Chancellor Rishi Sunak has confirmed wage increases for the lowest paid workers and public sector staff in his Budget today, as well as changes to Universal Credit (Wednesday 27 October).
As announced earlier this week, national living wage will increase to £9.50 an hour from 1 April 2022 – a 6.6% increase on the current rate of £8.91.
The minimum rates for younger workers will also rise. The national minimum wage will rise from £8.36 an hour to £9.18 an hour for those aged 21 to 22; from £6.56 to £6.83 for those aged 18 to 20; from £4.62 to £4.81 for under 18s; and from £4.30 to £4.81 an hour for apprentices.
“The government is accepting [the Low Pay Commission’s] recommendation. For a full-time worker that’s a pay rise worth over £1,000 [and] it will benefit over 2 million of the lowest paid workers in the country,” the Chancellor said. “This is a major commitment to the high wage, high skill, high productivity economy of the future.”
Sunak also confirmed the end to the public sector pay freeze that was implemented a year ago, with a return to the usual independent pay setting process which may see an increase in wages for 2.6 million workers including police officers and teachers.
Changes to Universal Credit were also revealed, with the taper rate lowered to allow workers to keep more of the money they earn as their working hours increase. The rate will be lowered to 55% from 63% no later than 1 December, allowing workers to keep 55p of every pound they earn. It will also increase work allowances in Universal Credit by £55 a year.
Skills development
He reiterated the government’s investment in adult and STEM skills development. The spending package includes £1.6bn to support the roll-out of T Levels, £550 million for adult skills including the “skills bootcamps” announced earlier this year, and £830 million to revamp and modernise colleges.
A document published by the Treasury shortly after his speech said total spending on skills will increase over this parliament – by £3.8 billion by 2024-25 – equivalent to a cash increase of 42% (26% in real terms) compared
to 2019-20.
It says: “This funding will quadruple the number of places on Skills Bootcamps, expand the Lifetime Skills Guarantee on free Level 3 qualifications, and improve numeracy skills through the new Multiply programme. This is in addition to providing extra classroom hours for up to 100,000 T Level students. [Spending review 2021] also confirms funding to open 20 Institutes of Technology and for upgrades to the further education college estate across England.”
Sunak revealed that the the economy is forecast to return to its pre-Covid level “at the turn of the year”, as 2021 had seen “growth up, jobs up and debt down”.
“Employment is up, investment is growing, public services are improving, public finances are stabilising and wages are rising,” he said.
“Today’s budget delivers a strong economy for the British public [that has] stronger employment with fewer people out of work and more people in work.”
He said that his mission is to “create a society that rewards work”.
He said that unemployment is expected to peak at 5.2% – much lower than expected in the last Budget.
Other announcements included:
- New funding to improve lorry park facilities to help encourage more people to join the road transport sector, which is experiencing a chronic driver shortage
- An increase in healthcare resource spending from £133bn to £174bn, funded by the new health and social care levy. This will help fund training for 50,000 more nurses, he said.
- £150m to support training for early years’ workers
- Confirmation of a new Scale up visa, which will make it “quicker and easier” for fast-growing businesses to scale up their operations by recruiting workers from overseas, as well as High Potential Individual and Global Business Mobility visas.
- A new UK-wide numeracy programme called Multiply. It will receive £560m to help improve basic mathematics skills among adults.
Reaction
Firms will continue to struggle to fill vacancies, while the four million people out of work due to long-term ill health and caring responsibilities will continue to receive virtually no employment support at all” – Tony Wilson, Institute for Employment Studies
Tony Wilson director of the Institute for Employment Studies, said the Chancellor had missed the chance to address the growing recruitment crisis.
“With a million fewer people in the labour market than on pre-crisis trends, we were hoping to see substantial new measures to increase labour market participation and address skills mismatches. Instead, firms will continue to struggle to fill vacancies, while the four million people out of work due to long-term ill health and caring responsibilities will continue to receive virtually no employment support at all,” he said.
“That being said, the substantial improvements in Universal Credit are welcome, and will benefit low income workers and particularly those with children. For many of those on on Universal Credit this will go some way to reversing the cuts made last month, although most households will continue to be worse off, including all of those where no-one works.”
Peter Cheese, chief executive of the CIPD, said: “There is still a glaring gap between the Government’s ambition to transition the UK to a high-skill, high-wage economy and its current policies and investment priorities. Piecemeal interventions like those announced today are unlikely to amount to a skills revolution, more an evolution of things that already aren’t hitting the mark for many employers or jobseekers.”
He added: “After a decade of underinvestment in skills we need employers and government to be looking not just at routes into work but in-role development too. Increased investment in T-levels is a step towards improving technical skills but many employers simply don’t know enough about them or fully understand them. Given current pressures on businesses, there’s also concern over whether enough employers will be able to offer the work experience element.
“Equally, if the government wants to work in partnership with business to create a high-skill, high-wage economy, it must listen to business and reform the Apprenticeship Levy into a more flexible training levy. ”
Michael Carty, editor at XpertHR, said increases to the national minimum wage are always welcome, but may be eroded by inflation and increasing taxation. Sunak indicated that the consumer price index (CPI) rate of inflation will likely hit 4% in 2022, which could hit workers’ pockets.
He said: “It’s no secret that the UK faces a national labour shortage, so the pressure is on for employers to attract and retain top talent with fair and competitive reward packages. But we must also remember that business has been tough for many.
The chancellor’s Budget sets out again to keep the UK at the forefront of global innovation and recognises that people are central to that goal” – Tijen Ahmet, Shakespeare Martineau
“The need to offer competitive pay awards, combined with likely tax increases, creates a challenge to balance the needs of the organisation with those of its employees. While many organisations believe that some economic recovery will enable them to award higher pay increases at their annual pay review, others are likely to remain cautious.”
Commenting on the scale up visa, Sherisa Rajah, vice president of employment law and compliance at overseas hiring support company Elements Global Services said: “The talent initiative rightly recognises that the UK urgently needs to recruit from overseas to mitigate skills shortages. But while the programme appears great for business, initiatives like these are in direct competition with the booming ‘work from anywhere’ movement.
“To truly alleviate skills pressures facing the UK firms, plans to attract workers to Britain should be paired with initiatives for companies to harness remote workers. However, with regulatory compliance presenting a significant challenge for companies looking to recruit overseas workers, having the tools to navigate complex global recruitment strategies will be key. Compliance in global expansion is of paramount importance.”
Tijen Ahmet, head of business immigration at law firm, Shakespeare Martineau, said: “Immigration is clearly on the chancellor’s agenda and recent calls from businesses to address global talent issues obviously haven’t fallen on deaf ears. The chancellor’s Budget sets out again to keep the UK at the forefront of global innovation and recognises that people are central to that goal. The scale-up visa will be particularly useful for tech-based and knowledge-intensive industries which rely on attracting the brightest minds from across the world.
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