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#Budget2017 - What recruiters need to know
#Budget2017 - What recruiters need to know
Regulation 08th Mar 2017

Today the Chancellor delivered his first and last Spring Budget (from now on budgets will take place in Autumn), reading from a much slimmer red book in comparison to recent years. Although there were fewer announcements, there were still some important announcements for recruiters to take on board.

Tax

The self-employed will be remembered as the group hardest hit by this budget. The Chancellor wants to redress the balance between employees and the self-employed, announcing his intention to:

  • Increase Class 4 National Insurance Contributions (NICs) from 9 per cent to 10 per cent in April 2018 and to 11 per cent in April 2019. Taken with the abolition of Class 2 NICs, Treasury say these changes will affect self-employed individuals with profits above £16,250.
  • Reduce dividend tax-free allowance from £5,000 to £2,000 from April 2018. This will have a particular impact on those working via their own company.
  • Ask Matthew Taylor, who is leading a review into employment practices, to consider whether there is a case for greater parity in parental benefits between the employed and self-employed.

Disappointingly - but unsurprisingly - IR35 changes in the public sector were also confirmed. 

The REC has long been calling for clarity and a level playing field in taxation matters, but we think it would be more sensible to take a holistic approach to employment status and tax. We would prefer to see tax either incorporated into the scope of Matthew Taylor’s Review, or deferred until his review and the Office for Tax Simplification have reported on the findings of the cross-departmental working group into employment status.

Many of the employment practices seen today are a direct product of our existing tax system. Therefore, we call for a broader, cross-departmental review which better aligns these different work streams.

Others points to note:

  • Personal tax allowance will increase to £11,500 as planned. 
  • As outlined in Autumn Statement 2016, corporation tax will be cut to 19 per cent from April this year and 17 per cent in 2020.
  • Making Tax Digital for unincorporated businesses and landlords with turnovers below the VAT threshold will be delayed until April 2019. The REC, alongside other business bodies, called for such a delay.
  • The government announced measures to ease the burden of business rate revaluations, including support for small businesses and pubs, and additional funding to support individual businesses hit the hardest.

Skills and productivity

There was some good news on the skills front, though few surprises as the new funding commitments had been trailed in advance. The Chancellor committed to supporting:

  • Technical education – £500million for the creation of ‘T-levels’, in an effort to bring technical education on par with academic qualifications.
  • Return to work support – £5million for ‘returnships’ to get more people back into work after lengthy careers breaks, a message aimed to chime with International Women’s Day.
  • Lifelong learning pilots – £40 million to help retrain and upskill the UK’s workforce, a key commitment in the government’s industrial strategy.

These measures will be welcomed by employers facing acute skills shortages, as highlighted in today's Report on Jobs

We look forward to working with the government to develop these initiatives. Recruiters have significant experience in supporting people from all backgrounds into jobs. But it will take time for Britain to reap the rewards of a new approach to skills. Britain needs continued access to people and skills from abroad now to ensure businesses can continue to grow.

Productivity

The UK’s lagging productivity levels were again in focus, though there were few new announcements. The Chancellor reiterated commitments made in the Autumn Statement to allocate funds for 5G, transport infrastructure, artificial intelligence, the next generation of electric vehicles, as well as funding for PHD places through the National Productivity Investment Fund.

This is good news for our members in the technology, construction, drivers, engineering and life sciences sectors.

Health and social care

Health and social care members will be pleased to see that action is being taken to tackle the crisis in the NHS through immediate funding increases. A green paper on the long-term sustainability of the NHS is due soon.

There will be £2billion in additional funding for social care to councils in England and a further £425million to improve local NHS and A&E services.

Public sector resourcing

The Chancellor didn’t give much air time to this, but within the Spring Budget documents is a reaffirmed commitment to find £3.5 billion of savings. The government has asked Sir Michael Barber to lead a review which will consider how to embed a culture of efficiency across government departments as they cut costs. We will track developments as part of our work on procurement.

You can read the budget statement in full here. We will continue to keep members up-to-date as details emerge via consultations and draft regulations.

Karen O'Reilly is the REC's Stakeholder Engagement Manager

Karen O’Reilly works with the policy team to represent the interests and concerns of  members to policymakers and stakeholders in a number of sectors including executive search, interim management, financial and legal services, HR and office support. She also works on cross-sectoral issues including employment tax and social mobility and inclusion policy. Prior to joining the REC, Karen worked at the British Chambers of Commerce.  

View More articles by Karen O'Reilly >

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