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Budget puts spring in step of STEM sector

The Chancellor Phillip Hammond has today presented his Spring Budget for 2017 to Parliament, detailing a focus on investment in education and the STEM sector.

Business rates, tax rates for self-employed people and the NHS were also addressed in the Budget.


The National Living Wage will rise from £7.20 to £7.50 in April, for those aged 25 and over, the Chancellor confirmed.

The main rate of National Insurance contributions (NICs) for the self-employed will increase. Currently, the self-employed may have to pay both Class 4 and Class 2 NICs. Class 4 NICs at 9% are paid on profits between £8,060 and £43,000. Class 2 NICs are paid on profits of £5,965 or more. From 2018, Class 2 NICs will be abolished. Class 4 NICs will rise to 10% in April 2018 and to 11% in April 2019.

The government will cut the rate of corporation tax to 19% from April this year and then again to 17% in 2020.

The business rates revaluation takes effect in England from April 2017. In addition to the £3.6 billion transitional relief which was announced in November 2016, the government will support small businesses losing Small Business Rate Relief to limit increases in their bills to the greater of £600 or the real terms transitional relief cap for small businesses each year, providing English local authorities with funding to support £300m of discretionary relief.

Small Businesses and landlords under the VAT threshold will have an extra year to prepare for Making Tax Digital (MTD). Unincorporated businesses that have an annual turnover below the VAT registration threshold will have until April 2019 to prepare before MTD becomes mandatory. Under MTD, businesses will use digital software to keep tax records and update HMRC quarterly.

Tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018. This will reduce the tax difference between the self-employed and those working through a company. The Budget summary statement issued by the Government declares that general investors will need over £50,000 worth of stocks and shares outside an ISA to be affected.


£536 million will allocated for education. £320 million will go to new free schools and £216 million will be put towards maintenance of existing schools.

Investment in technical education for 16-19-year-olds will rise to over £500m. New technical education focussed ‘T-levels’ for technical students will be introduced from autumn 2019. Students aged between 16-19 will be able to choose from 15 different routes such as construction, digital or agriculture. The government will also provide maintenance loans for students doing higher-level technical courses at National Colleges and Institutes of Technology.

Commenting on the education spending pledge, Baljinder Kuller, managing director of online supply teacher portal The Supply Register, said, “While it’s fantastic that the education sector has not been overlooked in what has been hailed by many as a ‘no-frills’ Budget, Hammond’s plans seem to outright ignore the existing issues that school leaders are currently facing.

“At a time when headteachers are protesting about a funding crisis in existing schools, directing funds into new schools seems bizarre – particularly when the National Audit Office is questioning if free schools offer value for money, with half of the 113,500 new places being opened in free schools by 2021 creating spare capacity in nearby schools.

“Aside from this, we need to take into account existing skills shortages in the education sector. Recent news that the number of graduates training to be teachers has fallen for the fourth year running, with a 2,000 shortfall in the number of people starting initial teacher training courses in 2016, is the latest in a long line of indicators that the current teacher recruitment crisis only looks set to worsen. Consequently, this money would be better invested in training and developing teachers to help mend damaged talent pipelines and fill existing vacancies. What’s the point of building new schools if there are not the teachers to fill them?”   

A total of £300m will be invested in new academic research placements. £90m will be spent on providing 1,000 new PhD places, including in science, technology, engineering and maths. A further £210m will be spent on creating new fellowships, including programmes to attract top global talent to conduct research in areas such as bioscience and biotechnology, quantum technologies, and satellite and space technology.

The government will provide maintenance loans for people entering part time degrees, and doctoral loans of up to £25,000 to support higher-level study. The government will invest £5m to increase the number of returnships, helping people back into employment after a career break.

£270m will be used to launch the Industrial Strategy Challenge Fund. Initial funding will support research and innovation in universities and businesses, in areas like: developing artificial intelligence and robotics that will work in extreme environments, like offshore energy, nuclear energy and space; designing and manufacturing better batteries for new electric vehicles that will help improve our air quality and improving medicine manufacturing technologies to speed up patient access to drugs.

Paul Nolan, managing director of engineering and construction specialist Carbon60, part of Impellam, commented on the STEM investment announced in the Budget: “The announcement in the Budget today that the Government will invest more money into STEM related projects is an important step to filling the engineering skills gap that the industry is currently facing. The planned spend will help create new opportunities and support more people to develop their skills in STEM subjects.”

