Public sector creating jobs at faster rate than private industry

Public-sector employment rose by 95,000 over the year to the second quarter to 5.85 million, faster than the 82,000 in the first quarter of the year and the first acceleration since the autumn of 2003.

Although businesses created 216,000 jobs, the 1 per cent increase was overshadowed by the 1.7 per cent rise across Whitehall, local councils and public corporations.

The numbers came a day after figures showed the annual rate of productivity growth fell to its lowest level in 14 years in the same period.

The Opposition said that it showed that Gordon Brown was set to miss the target of reducing the back-office headcount by 84,000 over the next two years laid out in Sir Peter Gershon's report into public-sector efficiency. George Osborne, the Conservative Treasury spokesman, said the breakdown showed that 14,000 jobs were created in public administration.

"Gordon Brown was promising in the run-up to the election to spend taxpayers' money more efficiently. We now learn that at the same time he was busy expanding the Government's bureaucracy," he said. "These figures show that at this rate Mr Brown will not reach the targets set by Gershon. Far from reducing waste, he has recruited 17,000 more administrators."

The Treasury rejected the claims, saying Civil Service employment - the main target of the Gershon review - fell by 12,000. A Treasury spokesman said: "These figures show further progress in reducing Civil Service numbers as we continue to move resources into front-line services."

He said 60,000 jobs were created in the health and social services, 19,000 in education and an extra 12,000 in the police services.

John Philpott, the chief economist at the Chartered Institute of Personnel and Development, said the increase was "consistent" with the Government's policies. "They are trying to cut back on back-office staff and release the resources for the front line," he said. "If you assume these new jobs are on the front line then one shouldn't get too worried."

"I take the point of view that public-sector jobs are serving a valuable purpose for the economy and society and should not be seen as a burden on the private sector but as meeting real needs."

Many economists fear the scale of job creation will make it harder for private companies to compete for spare workers, driving up wage inflation and eventually interest rates. But Mr Philpott said: "You might argue that given the economy is going through a soft patch, the likelihood is that private-sector employment will be muted and that the Government is picking up some of the slack."

Thursday's figures showed that between April and June, output per worker was only 0.5 per cent higher than in the same months of 2004, the lowest annual growth rate since spring 1991.