Spring Budget 2024: What about the workers?

The question will be - is this likely to be the final major fiscal event before a general election or will there be more room for manoeuvre in an Autumn Statement that means a winter General Election is more likely? Chancellor Jeremy Hunt was keen to stress that this was the government’s “budget for long-term growth”. Repeated references to growing GDP and growing GDP per capita punctuated the Chancellor’s policy announcements, but with nothing much on the skills system beyond a few specific pots of spending on AI and some money for regions that may or may not trickle down to supporting local jobs – we will be watching to see what happens there.  So given the rhetoric on boosting the UK’s workforce, there was a distinct lack of a comprehensive plan to do so.  

Any policy announcements on skills, the Apprenticeship Levy or changes to IR35 were conspicuous in their absence, leaving a clear gap in the Chancellor’s aims for long-term growth. Helping people improve within work, making training and professional development more accessible and simplifying the tax regime for the self-employed are all key tools to developing the high wage, high skill economy the Chancellor aspires to.

That said there were plenty of initiatives in the Budget today that business will welcome. Even if taken together – they didn’t add up to the industrial and workforce strategy we really need. For SME businesses, the government announced an increase in the VAT registration threshold from £85,000 to £90,000 from 1 April 2024 and an extension to the Recovery Loan Scheme, albeit rebranded as the “Growth Guarantee Scheme”. This is good recognition of the invaluable contribution that SMEs make to the UK economy. SMEs will also be able to benefit from the very welcome AI Upskilling Fund. Artificial intelligence holds huge opportunities to boost productivity and the £7.4 million to pilot a flexible scheme for SMEs will mean more business can benefit from this and will boost AI adjacent skills in the labour market.

On public services, the Chancellor announced “Public Sector Productivity Plan” – for after an election but that sets out plans for more investment and more jobs in our public services. There was a more specific announcement on the NHS, £3.4 billion was promised to fund an NHS productivity plan, aimed at improving outdated systems and digitising processes to implement savings of £35 billion by 2030. The Chancellor specifically mentioned the need to tackle ‘off-framework’ staffing for the NHS which is a win for us all. The recognition of this nuance is important and gives the REC another opportunity to engage in a discussion about a wider framework and procurement review.  We’ve been pushing this issue with Treasury for several months now, and it is good to see them finally listening to the REC on this issue.

Childcare also featured, with the Chancellor seeking to build on his previous announcements in this space to help parents back into work. A review of the high-income child benefit allowance is particularly notable, reforming the current £50k threshold for one parent to £60k, taking 170,000 families out of scope of the tax. Paired with the confirmation that the hourly rate for childcare providers will be guaranteed for the next two years with the intention to secure a higher level of provision. This shows a welcome commitment to helping parents back into work.

Where there were big announcements was around funding for regions across England. A £100m funding package for the new Northeast Mayoral Authority was announced with a new Growth Zone part of this. Devolution powers are also being extended across regions including Buckinghamshire, Surrey, Warwickshire, West Yorkshire, Liverpool, South Yorkshire and the West Midlands. REC has long called for more local involvement in skills and growth, but the devil will be in the detail of how and when these powers will be used to boost skills and productivity.

The Chancellor’s big closing announcement (although is it an announcement if everyone already knew it was coming?) was the 2p cut to National Insurance. Reducing the rates of NI for workers from 10% to 8% and for the self-employed from 8%-6% is great news for those on lower pay and will offer protection against rising costs. However, not applying the cut to Employer’s NI is a missed opportunity for the Chancellor. A cut to employer’s contributions would have benefited businesses in the face of rising costs (including the minimum wage rise coming in April) and would have acted as a stimulus for hiring and wider business investment. A cut to employer’s NI would also have had the pleasing side-effect of reducing the appeal of the not so wholesome umbrella companies, many of whom use lower NI as a hook to attract candidates.

One final point always worth noting and celebrating in any budget is that alcohol duty will remain frozen until Feb 2025. Given how busy the next few months will be as a general election draws closer, this will certainly come in useful!