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Reaction to the 2011 Budget

Chancellor's 'Budget for Jobs' welcomed by business, but must go further says REC

The Recruitment and Employment Confederation (REC) has today welcomed the pro-employment provisions in Chancellor George Osborne's budget, but cautioned that more must be done to boost job creation.

In his initial reactions to the Budget statement, REC Chief Executive Kevin Green said:

Recruiters will be pleased to see the concrete steps announced to help businesses grow and take on new staff. We are delighted that the Chancellor has listened to recruiters and the wider business community and taken faster action on dropping corporation tax, which will be welcomed by firms across the country.

We are also pleased to see that the Government has prioritised youth employment with a new 300 million package to help young people into work. Our Youth Employment Taskforce has urged Government to take decisive action on the rising number of young people outside of education or employment, and it is good news that 40,000 new apprenticeships and 100,000 work experience opportunities are coming onboard.

However, we urge the Chancellor to consider further fiscal incentives to help employers take on young people, such as a National Insurance holiday of at least one year for SMEs who take on additional young people.

Kevin Green added: Despite the positive direction of travel in this budget, there are areas where more must be done. We were disappointed to see the Chancellor has maintained the planned increase on National Insurance contributions, which drive up the cost of taking on new staff, and has failed to look at current barriers in the benefits system that prevent unemployed people from taking on short-term job opportunities.

The Chancellor could also have provided assurances that Government will do all it can to limit any negative impact of the Agency Worker Regulations, and reject calls for further goldplating. It would also have been helpful to outline a full plan for the Employment Law review, to give businesses certainty on what areas will be looked at during this Parliament.

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FCSA RESPONDS TO 2011 BUDGET

Stuart Davis, Chair of the Freelancer and Contractor Services Association, said:

Were pleased that the Chancellors Budget for Growth has sought to reduce red tape and ease the tax burden on small businesses, which will be fundamental to the UKs economic recovery. In particular, we welcome the decision to retain IR35 but improve the way it is administered, as we agree that abolition could increase risks and confusion for the flexible workforce. But yet again, the needs of the flexible workforce have not been given due attention in the Budget, despite the fact that 4.6% of the UK workforce more than 1.4 million people are freelancers and contractors.

The reduction in the main rate of corporation tax is very welcome, but it is not clear which businesses this will support most, given proposals to harmonise rates paid by SMEs and larger businesses. And while we are glad that the Government is adopting a cautious approach to the merger of NICs and income tax rates, any future alignment will be bad news as it potentially reduces the incentive to accept the greater risks that freelancing and contracting involves.

There remains an ongoing lack of clarity for the flexible workforce, putting up barriers for the genuinely self employed and disincentivising freelancers and contractors choosing to work in this way.

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HAYS RESPONDS TO THE BUDGET

Hays, the leading recruiting expert, welcomes the Governments new measures to support small businesses and its strategy to address UK skills shortages. But more needs to be done to ensure growth, according to Charles Logan, Director at Hays.

Commenting on todays Budget, Charles Logan says: The greatest problem is existing employment legislation and the abundance of red tape that is really preventing growth. We need the Government to act quickly with regards to its plans to scrap 350m of business regulation and work with employers to ensure any new and existing regulation is easy to implement and supports both employers and employees.

The implementation of the Agency Workers Directive needs to be a priority. UK employers are dependent on a flexible labour market and dont need any further administrative burden so we urge the Government to clarify the implementation of the new regulation. This is essential if we are to support small businesses to grow, ensure organisations have access to sufficient resources when required and promote new job creation.

Growth also depends on addressing the skills shortages that we now face in the UK. It is positive to see that the Government plans to fund 24 university technical colleges, create 40,000 new apprenticeships for young people and funding for 100,000 work experience placements. But these strategies will only be successful in closing the skills gap and reducing high levels of unemployment if we continue to engage with young people and the jobless to encourage them to train and develop skills in the more in demand areas. 100m investment in new science facilities is also a step in the right direction given the lack of students emerging with key STEM (Science, Technology, Engineering, and Mathematics) skills. Ensuring the UK is an attractive place for businesses to invest will kick-start job creation and secure our economic growth.

