Budget 2024 – encouraging growth is not cheap

The Budget tomorrow will be a source of great excitement, as it is tasked with addressing the black hole in the country’s finances and the urgent need to promote growth and investment. Adam McCulloch

The speculation surrounding the Budget of tomorrow has reached fever-pitch. From bus fares, to “working people”, and employers’ national insurance rates to increased bus fares, there is no end to it.

Rachel Reeves’s biggest problem is the lack of money in the UK, as evidenced by the 22 billion pounds black hole at the core of the country’s finances. Austerity and Brexit are factors as well as Covid and a lack of investment. Ministers also struggle to find ways to please the public, financial markets, unions, and different types of employers.

Reeves appears to want to fix the public services, while also encouraging growth and investments. Ministers warn against a new round of austerity that would affect workers. All of this adds up into an unenviable job.

It is not surprising that the Employment Rights Bill could create new risks and costs for employers. This is especially true if the 1-2% increase in employer national insurance contribution predicted by Reeves tomorrow comes to pass.

There are some ways employers can reduce the impact of increased taxes. Gary Smith, partner and retirement specialist with Evelyn Partners in financial planning, says that firms can use salary sacrifice pension plans to offset the cost of employer national insurance increases.

He adds: “Employers may be able to offset some costs through the use a salary-sacrifice pension scheme. Bonus sacrifice is also an option, if it’s not in place already.”

Smith warns, however, that Reeves may announce a crackdown against salary sacrifice plans to protect revenue that the national insurance might raise.

The Budget is not the only factor that drives policy and change. Yesterday, the government announced its much-anticipated Get Britain Working package which includes work and skills support for the disabled and the long-suffering.

Media coverage of the measures was minimal: It appears that broadcasters are more concerned with the definition of a “working person” than the fact the UK is the only G7 nation that has higher economic inactivity levels now than it did before the pandemic. 2.8 million people have been out of work for long periods of time due to illness.

The funding will be used to boost the local rollout of “trailblazers”, which are specially designed to integrate and streamline support for people with disabilities and long-term illnesses in terms of work, health and skills.

Neil Carberry, chief executive of the Recruitment and Employment Confederation, said that the first priority for the Budget tomorrow is to encourage investment.

He said: “This Budget needs to show that it understands the challenges we face in our workforce if we are going to grow. Growth is based on public and private investment, so it’s important to boost these over short-term concerns.

Carberry warns that “saving today for spending more in three or even four years is not the best way to support public services or reduce the tax burden.”

Productivity and growth can be improved by improving skills, engaging youth and increasing job security. These measures will cost money.

Youth and skills

The CIPD may be better able to recognize this, with its focus in skills and youth employment. It calls on the government for more apprenticeships to be available for young people.

Ben Willmott is the head of public policies at the CIPD. He says that “the Budget will be a crucial moment for this government to signal its ambition to boost economic growth and improve living conditions.” The government must work with employers in order to develop policies that will boost investment in management capabilities, skills and technology adoption throughout the economy.

He also adds that CIPD calls on the government for an “apprenticeship guaranteed” which would provide an apprenticeship of level 2 or 3 to all 16-24 year olds who have the minimum qualifications.

A new partnership fund of PS50 million is also on the CIPD’s “would like” wish list. This fund will help improve sectoral management capabilities, skills development and adoption of technology.

Productivity Pilots

The CIPD also wants the government to set up and finance “workforce productivity” pilots in the public sector, to improve innovation and effectiveness.

The CIPD says Acas requires more resources and that money should be spent on employer compliance. Just creating a Fair Work Agency under the Employment Rights Bill is not sufficient.

While the UK waits for the minute details of ministers’ tax increases and analysts prepare to calculate the impact on us all, employers and employees should remember that the chancellor is responsible for creating the conditions necessary to foster future growth and investment.

Personnel Today has the latest HR job openings.

Browse Human Resources Jobs