James Smith, managing director of Networkers, said, “We welcome the government’s £300m to support 1,000 new PhD places and fellowships in STEM subjects and the introduction of T-Levels. The skills gap in the technology sector is well documented, and the industry and government desperately need to address this to ensure UK businesses are fit for the future. In our recent Voice of the Workforce survey, 57% of tech professionals said they felt there is a skills shortage in their sector, so this will come as a welcome relief to the companies we work with.”

Chris Rosebert, head of Data Science & A.I at Networkers, added, “It’s good news that the Government is going to invest in developing local skills and technology hubs for A.I. and Robotics. Without doubt A.I. and Robotics are providing the biggest technology leap that we have seen in a very long time and will affect every business and individual. In our recent Technology: Voice of the Workforce survey of over 1,600 tech professionals, 39% of respondents see automation technologies replacing traditional human processes as the biggest disruptor to the industry in the next five years. The fight for skilled professionals is intense and tech hubs like Berlin and Barcelona are becoming increasingly attractive to UK based candidates. Any steps the Government can take to combat this can only be positive.”

Matt Southall, managing director of Wales-based recruitment and training agency Acorn, stated, “Before the budget announcement there were a number of key areas that the sector was keen for the Chancellor to address: labour market policies, apprenticeships and an up-to-date tax system for the twenty first century.

“He addressed all of these issues in one way or another and it will be particularly pleasing to see that the government finally seems to be responding to calls by the recruitment and tech industries to close the skills gap.

“By ensuring that there is a parity of esteem between academic and technical education, and putting financial steps in place to enable access for all students, it is hoped that this will encourage young people to grasp the opportunities that will be available and narrow the skills gap.

“The Chancellor also reiterated the commitment to apprenticeships, which is especially relevant in National Apprenticeship Week. With only a few weeks to go until the Apprenticeship Levy kicks in, the Government is committed to offering an additional 3000 apprentices by 2020.”

Lesley Phillips, co-founder and co-director of Prospero Group, said, “Vocational T-levels will be very helpful as currently technical student offers are still limited. People say 'most of the jobs in the future haven’t even been created’ – but we know a good majority will be ‘technical’. As employers, we welcome more applicants with work placement experience rather than pure academics, and we see more and more employers responding positively to applicants with ‘life experiences’ and an understanding of the ‘real’ workplace and the skills required to thrive in the technical / work environment.


“Maintenance loans are a definitely a step in the right direction - beginning to redress the balance between technical and academic funding. The future for technical careers is very exciting, and as a country we want to be a leading force. Not to mention the investment in technical PHD academic places. We support anything that encourages more students to apply for higher Ed technical degrees. As a country, we will need to build our technical education, skills and educational infrastructure so we develop from within once we exit Brexit with a view to building self-reliance.”


She added, “I am questioning whether we are robbing Peter to pay Paul because we need to invest in pre–16 education as well as post- 16. In light of the ongoing schools’ National Funding Formula the numbers need to be examined to see whether this budget is increasing investment or just moving it around. Not to mention the rather confusing debates that the funding formula will negatively affect school maintenance, yet this budget then aims at boosting school maintenance funding. We as an agency need to examine and work out how to work with schools, colleges and universities to help bridge funding gaps.”

Oil and gas

The Chancellor also announced plans to help the North Sea oil and gas industry. The Government will investigate the use of tax incentives to make it easier for operators to sell oil and gas fields, helping to keep them productive for longer.

To determine the best approach, the government will publish a formal discussion paper alongside the Finance Bill on the case for allowing transfers of tax history between buyers and sellers. The government will also establish a new advisory panel of industry experts to ensure appropriate scrutiny of the options. The review will report at Autumn Budget 2017.

Sean Buchan, managing partner – EMEA at executive search global energy specialists Ducatus Partners, commented on plans for oil and gas: “The North Sea oil and gas sector has faced stark challenges during the downturn due to high operating costs and the maturity of the basin. The tax incentive measures announced today, particularly around decommissioning, should help increase M&A activity with new ambitious owners of key assets emerging. As a result, operators and service providers will require a novel approach to sourcing the right leadership talent with the capabilities and experience to drive the kind of organisational and behavioural change needed to succeed in this climate. But what’s more, the industry will also require an increase in the adoption of innovative technologies in addition to bold leadership to make a sustained impact on the bottom line.”


£425m is to be invested in the NHS in the next three years. £325m will be invested in a first set of the best local Sustainability and Transformation Plans (STPs) to improve patient services in local regions.

