Chancellor Philip Hammond has announced the Conservative government’s 2017 budget, pledging to “build a stronger, fairer, better Britain”.
The Office for Budget Responsibility (OBR) has raised the forecast for the UK’s economic growth to 2% from 1.4%. The OBR also said inflation will rise to 2.4% this year, before starting to fall.
Hammond said there were record numbers of people, and record numbers of women, in employment. He also said that real wages are forecast to rise despite inflation.
This will be the last Spring Budget. Hammond announced in last year’s Autumn Statement that from this year the main Budget will be delivered in the Autumn instead.
While the Budget contained few surprises (and no mention of Brexit), HR magazine has rounded up the main points HR professionals need to be aware of.
Skills and education
Hammond confirmed the introduction of ‘T-Levels’ for those aged 16 to 19 who plan to go into a technical field.
“The next step in raising productivity and living standards in the UK is to focus on quality education and the teaching of technical skills,” he said. “Long ago our competitors, such as Germany and the US, realised that to compete globally a country needs to link technical skills to jobs.”
As previously reported, the number of technical courses available will be significantly cut from around 13,000 to 15, in a bid to raise quality. Students will also be expected to carry out high-quality work placements to ensure they are “genuinely work ready”.
Lifelong learning was also discussed. “In changing labour markets retraining is vital,” Hammond said. The Department for Education will be given £40 million to pilot and test various lifelong learning projects.
The CIPD and CBI have welcomed the extra investment in technical skills.
Hammond unveiled funding of £320 million for free schools, announcing 110 new schools on top of the 500 already confirmed. This will include specialist maths schools and selective schools for the most academically gifted students. Hammond said increasing STEM (science, technology, engineering and maths) skills is a priority.
Hammond pledged £5 million towards helping people back into work after a career break, highlighting the benefit this would provide to women returning to the workforce after having children.
Hammond set out plans to increase tax rates for the self-employed. He said the lower tax rates paid by self-employed people will cost taxpayers £5 billion this year, and that there was no longer enough difference in the benefits accessible to employed versus self-employed workers to justify this. He said the government wants to even out the tax burden on employers and self-employed contractors to make the system “fairer”.
From April 2018 NI contributions will rise for the self-employed from 9% to 10%, and to 11% in 2019. Hammond said this would cost the average self-employed person only 60p extra a week. The tax-free dividend allowance for directors/shareholders will decrease to £2,000 from £5,000 from April 2018.
Charles Urquhart, employment partner at Clyde & Co, said this could be a blow to the gig economy. “There's a clear mismatch between the employment and tax positions and the law needs to be made clearer so that gig economy businesses and their employees know where they stand," he said.
As mentioned in the Autumn Statement, the National Living Wage rises to £7.50 in April.
The personal allowance tax rate will also rise to £11,500 and the higher rate tax threshold to £45,000. Hammond said the government is on track to meet its manifesto commitment of £12,500 and £50,000 respectively by the end of parliament.
Business rates will be capped so they cannot rise more than £50 a month, and local authorities will be given a £300 million fund for discretionary relief. Hammond added that, because of the “valuable role they play in our community”, 90% of local pubs will get a £1,000 discount on business rates.
HR magazine will have more in-depth analysis tomorrow.