Deficit reduction will overshadow all new legislation

Industry bodies have broadly welcomed the employment-related Bills set out in today’s Queen’s Speech, but warned that the government’s efforts to address the £156bn deficit will overshadow everything else it does.

The Queen’s Speech unveiled the details of 22 new Bills, including confirmation of plans to block next year’s 1% rise in National Insurance contributions (NICs) by employers.

Parliament also heard details of Bills to phase out the default retirement age and set a timetable for raising the state pension age, and to create a single welfare-to-work programme, and make benefit payments more conditional on willingness to accept employment.

John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development (CIPD), said: “The Queen may have outlined a long list of parliamentary Bills but it was clear from her opening remarks that the government’s overriding priority is to meet the most important bill of all – the UK’s £156bn budget deficit.

“This will overshadow whatever else the coalition government does and determine the success of several key aspects of its legislative agenda.”

John Cridland, CBI deputy director-general, agreed, stressing that the coalition is right to put deficit reduction and securing economic growth at the heart of its first Queen’s Speech.

“The programme that has been set out is ambitious and far-reaching with a clear sense of renewal,” he added. “Businesses recognise their responsibilities and look forward to playing their part.”

Both the CIPD and the CBI warmly welcomed the block on the 1% rise in employer NICs.

“A freeze on NICs is a welcome move and good for jobs while the economic recovery remains fragile,” said Philpott. “The CIPD has campaigned against the proposed rise in employers’ NICs since it was first signalled by the previous government in 2008.”

Cridland added: “NICs are a tax on jobs, and reducing next year’s increase to the employers’ contribution is the right move at a time when we want to encourage businesses to create jobs. This is good news for firms of all sizes.”

However, the CIPD reiterated its opposition to the proposed cap on immigration, warning it would lead to higher wage costs, higher prices in the shops, and slower economic growth.

“CIPD research has shown that there is an ongoing appetite among employers for migrant labour,” said Philpott. “The government needs to consider these experiences and business needs as part of its consultation.”

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