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Budget and Spending Review: what did chancellor Rishi Sunak say?

Chancellor Rishi Sunak has pledged to address the UK's economic vulnerabilities through a mixed programme of heavy investment and increased taxation.

Cost of living and minimum wage rises

Sunak warned of an unavoidable increase in the cost of living, as inflation is set to rise above 4% (and peak as high as 4.6%, according to banking service CITI).

To counter this growth, he announced a rise in the National Living Wage to £9.50/hr, a 6.6% increase, from April 2022. The chancellor claims this will put around £1,000 more in minimum-wage workers’ pockets each year.

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Graham Griffiths, interim director of the Living Wage Foundation, said: “The past 18 months has been a perfect storm for workers and families, with costs like fuel and energy rising, and cuts to household incomes, so it's positive to see a significant increase in the minimum wage from April 2022.”

The chancellor has also slashed Universal Credit’s taper rate, the amount of claimants’ earnings above the Universal Credit minimum that the government takes. Previously 63%, this will fall to 55%.

Kate Schmuecker, however, deputy director of policy and partnerships at the Joseph Rowntree Foundation, said that while the chancellor’s pledges are a significant step towards helping those suffering in-work poverty, they leave behind those who are unable to work.

“The reality is that millions of people who are unable to work or looking for work will not benefit from these changes,” she said.

“Their energy bills and weekly shop are going up like everyone else’s and they face immediate hardship, hunger and debt in the months ahead.”

The increase will also squeeze public service budgets, warned Mary-Ann Stephenson, director of the Women’s Budget Group.

She said: “The government must ensure that the public sector receives increased funding to meet higher pay costs.

“Childcare and social care are already in crisis because of under-funding, and providers face collapse unless they are properly resourced.”


National Insurance rise

National Insurance contributions will rise by 1.25% from April, the chancellor confirmed, for both employers and employees, as part of a health and social care levy.

Steve Herbert, head of benefits strategy at consultancy Howden Employee Benefits and Wellbeing, told HR magazine that as well as hitting low-income workers, this may pose a problem to struggling businesses.

He said: “Businesses in low-paying industry sectors will now also have to absorb an above-inflation increase to their salary roll at exactly the same time as the National Insurance increase.

“This may hit those sectors that have been struggling during the pandemic the hardest, including agriculture and hospitality."


Skills and training

The chancellor announced a £3 billion boost to skills programmes, including investment in T-levels, the apprenticeship levy and traineeships.

Peter Cheese, chief executive of the CIPD, warned that the investment will not do enough to close the skills gap.

“There is still a glaring gap between the government’s ambition to transition the UK to a high-skill, high-wage economy and its current policies and investment priorities,” he said.

“Piecemeal interventions are unlikely to amount to a skills revolution, more an evolution of things that already aren’t hitting the mark for many employers or jobseekers.”

He added that many employers are unaware of how to take advantage of the programmes already in place, and that it was unclear if efforts were delivering results, or how employers would be incentivised to train workers.

“The Apprenticeship Levy in its current form has failed on every measure. Failure to reform it continues to hold back employer investment in skills at a time when this has never been more important.”

Tony Wilson, director of the Institute for Employment Studies, said that Sunak had missed a chance to address the growing recruitment crisis companies are facing.

He added: “With a million fewer people in the labour market than on pre-crisis trends, we were hoping to see substantial new measures to increase labour market participation and address skills mismatches.

“Instead, firms will continue to struggle to fill vacancies.”


Overseas talent

The chancellor also announced a ‘Scale-up’ Visa, which would hope to attract highly skilled workers from abroad to fast-growing UK companies.

The visa would allow workers to come to the UK as long as they held a highly skilled job offer from a company with at least 10 employees that had a growth rate of at least 20% in revenue or employment in the past three years.

Sherisa Rajah, vice president of employment law and compliance at HR tech firm Elements, said: “The talent initiative rightly recognises that the UK urgently needs to recruit from overseas to mitigate skills shortages."

But while the programme appears great for business, she said, initiatives like these are in direct competition with the booming work from anywhere movement.

“To truly alleviate skills pressures facing the UK firms, plans to attract workers to Britain should be paired with initiatives for companies to harness remote workers."