REC Budget Submission – February 2023

Ahead of this year’s Spring Budget, due to take place on 15 March 2023, the REC has written to the Chancellor, Rt Hon Jeremy Hunt MP, sharing our latest labour market analysis and making five key policy recommendations. We know the fiscal position is tight but to boost business confidence and investment, some targeted spending is needed. The Spring Budget is the opportunity to set out a much-needed long-term strategy for growth, but also to take some immediate actions to provide stability, clarity and support for businesses to thrive.

On behalf of our members, we have asked government to:

1. Reform the skills system to catalyse business investment and enhance participation.

As well as much needed Apprenticeship Levy reform, we’ve asked government to make Local Skills Improvement Plans (LSIPs) a core part of levelling up. We know local people – local recruiters – are the experts when it comes to what’s needed in their areas, but as highlighted in our Overcoming Shortages report, we know there’s also a mismatch between the jobs, skills, training opportunities and infrastructure available locally.

In addition, we've asked government to do more to incentivise businesses to invest in green skills and green technologies. The government has already committed to thousands of new green jobs, but unless workforce planning and business support happens now, we're at serious risk of falling short.

Lastly, we've asked for the number of Skills Bootcamps to be expanded with more flexibility introduced in the way they can be delivered. Bootcamps are a great way of finding new talent, reskilling existing employees and introducing people to potentially new sectors and many REC members have been successful in tenders for delivering Bootcamps. However, flexibility around payments to providers and funding for pathways is needed to maximise reach and encourage more trainers to bid.

2. Work with labour market experts to better understand and address the causes of economic inactivity. Address key issues like childcare as part of this.

Parents pay an average of over £7,000 per year for a part-time nursery place. This cost means many parents reduce their hours to offset the expense, an issue exacerbated by the cost-of-living crisis. We need to stop people trading down on their career prospects for flexibility and recognise that as more people enter work and increase their hours, their annual tax contribution will also increase. We know childcare isn't just an issue for working parents, but also for grandparents - many over 50s - as well. We've asked government to double its financial contribution to the tax-free childcare scheme, require businesses to conduct a review with all staff over the age of 55 on flexible working arrangements, and increase funding for nurseries and childcare providers so that nobody in the UK is left without provision.

As well as continuing to commit to activation programmes, like Kickstart and Restart, we've asked government to fund recruiters to work with older workers to help transition them into roles with more flexibility rather than hiring more work coaches in JCP to do this. To push more onto already overburdened work coaches would be a mistake and would duplicate effort with staffing firms who are better equipped to help older workers.

3. Address the challenges inherent in the tax system for temporary and contract workers, including the need for umbrella company regulation, the effects of IR35 changes and clarity on employment status for tax.

We know that diverse forms of engagement in our labour market are critical for growth. Ensuring policy does not penalise those who work flexibly should be a vital part of government's growth agenda. Getting taxation right for contractors must be part of this. That’s why we've asked government to reduce ambiguity over employment status for tax and overhaul the overly complex IR35 legislation, which is still not working and undermining compliance.

In addition, we've asked government to introduce umbrella company regulation and to issue guidance to Crown Commercial Service (CCS) or other framework providers not to allow the proliferation of Joint Employment Models by making it acceptable as part of government frameworks. We have reiterated the need for an Employment Bill and the creation of a Single Enforcement Body (SEB) to act as a one stop shop for labour market enforcement.

4. Work with employment experts to design procurement frameworks that provide value for money and deliver efficiency.

The government is an employer, but too often its approach to public sector procurement is inefficient, risky, and doesn't provide best value for money. Chasing lowest cost provision has reduced the range and quality of provision government can achieve - this costs more in the long run. We've seen this in both the way the NHS procures staff but also via the Public Sector Resourcing Framework. Costs to bid on large frameworks reduce competition and often hit SMEs hardest - at a time when the labour market is so tight, having access to specialist supply is vital. That's why we've asked government to work with staffing experts to design public sector frameworks.

5. Provide regulatory stability by taking a pragmatic approach to EU law, using deregulation as a targeted tool to drive growth.

The government’s Retained EU Law (Revocation and Reform) Bill, which says that at the end of 2023 all retained EU law in the UK expires, is creating huge and unnecessary uncertainty for UK firms. Removing key pieces of legislation from UK law like the Agency Work Regulations (AWR) 2010 and the Working Time Regulations (WTR) 1998 would have a huge impact on the stability and efficiency of the UK recruitment industry and potentially undermine the rights of those working in temporary, contract or freelance roles. Whilst some areas of these regulations are inefficient and in need of reform, completely deregulating the market will lead to confusion and chaos as businesses have to completely rewrite their processes. That's why we've asked government to work with industry to take the necessary time to review, retain, reform, or where appropriate, repeal EU law.

You can read the full submission here.