Chancellor Philip Hammond presented his Spring Budget yesterday in which he addressed the UK’s labour market, education and skills, as well as the UK’s plan to leave the EU.
On the labour market, the Chancellor recognised the UK’s historically low unemployment. He pointed to forecasts from the Office for Budget Responsibility which show that unemployment will remain near historic lows over the next five years. The OBR also forecasted employment will increase by a further 600,000 by 2023 and added that wages are increasing at their fastest pace in over a decade, and are forecast to continue growing faster than inflation.
The Spring Budget Statement also announced updates to apprenticeship reforms that mean from 1 April, employers will see the co-investment rate they pay cut by a half from 10% to 5%, at the same time as levy-paying employers are able to share more levy funds across their supply chains, with the maximum amount rising from 10% to 25%.
Meanwhile, the government also appointed Professor Arindrajit Dube to undertake a review of the latest international evidence on the impact of minimum wages, to inform future National Living Wage policy after 2020.
Hammond also warned that leaving the EU without a deal would damage the British economy and leave people less well off.
He told Reuters that he could free billions of pounds for extra public spending or tax cuts if a Brexit deal is done.
"Leaving with no deal would mean significant disruption in the short and medium term and a smaller, less prosperous economy in the long term, than if we leave with a deal," Hammond said. "Higher unemployment, lower wages, higher prices in the shops. That is not what the British people voted for in June 2016."
On the UK’s plan to leave the EU, Hammond also announced that research institutes and innovating businesses will benefit from an exemption for PhD-level occupations from the cap on high-skilled visas from this autumn. Overseas research activity will also count as residence in the UK for the purpose of applying for settlement, meaning researchers will no longer be unfairly penalised for time spent overseas conducting vital fieldwork.
The Chancellor also confirmed that the government will hold a Spending Review which will conclude alongside the Budget. This will set departmental budgets, including three year budgets for resource spending, if an EU exit deal is agreed.
The Spring Budget Statement did not address IR35. Last week the government announced it was moving ahead with plans to expand IR35 off-payroll rules covering taxation and independent contractors to the private sector.
Neil Carberry, Recruitment & Employment Confederation chief executive responded to the Budget Statement, “Good regulation is at the heart of government action on jobs, so firms will also welcome the commitment to consulting on the future of the National Living Wage.
“Recruiters also want the Chancellor to listen to firms on upcoming tax changes for contractors to deliver a level-playing field. Without clients taking responsibility for contractors paying the right tax, law-abiding firms may be undercut. REC will make this point forcefully in the run-up to the Budget,” Carberry said.
"We will be interested to see what the National Retraining Scheme looks like in practice as REC members will have a big role to play. And while it is good news that the limited package of reforms to apprenticeships announced in the last Budget are to be brought forward, we still need to have the debate about changing the failing apprenticeship levy policy into a flexible skills levy that really works for business and workers,” Carberry said.
“Even if we get skills changes right, UK competitiveness needs to be backed up with flexible immigration policies that meet our economy’s needs. There were some welcome steps today - but the real test is an open approach to attracting people to work in the UK after Brexit. REC data shows that candidate availability has been falling month-on-month in the last year,” Carberry said.
Samantha Hurley, Director of Operations at the Association of Professional Staffing Companies, also commented, saying that announcement of changes to the Apprenticeship Levy was welcome.
“As we have repeatedly stressed to HMRC, the fact that a company’s ‘size’ is directly related to its payroll means that many staffing firms have Levy pots so large that they cannot realistically use all the funds to upskill their own people,” Hurley said. “While not perfect, this new system at least means that more of this money can be directed towards skills development, as the initiative was originally designed to do.”
Seb Maley, CEO of contractor tax expert Qdos, also commented, “After the arrival of the IR35 consultation last week and amid yet more Brexit uncertainty, it’s hardly surprising - albeit disappointing - that the Chancellor chose not to address the off-payroll working rules in his speech.”