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Budget quotation from Brian Wilkinson, UK Chief, Randstad.

Randstad welcomes the Chancellors plans to reduce youth unemployment by creating 130,000 new work experience and apprenticeship positions over the next few years. However, given that there are over three quarters of a million unemployed young people, it is vital that confidence is built and maintained in the private sector so that it can generate the jobs required. Temporary work will be of critical importance. Such assignments have always been a vital route to work for unemployed youth and as well as for the long-term unemployed and about a third of temps have been able to use their experiences to find permanent work.

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FULL CBI REACTION TO THE BUDGET

The CBI today gave its full reaction to the Budget.

John Cridland, CBI Director-General, said:

This Budget will help businesses grow and create jobs. The Chancellor has made clear the UK is open for business.

The extra 1p cut in corporation tax will help firms increase investment. Meanwhile, significant changes to entrepreneurs taxation will rightly focus much-needed support on businesses with growth potential.

Reductions in regulations on businesses and the promise of a faster planning system will provide relief to companies trying to take on staff and invest.
Support for manufacturers through the Climate Change Agreements will help them manage energy costs, which is particularly important given that the Government is pushing ahead with a carbon price floor.

Businesses and consumers will benefit from reduced fuel taxes, but the increased tax on North Sea oil and gas could be counterproductive, and will create uncertainty for future investment.
Commenting further, Mr Cridland added:

On the economy:

The fall in economic activity late last year has forced the Chancellor to moderate his short-term growth forecasts, but we agree that the recovery is likely to strengthen into next year. Higher inflation has increased the headline deficit, but the Chancellors plan to eliminate the structural deficit over the course of this parliament, which businesses support, remains on track.

On business taxes:

The extra 1p cut in corporation tax will help firms increase investment. Meanwhile, significant changes to entrepreneurs taxation will rightly focus much-needed support on businesses with growth potential.
Measures to increase the certainty of the tax treatment of foreign profits increase UK tax competitiveness. The agreed effective rate for overseas group financing will make the UK a more attractive location for multinational businesses.

Businesses will be encouraged by the confirmation that the 50p top tax rate, which deters internationally-mobile talent, is only temporary. We look forward to further details of when it will be removed.

The reduction in excise duty and the postponement of the escalator will be welcome at a time when businesses and consumers are facing such sharp increases in fuel costs. However, the 2bn windfall tax on North Sea oil and gas, which has been levied to pay for this, creates uncertainty for future investment and hits a sector which already pays a significant amount of total tax.

The banking levy is an additional cost to doing business in the UK, so it is important that international agreements are put in place quickly to avoid banks paying double taxation and to ensure that the UK remains an attractive global financial centre.

The proposed simplification of National Insurance represents a significant improvement, increasing the transparency of the tax system, removing loopholes and reducing compliance costs.

On business regulation:

The Governments commitment to reducing red tape will increase the amount of time that managers spend growing the business and creating jobs.
The moratorium on new legislation will be welcomed by smaller firms. The Government should think small first when it comes to making employment law - if it works for the smallest firms, then it works for businesses of all sizes.

On Housing:

Support for first-time buyers will inject confidence into the housing market and could create thousands of construction jobs. However, this is only a short-term solution as the scheme only runs until the end of next year. We need a longer-term approach to meet our growing housing needs.

On support for growing businesses and smaller firms:

Widening the scope of the Enterprise Investment Scheme will bridge the funding gap for small and medium-sized businesses, and could unleash a new wave of finance for the most entrepreneurial firms.

Doubling the lifetime limit on entrepreneurs relief within Capital Gains Tax will encourage them to keep on innovating and growing their businesses, as well as providing much-needed investment for start-ups.

Increasing the SME Research & Development tax rate will make the UK a more attractive place to invest, reducing the cost of doing R&D by a quarter by 2012-13.

On public sector pensions:

The Chancellor is right to say that Lord Huttons review should be implemented in full. It will secure affordability for taxpayers and good pensions for employees. Changes announced to the discount rate will help to close the yearly gap between both employee and employer contributions and the value of pensions promised by the Government.

