Yesterday’s Spring Statement from chancellor Rishi Sunak has received mixed reviews from experts around how helpful it will be for businesses.
In his address to the House of Commons – which serves as an update on the health of the UK economy and public finances – Sunak announced new measures including an increase in the National Insurance threshold and a review of skills and training within businesses.
People Management takes a look at what was and wasn’t covered, and the ramifications for employers.
A ‘consideration’ of skills reform…
The chancellor acknowledged that the UK “lags” in adult technical skills compared to its international peers, and said the government would consider whether the current tax system, including the apprenticeship levy, was “doing enough to incentivise businesses to invest in the right kinds of training”.
This scrutiny was generally welcomed by experts; however, all agreed that the government has not done enough to improve skills training.
While addressing the apprenticeship levy presents an opportunity to rethink how to boost employer investment in skills, Ben Willmott, head of public policy for the CIPD, warned that “more needs to be done to encourage and enable employers across the economy to invest more in the technology, management capability and workforce development”.
Willmott explained that there was a need for further thinking on how employers can meaningfully engage with the further education system and on other areas of skills policy, adding that local business support services for smaller businesses are also lacking.
…but not enough on reskilling marginalised groups
The government also needs to address imbalances in skills training – particularly for groups most affected by the pandemic such as older workers, disabled people and those with long-term health conditions – through major reforms, including to the apprenticeship levy, added Naomi Phillips, deputy chief executive and director of policy and research at the Learning and Work Institute.
She said that the government’s previous support for employer training had “reinforced existing inequalities in access and opportunity, rather than tackling them”. “More support is needed for people who have fallen out of the workforce who can return but need to retrain or reskill,” she said.
A rise in the NI threshold…
Sunak announced that National Insurance (NI) starting threshold will rise to £12,570 from July, claiming this would amount to a “tax cut for employees worth over £330 a year”. Under this new measure, everyone earning below £32,000 will be protected from the increase in NI rates (from April, those earning £9,880 and above will pay 1.25p per pound more in NI contributions) and the income tax threshold freeze.
This announcement came as a surprise to Tania Bowers, global public policy director at the Association of Professional Staffing Companies (APSCo), who said the organisation wrote to the chancellor earlier this year, calling for a delay to the NI contributions increase due to the Health and Social Care Levy.
But, she said, the measure “doesn’t support the needs of the wider workforce and will not mitigate the tax increases for most agency workers and independent contractors”.
Nor will the NI changes help larger businesses, said Tim Stovold, head of tax at Moore Kingston Smith, explaining that the higher threshold will only apply to NI contributions paid by employees and the self-employed. “The employer’s liability will remain due at the new higher rate of 15.05 per cent on employees’ earnings above £9,100 per year,” he said.
Melissa Blissett, senior consultant on pay gap analytics at Barnett Waddingham, was positive about the changes to the NI threshold, saying it “will particularly support women, who make up a higher proportion of lower earners and have been left especially financially vulnerable following the pandemic”.
“The change could make it more affordable for women to contribute more to their pensions, and will make salary exchange more effective,” she explained, adding that there was still a long way to go to solve the issue and employers need to do more to understand and reduce their gender pay gap.
Sunak also announced an increase of the Employment Allowance to £5,000 from April, but Stovold said that it “only applies to employers who paid less than £100,000 of employer’s NICs last year, so larger employers will miss out”.
…but no mention of sick pay
While the increase in the NI contribution threshold goes some way to help support working people, Wilmott said it was disappointing that nothing was announced about reforming Statutory Sick Pay (SSP).
“Workers shouldn’t have to make a choice between their health and earning a wage, especially as the pandemic continues and infections remain very high,” he said, arguing there was still an urgent need for the government to review SSP with a view to raising it to at least the equivalent of someone earning the national minimum wage or national living wage.
…and not enough on the cost of living crisis
Another issue was that businesses themselves are likely to struggle during the cost of living crisis, according to Alan Price, group chief operations officer at Peninsula and CEO of BrightHR.
"In addition to increased outgoings, employers are having to compete with record-high starting salaries, and juggle pay review requests coming in thick and fast from employees who are trying equally hard to meet inflated prices,” he said.
Price warned that firms without extensive financial resources may find it difficult to meet employees' expectations and risk losing key people, and suggested affected firms review wider approaches to motivation and satisfaction, such as flexible or hybrid working arrangements, enhanced holiday entitlements and dedicated mental health days.