data is provided by ONS means that there are two ways to define the public sector. One is to use the pre-defined ONS definition, and the other is to use a sector based definition that includes public sector administration and defence, health and education, which the Centre for Cities uses.

There are two reasons why the Centre uses the sector definition rather than the ONS definition. Firstly, the definition of the public sector was changed in 2012, with further education colleges moved from the public to private sector. However, 2010 data for public sector jobs has not been updated to reflect this change. This means that in the ONS definition sixth form college jobs have 'moved' from the public to the private sector, which makes it look as if jobs have increased in the private sector and reduced in the public sector.

Secondly, there's a wider debate about what the ONS classes as private sector. ONS explained to Full Fact that their definition means that 40% of jobs in education are in the private sector. But this 40% figure includes further education colleges and universities. In health the ONS definition also counts GPs as operating in the private sector. Public policy decisions (rather than commercial pressures, which were the subject of the analysis in Cities Outlook 2014) are likely to drive decision making in these institutions and therefore we included them in the public sector.

We should note here that we do not claim our definition, based on sectors, to be perfect. But given the constraints, our definition aimed to give the clearest possible picture of how commercial, private sector-led decisions are affecting employment in UK cities.

Job creation: Our Cities Outlook publication states that the analysis looks at net new job creation i.e. jobs created minus jobs lost.

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Correction (8 July 2014)

The article originally stated that the latest public sector employment figures from the ONS showed London accounted for 18% of the rise in employment across the UK and 29% of the rise since the election. This was based on data that was not adjusted for the reclassification of public and private sector jobs during that time.

The adjusted figures aren't up to date however: the latest period they go to is April to June 2013. This isn't ideal, but they're the best available figures for showing comparable trends. On these figures, London accounts for roughly 41% of the private sector employment growth in the year to April to June 2013, and around 32% of the growth since the election.

We've updated the piece with the better figures and made clear that this comparable dataset is available. We've also simplified the explanation about how changes in employment don't equate to 'new jobs'.

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