Emergency Budget: HR Austerity Panel’s reaction

Personnel Today‘s HR Austerity Panel has issued its reaction to this week’s Emergency Budget, explaining what the announcements mean for the HR profession, job creation and the public sector.

Richard Crouch, head of HR and organisational development at Somerset County Council:

In general terms, it is right the public sector is not entirely shielded in the same way the private sector hasn’t been. The two-year pay freeze won’t help morale in the sector, as a pay freeze actually means a pay cut, and I worry that discretionary effort may be badly affected.

But a freeze on council tax will impact on jobs as the councils will have less money to pay staff, which for many will make up the biggest spend.

The government has probably been mindful of the impact of its measures on the economic recovery and on the possibility of stalling the fragile situation. There are some initiatives to support business, and this will help create some growth. The issue will be whether such growth mirrors the level of losses in the public sector, and if it doesn’t, will this lead to high unemployment and thus a further drain on the public purse?

The Budget probably wasn’t as bad as most predicted, but of course there is more bad news to come. In local government, it was probably as predicted and many councils would have already made preparations for it.

Roger Seifert, professor of industrial relations and HR management at Wolverhampton University Business School:

The Budget embodies two unwelcome features of the coalition government: that it is fundamentally unfair in the distribution of burdens and benefits as between sections of the population; and that it dogmatically assumes that the ‘market’ will allow for the creation and expansion of private sector businesses to plug the hole left by the reduction of the public sector.

It also, in itself, does not really deal with the deficit because it assumes too much about the future growth of the economy, is reckless with the prospects of a second tranche of economic downturn, and fails to consider the international situation with regards to trade and inward investment.

In terms of the public sector, the pay freeze is unwelcome as it distorts recruitment and retention strategies, makes it harder to plan internal labour markets with promotions and upskilling, and may lead to sufficient discontent to trigger public sector strikes by next summer.

Overall, this is a Budget that splits the country north and south, rich and poor, employers and employees, and employed and unemployed. Not a recipe for national renewal, social cohesion, and future prospects.

Graham White, HR director at Westminster Council:

The public sector pay freeze is a very sensible move and, while it will be felt by many as the cost of living rises, it will impact positively in a number of ways. It will reduce the risk of future pay cuts; it will protect some job numbers and will ensure more staff are available to deliver services where they are needed most. But it will be the outcome of the Comprehensive Spending Review (in October) that will determine the real size of reductions in the public sector.

The national insurance contribution threshold for employers being raised is further good news, as we see new smaller employers being incentivised to grow. We are not a nation of shopkeepers but we do have a history for entrepreneurial endeavours, and much of the help to businesses is focused at promoting growth increasing GDP and reducing reliance on the public sector as an employer.

There is much to hope for in this Budget. Capital investment protected, increased drive to address worklessness, and a consideration to allow staff to work longer will all help reposition the UK as a credible place to invest and for the private sector to grow. Whether this is enough is a matter of wait and see but I remain quietly positive.

Dean Shoesmith, president of the Public Sector People Managers’ Association:

The repercussive effect of the public sector pay freeze could be to affect the sector’s ability to recruit and retain key skills. While the economy and growth remain fragile, there aren’t many new jobs being created in the private sector, therefore in the shorter-term it is unlikely we will see an exodus of public sector employees to the private sector. There could also be strains with employee engagement and with employee relations – including with trade unions.

The Budget produced considerable cuts in spending as well as increases in taxation to meet much of the deficit – but not all. Growth is also essential to tackling the deficit. The increase in VAT to 20% may impact on consumer spending, which if reduced could impact adversely on growth – creating potential conditions for a Japanese-style double-dip recession.

With a 25% reduction in spending on government departments, we fully expect the Comprehensive Spending Review in the autumn to reflect this level of reduction.

Duncan Brown, director of HR business development at the Institute of Employment Studies:

Holding total public sector pay back makes sense to help reduce the deficit. Rather than helping to make job cuts cheaper, as in the private sector, it may help to reduce the number of redundancies. The key issue though is how well the pay budget is spent, and uniform freezes across the board for all staff may well not be the best way of encouraging and rewarding the required reforms in pay management, nor the most able staff.

Features of the reward structures in parts of the public sector – incremental progression, complex allowances and add ons – need to be seriously questioned and alternatives introduced.

The raising of the national insurance contribution threshold for employers should help to encourage job creation.

Sian Thomas, chief executive of membership organisation Synuron:

It was always likely that a second-year pay freeze would happen. In reality, some staff in the NHS will still get increases though and we have increased public sector pay significantly in recent years.

The big question for public sector employers is how they now manage the career transition of people to ensure they remain employable across all sectors and increase the mix of private/social enterprise organisations, while at the same time private sector employers use the national insurance savings etc to stimulate growth and employ our graduates, who face a tough few years.

I think local government will see this as an opportunity, and if left to locally innovate, will seize it. We didn’t see much detail in the plan beyond this year, and this gives us all a chance to influence how we protect the important economies of social care, energy, digital services and technology so that we decrease public sector spending in less damaging ways while still regenerating UK skills and jobs.

Alan Bailey, managing director of Capita HR Solutions:

It’s clear for all to note that most government departments cannot stand still in the way they operate. The target of 25% savings in real terms over the next four years will require some creative thinking by those affected. Outsourcing has been proven by many public and private sector organisations as a legitimate and low-risk approach that can reduce costs by this order of magnitude while often improving levels of service in parallel. At this stage, departments still have a choice of how they tackle the challenge – perhaps many will choose the outsourced solution without the need for a mandate.

Starting the ball rolling in terms of the 25% target will push departments into immediate action and is perhaps more manageable in the short-term. It may also uncover some great ideas to feed into the Comprehensive Spending Review. There needs to be a little more science into where the larger cuts are to be made, and let’s be honest, ‘initiative overload’ could put vital services at risk if undertaken in an unplanned and reactive manner. It’s probably wise to spend a little more time on the larger opportunities for cost cutting.

The message is clear, departments have to cut significant costs, and the longer they put it off, the bigger the challenge.

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