Does the Autumn Budget ‘fix the foundations’?

Employers bear much of the financial burden for providing the conditions for the UK’s economic growth in Labour's first budget this parliament. Yet its measures seek to benefit individuals, boost near-term growth and shore up efforts to safeguard workplace wellbeing and inclusion.

Ruth Holmes

30 October 2024

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The government’s £40bn tax-raising measures announced today are set against the election manifesto promise to not increase taxes on working people.In the long-awaited budget focused on how to backfill a £22bn shortfall in funding that changes the rules on public borrowing, Chancellor Rachel Reeves's focus was always going to be how to achieve this while waking the UK’s economy up from the past decade’s somnolent economic growth and productivity.On top of the much-trailed rise in the hourly National Minimum Wage (NMW) to £12.21 for over-21s from April 2025, the Chancellor is also moving the NMW moving towards an equalised, all-age rate and raised the NMW for 18-20-year-olds by 16% to £10 an hour. Apprentices benefit too with an 18% uplift to £7.55 an hour.The Chancellor is also asking employers, and ultimately employees, to pay more National Insurance. This will rise to 15% from 13.8% from April 2025 with a reduced secondary threshold of £5,000. Acknowledging the impact, Rachel Reeves defended the increases. “I know that this is a difficult choice. I do not take this decision lightly.”Overall, the Chancellor’s package of measures is estimated by the OBR to see the economy grow by 2% in 2025, slightly faster than previously predicted. However, the overall impact on growth by the end of this parliament for this first Labour budget for 12 years is likely to be neutral at best.

Autumn Budget reactions

Ahead of its annual conference in Manchester next week and pre-budget, the CIPD highlighted three areas it hoped Rachel Reeves budget would cover: skills reform, innovation and enforcement. “To kickstart economic growth, there is an urgent need for measures that encourage employers to invest more in skills, employee wellbeing and technology adoption across the economy,” said Ben Willmott, the CIPD’s head of public policy.Commenting on schemes launched before Budget day, including those to “make work pay”, the CIPD said more joined-up support for people’s wellbeing and skills development can play a positive role in helping more people with health problems return to work.“This development [the launch of Get Britain Working scheme] signals a welcome intent to bring together national and regional approaches to improving the health of the workforce and boosting labour market participation,” said Ben Willmott. “It will also be crucial to ensure that there remains a strong focus from the government on improving access to occupational health services for those in work. This will ensure that fewer working people fall out of employment due to a disability or long-term health condition."After Rachel Reeves had delivered her speech, Ben Willmott, head of public policy at the CIPD, the professional body for HR and people development, responded to the extensive measures it contained. “The budget will provide welcome support for some working people and for hard-pressed public services,” he said. “However, the increased business costs announced in the budget, alongside the raft of changes planned to employment regulation, are bound to act as a headwind to growth. There are real risks that together these measures could disrupt many employers’ recruitment and skills investment plans."On rises to the NMW, he said improving productivity in low-wage sectors “will need to be a priority” for the government’s new industrial strategy as well as high-growth potential industries. “It should also be recognised that previous significant increases to the National Minimum Wage haven’t acted as a catalyst to businesses becoming more productive.“This budget has cemented the Chancellor’s ambition to boost economic growth, but it’s essential that this also targets the ‘everyday economy’ sectors that employ millions of workers, not just those on the sharp edge of innovation and R&D. This will help to raise productivity and help employers to manage the cost of NICs rises and other measures introduced in today’s Budget.”

Additional focus on workplace health

The Society of Occupational Medicine (SOM) joined the CIPD to welcome the focus on supporting people into and remaining in work. Nick Pahl, CEO of SOM, said while the increase in Carer’s Allowance was a positive move, workplace health interventions are vital for helping people stay in paid employment and reducing the strain on the public purse.“Over 2.8m people are out of work due to ill health with a potentially significant increase forecast in benefit costs,” said Nick Pahl. “There is a key role for occupational health to support people staying and returning to work. SOM wish to see government significantly supporting people in work with health conditions stay in work, facilitate universal access in occupational health and review the fit note.“We look forward to responding to the Industrial Strategy consultation, working with Skills England and the DWP/DHSC work and health unit to support people stay and return to work.”Karl Bennett, wellbeing director at Perkbox Vivup and UK chair of the employee assistance body, EAPA, added that the extra funding for UK public health services is welcome, it needs to be combined with workplace policies to look after the people who look after people."While additional funding for the NHS is always welcome, today’s budget simply doesn’t acknowledge the urgent needs of those working on the frontline,” he said. “With three in four NHS staff already grappling with mental health challenges, the strain on our healthcare workers is undeniable. With winter – and all the risks it brings – approaching, these pressures will only intensify. As it stands, the current measures fail to provide the substantial, long-term support needed."The answer isn’t simply putting more money into the system. It’s about implementing the structures which ensure NHS staff can care for those who need them, without sacrificing their own wellbeing. Our healthcare workers are the backbone of this country, showing up day after day for us. It’s time the government showed up for them, putting in policies which prevent them being burdened with the emotional costs of simply surviving."The budget also confirmed the £240mn fund to support people who are economically inactive, getting them back into work and reducing the benefits bill. Janine Chidlow, EMEA managing director at outsourced recruiter WilsonHCG, said anything that helps support people into work is welcome. However, as this investment is rolled out, it is crucial that appropriate support mechanisms and measures are put into place – including on workplace culture.“There’s a huge percentage of individuals who want to work, but can’t because they don’t have access to the support structure they require,” said Janine Chidlow. “That’s what needs to change in corporate cultures first. The business community must also recognise that people who are being brought back into work following an extended absence will have gaps in their CV and require tailored training and development programmes. If we’re to help those with disabilities and long-term illness into work, the stigma around career breaks and the focus on prior experience needs to be truly shifted.”

An historic budget for inclusion?

In Prime Minister’s Questions before the Autumn Budget announcement, Prime Minister Sir Keir Starmer and Leader of the Opposition, former PM Rishi Sunak, highlighted how the UK was a place where diversity and inclusion where everyone can flourish.It set the stage for Rachel Reeves being the first female Chancellor of the Exchequer in the role’s 800-year history as she set out her plans to get the best return on the government’s spending and taxation.Looking to Sir Keir Starmer's “better days ahead” Chancellor Rachel Reeves said the Autumn Budget will “fix the foundations” and create an “economy that is growing and creating wealth and opportunity for all because that’s the only way to improve living standards.”Opening her historic budget, she said her aim is to restore stability and ensure change is felt. This included acknowledging that this is “the first budget in more than 14 years delivered by labour government and first in country’s history to be delivered by a woman”. In a message to young girls, she said: “Let there be no ceiling on your ambition, your hopes or your dreams. Fairer society and stronger generation to next generation of women.”

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