Cutting the public sector headcount would likely lead to increased spending on unemployment benefit.

That’s the warning from the Council of Ministers in its response to a damning Public Accounts Committee report on the size of the structural deficit.

Quite why Ministers think civil servants made redundant would languish on the dole rather than getting a new job is not clear.

The PAC report, due to be debated at this month’s Tynwald sitting, concluded that government is living beyond its means.

It said the scale and cost has grown beyond what the taxpayer can sustain.

Treasury now treats public sector overspending as routine rather than as the last resort, the PAC report argues - and over-reliance on reserves meant we may not be able to deal with future economic shocks.

Among its recommendations is that the size of the public sector should not threaten or compete with the private sector, and the recruitment control framework should be updated.

But in its response, to be laid before the same Tynwald sitting, the Council of Ministers said this did not account for the ‘financial or social consequences of reductions in public sector employment, including the likelihood that government would need to fund increased unemployment benefits’.

CoMin agreed the public service workforce should be planned in a way that supports and aligns with the economy and labour market.

It said a recruitment control framework introduced last year and quarterly reports on headcount were ‘steps in that direction’.

But turning to the report’s assertions about the public sector ‘crowding out’ private employers, CoMin said these were not supported by evidence.

Perhaps contradicting its comments about the risk of increased spending on benefits, it said: ‘Current public sector recruitment challenges in specialist areas, such as audit and tax, indicate that the private sector may benefit from mobility out of government, rather than being constrained by it.’