Key announcements for HR professionals from chancellor George Osborne
The chancellor’s combined Autumn Statement and Spending Review will have surprised many, and not just for its spectacular U-turn on scrapping tax credits.
With the UK’s finances in better shape than expected, George Osborne was in a position to say there would be no cuts to the police budget, as well as announcing more investment in infrastructure and funding for science research and development. However, Mark Beatson, chief economist for the CIPD, questioned whether it could have contained more investment in much-needed skills for the UK’s workforce. “We need better human capital just as much as we need housing, roads or research facilities,” he said.
Tax credit U-turn
The chancellor’s decision to leave tax credits intact rather than cutting them was the shock announcement of his speech to parliament.
Proposals to cut tax credits for working families were unveiled in July’s post-election Budget, raising concerns that working people would be worse off.
But today, Osborne told MPs in the House of Commons that a £27bn improvement in public finances, as revealed by the Office for Budget Responsibility, “means we can help on tax credits”.
Osborne said: “I’ve had representations that these changes to tax credits should be phased in. I’ve listened to the concerns. I hear and understand them. And because I’ve been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether.”
Critics of cutting tax credits had previously warned that it could force working people into hardship as the benefit is used to top up low wages.
Dave Prentis, general secretary of Unison, welcomed the move to leave tax credits in place as he said nearly three million working families rely on them to make ends meet.
However, he added: “The real credit for today’s decision goes to the many brave parents who talked publicly about their already stretched finances, and the distress and hardship the cuts would cause. Their stories convinced the government this unfair tax credits grab was wrong.”
Prentis continued: “The government must now do more to encourage employers to pay staff more – at least the real living wage of £8.25 an hour.”
However, the chancellor admitted that tax credits would eventually be “phased out anyway” as the government rolls out its welfare reforms under Universal Credit. This means that the tax credit taper rate and thresholds remain unchanged in the longer term.
Cost of apprenticeship levy revealed
Since the apprenticeship levy was first announced in July’s budget, large employers have been waiting for details of the cost, which will fund growth in ‘earn as you learn’ training to total three million apprenticeship placements by 2020.
Today Osborne announced that the levy rate will be 0.5 per cent of an employer’s paybill when it comes into force in April 2017. This rate is expected to raise £3bn a year, “with those paying it able to get out more than they put in”, the chancellor said.
“Every employer will receive a £15,000 allowance to offset against the levy – which means more than 98 per cent of all employers, and all businesses with paybills of less than £3 million, will pay no levy at all.”
Answering concerns that the levy could fuel a boom in poor-quality training, the chancellor said that the funding per place would rise “to make sure they are high-quality apprenticeships”, which will be overseen by a new business-led standards body to be created by the business secretary.
“As a result, we will be spending twice as much on apprenticeships by 2020 compared to when we came to office. It’s a huge reform to raise the skills of the nation and address one of the enduring weaknesses of the British economy.”
Beatson commented: “The apprenticeship levy could prove to be a double-edged sword in that the new charge of 0.5 per cent of payroll may improve the quality of apprenticeships but it could also squeeze out training opportunities for other sections of the workforce.
“If we are to raise the productivity of the UK, we need to see a fundamental review of the skills policy from government and for organisations to invest more in training and skills development for the many, not just the few.”
The Association of Employment and Learning Providers chief executive Stewart Segal said: “The apprenticeship levy will be set at the rate of 0.5 per cent of payroll, which will mean that the majority of large employers will be encouraged to increase their apprenticeship programmes. It will also apply to more businesses than we expected because the £3 million benchmark means that employers with fewer than 150 employees could be included.”