On the low carbon economy:

Support for manufacturers through the Climate Change Agreements will help them manage energy costs, which is particularly important given that the Government is pushing ahead with a carbon price floor.

The Green Investment Bank will play an important role in mitigating some of the risks for companies planning major low-carbon investments. The additional 2bn is welcome, but the bank should have powers to borrow from the outset to give investors confidence.

On planning:

The Chancellor is right to make the link between an effective planning regime and economic growth. This sends the right signals to attract the 200bn needed for the UKs national infrastructure upgrade.

On enterprise zones:

The new enterprise zones could provide positive incentives for local authorities to promote development, allowing the Government to carry out a real-time experiment on what actually works as a spur to economic activity.

On Air Passenger Duty:

Freezing air passenger duty is a boost for tourism and business travel. At a time when we are trying to encourage exports, it is good that the Government has avoided changes that could have damaged air freight.

On improving our skills base:

Increased funding for apprenticeships is good news, but employers also need bureaucracy to be cut to encourage take up.

More University Technical Colleges will support high-quality learning, boosting the number of science and maths graduates that businesses really need.

More work placements will raise employability skills amongst young people.

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BUDGET REACTION BRITAIN OPEN FOR BUSINESS UNLESS YOU ARE A BANKER

The decision by George Osborne to adjust the bank levy to fund corporation tax reduction has been met with scepticism by a City recruiter.

Adrian Kinnersley of Twenty Recruitment Group thinks it is time to stop bashing the banks. Financial services is the one single area in which we can claim to be a global leader but the UK is the only G20 country where there is a bank levy or a bonus tax. Additionally the Banking Commission is poised to deliver its report on restructuring next month again no other G20 economy has gone that far shouldnt that tell us something? We have already had whisperings that HSBC may defect to Asia and you do have to ask why large institutions would want to base themselves in the UK.

Its all very well to blame the banks for all the woes of the world but the financial services sector is integral to the economy - and while there is a need for a rebalance to reduce reliance on the City that shouldnt be done by patting other sectors on the head and then bashing the banks. This is not about whats best for the country its simply political grandstanding.

Kinnersley is also sceptical about the concept of a green investment bank. I think its a great idea but if its going to work it has to be exceptionally well managed that means they are going to need top dollar investment banking professionals who have the knowledge and the expertise it will be interesting to see how they go about attracting them.

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Adecco's response to today's budget

Steven Kirkpatrick, Managing Director, Adecco - the UK's largest
recruiter:

"In light of the current levels of unemployment, it is disappointing that we did not see more efforts to boost jobs in today's Budget. While we commend the steps introduced to assist young people seeking employment - from funding increased work experience places to additional apprenticeships - there was little evidence of any proactive and practical measures to assist the wider workforce.

"I had hoped to see the Chancellor commit to reducing the complexity surrounding the impending Agency Workers Regulations (AWR), removing any unnecessary barriers to the future employment of temporary agency workers. Today's Budget was a missed opportunity for the Chancellor to demonstrate support for this crucial element of the workforce."

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Badenoch & Clark: Budget for Growth?

Government isnt doing enough to help people find employment

In reaction to the Budget, Lynne Hardman, managing director of professional services, at recruitment consultancy Badenoch & Clark, comments:

Unemployment is at a 17 year high, yet the Chancellor has delivered little within this Budget to address it. The 40,000 additional apprenticeships and 100,000 work experience places announced are a positive move, but we need to guarantee jobs at the end of the schemes. Without a greater focus on employment, I fail to see how this can be a Budget for growth.

In our recent Employment Study, three quarters (75.9%) of respondents told us that they think the Government isnt doing enough to help people find employment. The same survey highlighted employment related initiatives as the top issue (55.1%) people wanted to see addressed today. This was listed above welfare reform, tax incentives for business and both income and VAT rates, amongst others.

We would like to see specific incentives for business that enable employment opportunities to be created. Cutting the red tape will help but clearly more is required.

The impact of the public sector cuts is being felt across the country and there are further cuts still to be implemented. We are yet to see whether private sector growth will be able to absorb the job losses within the public sector.

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