george osborne

The government has dealt a blow to IT workers by revealing that the Chancellor's Budget could lead to 1.3 million job losses.

After the Guardian newspaper published a leak of Treasury documents showing the Budget could result in this massive job loss, the government's new Office for Budget Responsibility was forced to release new employment forecasts, which showed that 610,000 public sector jobs would be cut over the next five years, reducing the number of government employees from 5.53 million in 2010 to 4.92 million in 2016. The rest is expected to come from the private sector.

Industry experts warned that IT workers will not be safe, if the government follows the route taken by some private sector companies.

"IT is often seen as the first port of call when cuts are due. It is seen as an expensive support service," said Iain Smith, founder of Diaz Research.

Despite the high number of potential job cuts in the public sector, the government has claimed that the private sector will eventually pick up the job losses.

"I imagine a lot of what they are talking about is the fact that, if increasing outsourcing of back office functions in Whitehall goes ahead, there will be a lot of staff transfer to the private sector," said Georgina O'Toole, research director at TechMarketView.

"The fear from industry is that the government's reason for favouring outsourcing is for exactly that reason, that is, to reduce the number of permanent employees in the UK public sector and meet targets, rather than to increase efficiencies," she added. "If that is the business case, outsourcing could be destined for failure. How many times do we hear 'you should never outsource a problem'?".

Naturally, the National Outsourcing Association disagreed, and said that the job cuts are a good thing for the outsourcing industry.

"Outsourcing is a proven business process for not just saving costs, but driving efficiencies, enabling flexibility and improving processes," said Kerry Hallard, communications director for the NOA.

In spite of her concerns about outsourcing, O'Toole supported the government's claim that the private sector jobs growth would balance out the public sector job losses.

"A lot will depend on whether we have a double-dip recession or not. However, at current course and speed we are predicting that the UK private sector IT market will grow at the same time as the UK public sector IT market is declining, so based on that, there should be opportunities."

Andrew Gardner, IT operations director for recruitment firm Reed Technology, also said there may be opportunities in the private sector. But he admitted there will be increased competition for jobs, and said that candidates may need to be flexible and look at short-term contract roles as well as permanent jobs.

"The jobs market in the private sector has seen a real upturn recently and is in a good position to absorb a percentage of public sector workers, although unemployment may increase in the short-medium term. We have seen an increase in the number of available roles in all sectors," he said.

But the government already outsources a lot of its IT work, Smith said. He explained: "The high level of outsourcing means that in IT, 'public sector' savings are in reality going to be largely private sector job cuts, so the logic that public sector cuts will be accompanied by private sector growth is faulty."

Smith believes that growth in IT jobs in the UK can only really happen if the government encourages start-ups – though he warned that it would not be easy. "We need to grow more companies like ARM, Sage and Autonomy, and this is a very exciting challenge for the government," he said.

Meanwhile, O'Toole said that the government needs to improve its general skills base in IT programme and project management, supplier management and business requirements definition.

"All programmes across government need these generic skills and they need strong, experienced people to take on these roles if IT projects are going to be successful," she said.

She added: "If the government and industry can prove that ICT is not just a cost, but that it can be used to drive efficiencies and drive down government spending, then the impact of the current situation on IT will not be as severe as people fear. However, without these basic important skills in place on the client-side, getting there will be difficult."

New government figures revealed today showed that the NHS spent £1 billion on the troubled National Programme for IT last year alone. The new government has not yet announced a direction for the programme.