UK Pre Budget Report: A budget for jobs?

Thursday, December 10th, 2009 - credit crunch, economics, Employment, Legal, politics

UK Pre Budget Report: A budget for jobs?

British Parliament

UK Chancellor Alistair Darling’s British Pre-Budget Report included a number of initiatives which will affect the employment market. But are the overall measures positive or negative on employment?

UK Pre Budget Report

The measures announced were:

  • All national insurance rates to rise by a further 0.5% from April 2011, raising £3bn a year. NI is a virtual tax on employment affecting employer and employee. The rate rise takes the effective tax rate for those earning over £7000pa to 32%
  • Basic state pension will rise by 2.5% in April 2010
  • Child and disability benefit to rise by 1.5% in 2010- why do I mention this? It is key to working women
  • Contributions to public sector pensions to be cut by £1bn a year- and I though we had a burgeoing pensions problem?
  • All public sector pay settlements to be capped at 1% for two years from 2011
  • Under-24s to be guaranteed work or training after six months out of work – brought forward from April 2010 to January 2010
  • Training or education guarantee for 16 and 17-year-old to be extended to 2010 – brought forward from April 2010 to January 2010
  • £160m investment in low-carbon and renewable projects

A budget for jobs?

The key direct employment initiative is that for the Under24’s, which together with the initiative brought forward for 16-17year olds will attack the now 1million under 24’s who are unemployed in the UK. The offered work or training and its quality is a fair debate, but it is at least positive.

The negative is that associated with the presently bloated public sector pay bill. Much like an proverbial elephant in the room problem, everyone knows that the public sector budget must be cut post a 2010 election, which must relate to job cuts. Secondly, a nominal 1% pay rise for all ignores the number of low paid workers in the public sector. Both the Conservatives and the Liberal Democrats have addressed this issue, by freezing upper three quartile pay, while addressing lower quartile to assure voters it will keep up with inflation – effectively the same cost, just a different spread of the budget.

Think about this quandary in public sector pay. Cleaners are the lowest paid workers in most work places, and yet they are key to MRSA initiatives in hospitals. Take Darling’s 1% proposal against that of the Tories or LibDem’s, and either you have fewer cleaners (not seen as frontline services), or and very low paid cleaners.

The financial summary of Darling’s budget is that for 2010/11 is that he is saving £19Bn, and spending £22Bn. I agree with many commentators, that is seems a budget for an election, over one which is sustainable and hence job creating.

Irish Budget cuts jobs

Mean while, in the Republic of Ireland Finance Minister Brian Lenihan announced pay cuts for public sector workers, as part of efforts to achieve savings of 4bn euros ($5.9bn; £3.6bn). Public servants will face pay cuts, ranging from 5% on those earning 30,000 euros to 15% on those earning more than 200,000 euro, which are summarised as 1bn euros reduction on the public sector pay bill. Taoiseach Brian Cowen will have his pay reduced by 20%. “Those at the top will lead by example,” Lenihan said. Richard Bruton, finance spokesman for the opposition Fine Gael party, called the budget “jobless and joyless” – oh how right in the short term!

UK Pre Budget Report: election summary

I like and applaud the initiates Alistair Darling took with tackling under 24 unemployment, but doubt who ever is in power post a 2010 election that this budget will ever be implemented. A budget for sustainability and jobs is what is required – this is not it.

Good Luck!


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