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Spring Statement 2019: What HR should know

While Brexit uncertainty remains, the chancellor announced plans around visa caps, apprenticeships and a minimum wage review

The government is under a “cloud of uncertainty” following the prime minister’s defeat on her amended Brexit deal, but the economy remains “remarkably resilient,” according to chancellor Philip Hammond in his Spring Statement yesterday.

Hammond revealed that the Office for Budget Responsibility (OBR) predicted the UK economy would grow by 1.2% this year, 1.4% next year and by 1.6% for the three following years.

The OBR also predicted that wage growth will be 3.1% this year, up from the 2.5% it predicted in October. Average earnings growth will reach 3.3% by 2023 it said. There will be 600,000 new jobs by 2023, Hammond pledged.

The Spring Statement was followed on Wednesday evening by MPs voting to reject a no-deal Brexit under any circumstances. MPs will now vote today on whether to ask the EU for permission to delay Brexit beyond 29 March.

Hammond warned that the UK's continued economic prosperity was dependent on making an “orderly exit” from the EU, and told MPs that “leaving with no deal would mean significant disruption in the short and medium term and a smaller less prosperous economy in the long term, than if we leave with a deal".

"Higher unemployment, lower wages, higher prices in the shops – that is not what the British people voted for in June 2016," he added.

Shadow chancellor John McDonnell condemned Hammond's comments, stating that they were a “toxic mix of callous complacency and austerity".

While there is yet to be a clear outcome regarding Britain's departure from the EU, the Spring Statement included several announcements of interest to the HR community:

PhD and research roles to be exempt from visa caps

PhD-level roles will be eliminated completely from visa caps to boost research and development in the UK, Hammond said. Overseas research activity will also count as residence in the UK for the purpose of applying for settlement, with the hope of ending penalties for researchers spending time overseas conducting field work.

Speaking to HR magazine, Jonathan Beech, managing director of Migrate UK, said that the announcement should be welcomed by employers. “This is a very positive move, and desperately needed. Now that the cap has been removed for both health workers and researchers it seems that the government is certainly heading in the right direction,” he said.

“It gives employers the opportunity to act much more quickly. Whereas previously you might have to wait weeks it’s possible to be able to use one of your quota and issue a visa within a matter of days.”

However, he added that it may be difficult to fill the quota: “I am slightly more sceptical, because the quota of 20,700 skilled workers was only exceeded once since it was introduced last year. So while it will make things quicker I’m not sure if it will have an effect on the availability of researchers.”

Neil Carberry, Recruitment & Employment Confederation chief executive, said: “Even if we get skills changes right UK competitiveness needs to be backed up with flexible immigration policies that meet our economy’s needs. There were some welcome steps today – but the real test is an open approach to attracting people to work in the UK after Brexit. REC data shows that candidate availability has been falling month on month in the last year.”

Funding for apprentices to be brought forward

A £700 million package of reforms to help small firms take on more apprentices, announced in the Budget last year, is to be brought forward to the start of the financial year. “To help small businesses take on more apprentices I can announce that I am bringing forward the £700 million package of reforms I announced at the Budget to the start of the new financial year in April,” the chancellor said.

This means that co-investment levels will be cut from 10% to 5% for small businesses from 1 April, to support more to take on apprentices. Employers will also be able to share more of their funding across their supply chain, with the maximum amount rising from 10% to 25%.

Karen Jones, group HR director at Redrow, said that the changes would have a positive impact on the number of apprentices SMEs can hire. “I warmly welcome the chancellor’s announcement today... A significant 59% of construction SMEs we asked in February this year said that this policy, when implemented, would lead to an increase in the number of apprentices employed in their business. Clearly this move has the potential to boost apprenticeship numbers across the sector,” she said.

The apprenticeship levy has faced ongoing criticism, as the government has shown little progress in reaching its target of three million apprenticeship starts by 2020, and as there continues to be billions of unused levy funds set to expire.

Jones said that the government should consider making the levy still more flexible: “We want to see even more apprentices coming up through the system, and there is still more the government can do to help.

"Crucially, the government should consider expanding the remit for what levy funds can be used for. Vital aspects of hiring an apprentice such as wages, statutory licences to practise, travel and subsidiary costs, as well as the costs for setting up an apprenticeship programme, are all the burden of the SME business. Introducing this flexibility would significantly ease the financial load on the small businesses themselves."

Other vocational skills initiatives 'on track'

Hammond said: “We are committed to returning technical and vocational skills to the heart of our educational system with the new T-Level system on track to deliver the first three routes in 2020, the first phase of the National Retraining Scheme starting this Summer, and the apprenticeship programme rolling out 3 million new high-quality apprenticeships.”

Carberry said: “With 600,000 new jobs to fill by 2023 addressing skills policies will be vital. We will be interested to see what the National Retraining Scheme looks like in practice... And while it is good news that the limited package of reforms to apprenticeships announced in the last Budget are to be brought forward, we still need to have the debate about changing the failing apprenticeship levy policy into a flexible skills levy that really works for business and workers."

Effects of minimum wage to be reviewed

Hammond said he wanted to end the “twin demons” of low productivity and low pay. He said that the government will be commissioning a report into the effects on employment and productivity of the minimum wage in April and that it intends to work with unions on this.

The government has appointed Arindrajit Dube, professor of economics at UMass Amherst, who will work alongside other academics and the Low Pay Commission (LPC), to consider the latest international evidence and recommend whether current economic conditions allow for the rate effective from April 2020 to meet 60% of median earnings by October 2020.

“This study will support the extensive discussions that we will be having with employer organisations, trade unions and the LPC itself over the coming months,” said Hammond.

Hammond also confirmed the LPC’s remit for 2019. A new remit for 2020 and beyond will be decided later this year.

“Good regulation is at the heart of government action on jobs, so firms will also welcome the commitment to consulting on the future of the National Living Wage," commented Carberry.