Today, the Chancellor of the Exchequer has set out his Spring budget, and it addresses the key areas we expected. Crucially, the Chancellor reported that the Office for Budget Responsibility (OBR) has said that the UK will now not enter a technical recession this year.
In this article, we break down today’s announcement and share our thoughts on what it means for employers.
Cost of living
It was anticipated that the Chancellor would address the cost of living crisis because of the continued impact it has on both businesses and individuals. Inflation remains at record high levels and the redundancy rate has increased in the quarter. We also know that in December 2022, the ONS reported that 40% of people on universal credit were in employment.
On top of this, we also continue to see an increase in mental ill health with 17 million working days lost – an average of 18.6 working days per person (HSE November 2022) and in our recent SME Survey, 85% of business owners said that mental health was the most important Health and Safety issue for 2023.
Whilst the COVID-19 pandemic was instrumental in the shift in the levels of mental ill health, the rising cost of living over the last twelve months has exacerbated the situation. It was therefore crucial to the UK economy that the budget addressed this serious issue.
The steps announced today to address the cost of living, include:
- The energy bill support scheme that was introduced last year and that caps energy bills to £2,500 has been extended from April through to June. It was due to increase to £3,000 from April.
- The 30-hour free childcare funding scheme that is already in place for children who are aged between 3 years and school age will be expanded and apply to parents of children from the age of nine months, for families where all adults are working at least 16 hours.
- Parents who are in receipt of Universal Credit will receive up to £951 for one child, or £1,630 for two children per month which will be paid upfront instead of being paid in arrears.
- A freeze on fuel duty for 12 months and the 5p fuel cut that was introduced will be maintained. This will continue to help employees in commuting to/from work and help in the management of costs for employers where there is a requirement for business travel.
We are seeing more employers introduce both Financial Wellbeing as well as Health and Wellbeing policies. Not only do they send a strong message of support and commitment to help employees, but it provides details of all the practical help and support the employee has access to either directly through their employment or via external sources.
Labour market shortages
Today’s budget reflects the need for measures to be put in place that address the UK’s labour market shortages. The context in which businesses now operate is very different to pre-pandemic. COVID-19 led to an increase in the number of people taking early retirement, and we have seen an increase in the number of long-term sickness cases, particularly with regards to mental health, and those claiming disability benefits has also increased.
The labour market is also impacted by a lack of employees returning from periods of maternity/adoption leave because the rising costs in childcare is making it difficult for them to return. In fact, the ONS reported that in January, 57% of those on universal credit were women, an increase of 52% from two years prior.
The budget announced several measures to address these labour market shortages, which include:
- Changes to the Universal Credit system to encourage more people into work by:
- Introduce a white paper that will be published today on disability benefits reform, including abolishing the work capability assessment, which would see people with disabilities being able to find employment without the risk of losing their welfare benefits. Plus separate benefits entitlement from a person’s ability to work
- Sanctions to be applied more rigorously to people who are on Universal Credit without a health condition looking for work. It includes sanctions being given to those who fail to take reasonable job offers and those who work low hours, which will see the threshold that is currently set at the equivalent of 15 hours increase to 18 hours at the National Living Wage.
- In England and Wales, funding will be given to a new program ‘Universal Support’ that will be a voluntary employment scheme that will provide up to £4,000 to someone who is disabled, to help them find employment, and to put in place support measures that they will need.
- A pilot scheme to be introduced to award incentive payments of £600 for those who become childminders
- The Staying Close programme will receive increased funding to help more care leavers into work
- £400 million is being awarded to increase the availability of mental health and musculoskeletal resources for workers
- A new apprenticeship scheme, ‘Returnships’ will be introduced that will target the over 50s who wish to return to work and will run alongside Skills Boost Camps and sector-based work academies.
- The existing ‘mid-life MOTs’ will be increased from 8,000 to 40,000 per year. These MOTs looks at a person’s finance, skills, and health to help them prepare for retirement.
Pensions
Developments around pensions have also been announced, as it is recognised that another key measure to addressing the labour shortage is to discourage early retirement and to help retain Doctors and Consultants. Today, the Chancellor has confirmed:
- An increase in the annual tax-free allowance from £40,000 to £60,000
- Abolish the lifetime allowance; this is the tax that people incur if they accumulate more than £1 million in pension savings
Business
In the Autumn statement, it included a financial commitment to small businesses by reducing the funding of research and development. However, in today’s announcement, funds are being made available again to SMEs specifically relating to research and development. The budget confirmed:
- A prize worth £1 million each year for the next 10 years to a person or team that carries out the most ground-breaking artificial intelligence research.
- Corporation tax rise will remain in place, increasing to 25% from April.
- Introducing a full capital expensing policy for the next 3 years with the intention to make it permanent when responsible to do so. This will mean for each pound invested in IT equipment, plant or machinery can be deducted in full and immediately from taxable profits.
- Enhanced credit for SMEs that spend 40% or more of their total expenditure on research and development by claiming credit of £27 for every £100 spent.
- 45% and 50% tax relief have been extended for theatres, orchestras and museums.
- Energy bills release and discount scheme to help businesses £600m of tax relief on energy efficient measures.
- Climate change agreement has been extended for a further two years to enable eligible businesses to receive £600 million of tax relief on energy efficiency measures.
Support for employers
We have added to our current webinar schedule and the new titles added are all aimed at addressing key employment issues. You can register for these free webinars here.
We are also running our annual free virtual employment law seminar on 22 March, where we will look at the upcoming developments in the world of HR that are likely to have an impact on your business and how you manage your people in 2023:
- Virtual employment law seminar
- 22 March 10am-12 noon
- Return to work interviews – why do them?
- 13 April 10am – 11am
- EU Law (Reform and Revocation) Bill – what is it likely to mean for employers?
- 11 May 10am – 11am
- The pros and cons of adopting a four day work week
- 15 June 10am – 11am
- Why businesses need a different approach to recruitment
- 13 July 10am – 11am
- Building skills and capabilities of your workforce
- 10 August 10am – 11am
- How to become an age friendly employer
- 14 September 10am – 11am
- Immigration developments and how they impact employment
- 12 October 10am – 11am
We are here to help
If you would like to speak to a member of our team, or you are considering outsourcing your Health and Safety, Payroll, or HR, you can contact us on 0844 324 5840 or get in touch with us here.