£100m will also go to A&E departments in 2017-18, to help them manage demand ahead of next winter, and help patients get to primary care faster. For example, it will provide more on-site GP facilities and more space in A&E units for assessment of patients when they arrive.

The Chancellor confirmed that £2 billion would also be spent adult social care over the next three years in a bid to help councils to provide high quality social care to more people and help to ease pressure on the NHS.


Olivia Spruce, operations director of TFS Healthcare, commented, "These are all welcome investments into our Health service, but I would like to see some real investment and financial incentives to attract more entry level workers into the Healthcare system. More on-site facilities and more space is great, but what about investments in staff to facilitate this?"

What did the recruitment industry think overall?

Samantha Hurley, operations director at The Association of Staffing Companies (APSCo) said, “While there was no further mention of the off payroll rules in the public sector in the budget speech, a policy paper published immediately afterwards suggests that the only change to the draft legislation is that it will be optional to take account of the contractor’s expenses when calculating the tax due, operating on the premise that contractors will be on the same basis as employees.   Within this the Government published an impact assessment with which we strongly disagree.  It states that: ‘Affected businesses will incur one-off costs for familiarisation with the new rules’. In reality, costs will be on-going, which materially undermines the conclusions of this assessment.  The Government also states that “smaller agencies may be disproportionately affected by familiarisation costs if they provide workers to the public sector.”  Despite the fact that the Chancellor said today that he is ‘determined to make Britain the most attractive place to start up and grow a business’, the Government actually admits that: ‘These costs to smaller agencies may be significant.

“We were disappointed that, despite press reports to the contrary, a Government review into how different workers are taxed failed to materialise. APSCo has been lobbying for a number of years for a complete review of tax and national insurance contributions for Personal Service Companies (PSCs) and the self-employed, rather than the ill-conceived bolt-on legislation such as the public sector off payroll rules.

“However, we eagerly await the results of the Matthew Taylor Review referenced by the Chancellor – and at which APSCo was invited to present evidence. We hope that the review will address the issue of differentiation between the professional and potentially vulnerable ends of the labour market, simplify employment status legislation and suggest a vehicle to allow professional contractors to work through whichever employment model they choose. However, we are very concerned that the Chancellor made clear that preliminary thoughts from the review suggest that the main drive for individuals to incorporate as companies is to maximise tax savings. In the professional sector this is simply not the case – these are bona fide business to business relationships where the individual has no guarantee of continuity of assignments, has genuine business risk and liability – and none of the benefits enjoyed by permanent employees.

“We welcome the T levels initiative and the commitment by Government to improving the technical skills base of UK PLC by getting young people into technical careers and improving the perception of their education – however our members would argue that the skills gap is very much here and now.”


Those working in the supplier industry were apprehensive about the Budget.

Martin Hall, Head of Compliance and Risk at ICS, said, “There was little mention of IR35 in the public sector during the Budget, the new legislation will be implemented next month as planned, without delay. One minor addition is that the fee payer has the option to consider a worker's expenses when making a payment to a personal service company inside IR35.


“The aim is to ‘level the playing field’, which means they want to ensure anybody doing a job, regardless of whether they are self-employed, employed or have their own company, is paying the same tax. The increase in National Insurance for self-employed and the cut to the dividend allowance are examples of this.


“On a more positive note, a number of SMEs will be relieved to hear about the solution to the impending rises in business rates, as Mr Hammond announced £435m of measures to help ease the impact of the rates rise on pubs and small businesses.


“The issue of tax avoidance also came up. Which, of course, is a talking point in our industry, as there is always the chance that people will hear ‘less tax’ and quickly sign up to such a provider, but they might not necessarily understand what exactly it is they have signed up for. Therefore the clampdown is a much-needed development and it’s important that people know who they’re working with, and that they are compliant.”  


Julia Kermode, CEO of FCSA, said, “The Chancellor wants to grow a fairer economy but there is nothing fair about today’s announcements.  Once again, microbusinesses and the self-employed are coming under attack for not paying enough tax with Mr Hammond believing that employees are being penalised by an unfair system.  This is wholly unjustifiable and today’s measures are targeting the wrong people.  We have seen a raft of tax policy changes penalising self-employed professionals over the last few years leaving them financially worse off and under-valued by a Government that purports to recognise the important role they have played in the country’s economic recovery to date.  It would have been sensible for the Chancellor to await the full outcome of Matthew Taylor’s review that is due out in the summer before he announced today’s kneejerk moves that will see policy changes that will have serious negative implications.”


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