CIPD responds to budget
Responding to today’s Budget with a welcome for the increased Investment Allowance for business, but concern that there was insufficient action on skills to address the UK’s poor productivity performance, Mark Beatson, Chief Economist at the CIPD, the professional body for HR and people development, said, “Our Budget submission highlighted the importance of raising the UK’s productivity, but this was not the focus of the Chancellor’s Budget today.
"We will not get sustained productivity growth without more investment by business, so we welcome the Chancellor’s decision to extend the Annual Investment Allowance and double it from £250,000 to £500,000 – a measure that should give investment a kick start.
“However, business will only reap the full economic benefits of investment in plant and machinery if they also invest in the training, people development and organisational change to ensure new technology is used effectively. While there was an extension of the current arrangements to increase the number of Apprenticeships, we didn’t see a sufficient level of ambition in raising the UK’s skills capabilities. We will continue to press the case for a fundamental review of UK skills policy, together with a new focus on the workplace, the nature of jobs for the future, and how skills are being utilised."
Reflecting on the economic forecasts and pay predictions included within the Budget, Beatson added, “The economic forecast released by the Office for Budget Responsibility expects output growth in 2014 of 2.7%, a little higher than the 2.4% anticipated at the of the Autumn Statement. The economy grew more strongly in the second half of 2013 than the OBR anticipated, and the new forecast assumes this stronger momentum will take the economy through 2015 and into 2016. However, the OBR’s underlying view of the UK’s economic potential has not changed, which means that we see a slight reduction in growth to its assumed trend rate of 2.5% by 2018.
“The OBR forecast for earnings growth is very similar to that made at the time of the Autumn Statement and has average earnings increasing by inflation, as measured by the CPI, in every year from 2014 onwards. This reflects an underlying assumption that the UK’s productivity will start to increase more quickly in 2014. However, average earnings between now and 2018 will not keep pace with inflation if it is measured by the RPI because interest rates are expected to rise. So we should expect no quick end to concerns about stagnant living standards.”
Youth employment and careers advice
Katerina Rüdiger, head of skills and policy campaigns at the CIPD, added:
“The CIPD welcomes the announcement of additional funding to support the creation of 100,000 more apprenticeships among small businesses. We know that many SMEs are often reluctant to take on young people so this funding will encourage more small firms to invest in the development of the next generation so they can learn and earn on the job and provide the skills the economy needs for the future. However, we still need to see a more concerted effort to bridge the gap between school and work, so that young people’s aspirations are better matched to the future skills needs of employers. The targeted funding for the National Careers Service we called for would have boosted their work with schools, and could have improved the labour market prospects of more of the UK’s young people."
Pensions and retirement
Charles Cotton, Pensions and Reward Adviser at the CIPD, said:
“The decision to remove compulsory annuitisation and to reduce the £20,000 requirement on income drawdown should make defined contribution (DC) pensions a more attractive workplace benefit and encourage greater saving.
“Given the additional freedom that workers approaching retirement now have, it is wise for the government to offer them free impartial advice so that they are able to make informed decisions.
“However, if workers and their employers are to be able to contribute more to the pensions of future generations of pensioners, we’re going to need to see much more sustained action to boost UK productivity.”