Public sector workforce will be "challenging" according to the Institute for Fiscal Studies, with worker numbers outside of the NHS and schools likely to fall between 30 to 40 percent in the next five years.
The public sector outside of the NHS and schools faces a "very challenging" 40 percent cut in its workforce over the next five years if those areas continue to be protected by Government, a new report by the Institute for Fiscal Studies has warned.
Independent forecasts released by the Office for Budget Responsibility in December predicted a 1.1 million reduction in general government employment between 2010/11 and 2018/19 as a result of austerity measures.
The IFS report found that this would be the biggest cut in the public sector workforce for more than half a century, "dwarfing" cuts of 350,000 seen in the early 1990s and "dramatically changing the nature of the UK labour market".
The impact of the Government's planned cuts in public services after the next election will be "hugely challenging", a leading economic thinktank has said, warning against a "false sense that all is now well".
The Institute for Fiscal Studies railed against overconfidence after a return to healthy growth in the economy, saying 60% of Chancellor George Osborne's cuts are still due to take effect from next year.
However, figures from Oxford Economics predicted 2.6% growth in GDP this year, raising the prospect that continued growth could remove the need for Mr Osborne's austerity plans to be implemented in full.
The Institute for Fiscal Studies (IFS) said the Government's figures on take home pay do not reflect what has happened to household incomes overall.
IFS director Paul Johnson told BBC Radio 4's Today programme that although the Government used "a perfectly sensible set of numbers", there were "two problems" that need to be taken into account.
He said: "First, we have other sets of data - the Office for National Statistics publishes an average weekly earnings index. That went up quite a lot less quickly than inflation in the most recent months.
"And of course they are not taking account of reductions in things like benefits which were occurring over the time. So if you are looking at household incomes, that will be different from what's happened to take home pay."
The Institute for Fiscal Studies (IFS) has presented its analysis of Chancellor George Osborne's Autumn Statement.
ITV News economics editor Richard Edgar reports:
The Government should impose a single carbon price to reduce both carbon emissions and "fuel poverty", according to a new report by the Institute of Fiscal Studies.
The IFS said that a multitude of policies aimed at reducing emissions have actually increased energy prices, and a uniform cost would help the Government to meet emission reduction targets at no additional cost, and without lower income households being made worse off.
The Government could be forced to raise £6 billion in new taxes after the 2015 General Election despite the Chancellor's latest round of spending cuts, experts have warned.
The Institute for Fiscal Studies (IFS) said that, despite the £11.5 billion worth of reductions for 2015/16 set out by George Osborne, savings of a similar magnitude had already been pencilled in for the following two years.
IFS director Paul Johnson said there would have to be a "serious debate" on whether fiscal retrenchment on such a scale could be achieved through more spending cuts alone, or whether taxes would have to rise as well.
He said: "At almost any other moment in the past 60 years, announcements of spending cuts of this scale would have created a storm.
"Returning to an 80/20 split for the consolidation as a whole would mean a £6 billion tax increase in the next Parliament. Coincidentally this is pretty close to the average tax increase seen in post-election budgets in recent decades".
Low wages are causing a "dramatic fall" in post-recession productivity rates, according to economists.
Workers are producing 2.6 percent less an hour than they were at the start of 2008 and 12.8 percent less overall than if pre-crash growth in output had continued, according to the Institute for Fiscal Studies (IFS).
Its research found a drop in real wage levels meant companies were able to take on more staff, while output remained the same. Restrictions in the benefit system mean more people may have been encouraged to find a job while the workforce also has less power to protect wage levels, it added.
Wenchao Jin, a research economist at IFS, said: "The fall in labour productivity seems to have been driven by low real wages and low firm investment. Productivity slowdown has happened right across the economy.
"They have not been driven by a change in the composition of the economy nor by a change in the composition of the workforce".