Speculation about what the Chancellor Rishi Sunak will announce in his Budget is rife, and he has already confirmed a pay increase for the lowest paid and public sector workers.
It’s been a volatile 12 months for the economy, which has culminated in a record high number of job vacancies and employers pushing up starting salaries and offering signing-on bonuses in order to lure candidates with the skills they are short of.
Zeeshan Syed, an economist at the University of Salford Business School, said this is an important budget for Sunak, as it is his first major announcement about the government’s vision of a post-Brexit Britain.
“Jobs at a record high, national debt levels declining, housing prices soaring, and a public ever more confident is the picture of post-covid UK. However, the last time we had such a picture of the economy we were close to the 2008 downturn,” said Syed.
We round up five things HR could expect to see in Wednesday’s announcement.
1. National minimum wage increase
With the government having set an ambitious target for the national living wage to reach two-thirds of minimum earnings by 2021 for workers aged 21 and over, Sunak will announce an increase to the minimum wage rates that will apply from April 2022.
The NLW, which applies to workers aged 23 and over, is earmarked for a 6.6% an hour increase to £9.50 from April, from the current rate of £8.91 an hour.
Earlier this year, the Low Pay Commission published its indicative NLW path forecasts, which recommended that the NLW should be set between £9.35 and £9.49. From 2024 there will be one NLW rate for all workers aged 21 and over.
At the Conservative Party Conference in Manchester earlier this month, Boris Johnson vowed to create a “high wage, high skill, high productivity economy”, which many commentators believed was a hint at a minimum wage rise.
2. End to the public sector pay freeze
Sunak has confirmed that he will lift the freeze on public sector pay that was implemented last year, which would mean a pay increase for 2.6 million workers including teachers, police and civil servants.
Speaking on the Andrew Marr show yesterday, Sunak said he would set out a “new pay policy” on Wednesday.
He said: “Obviously over the past year, we took a decision to have a more targeted approach to public sector pay, given that the year before there were large increases and obviously the private sector was seeing pay decreases last year, and people were on furlough.
“We thought that was reasonable and fair. Now going forward, we’ll have to set a new pay policy and that will be a topic for next week’s spending review.”
3. More investment in skills
Close to £3 billion is expected support to the roll-out of T levels, adult skills development and to revamp and modernise colleges.
There will also be targeted investment into STEM subjects such as maths, chemistry and biology with a view to improving workers’ skills in these areas.
The Mirror has reported that Sunak will announce a new £560 million adult maths coaching programme, which will help half a million people across the UK.
4. Increase to the student loan repayment salary threshold
Reports have suggested the Chancellor could reduce the salary threshold at which people have to start repaying their student loans.
Currently English and Welsh students who enrolled at university after 2012 pay 9% of everything they earn above £27,295 per year, but some reports have said that the Budget announcement will see the threshold reduced to around £23,000, meaning lower earners would need to pay more.
5. Sector-specific job support schemes
With Covid-19 rates increasing, many have also pressed Sunak to consider introducing further job support measures after the furlough scheme was withdrawn. However, this is not looking likely as Sunak ruled out a furlough successor on yesterday’s Andrew Marr show.
Accountancy firm BDO has also suggested that there may be successor schemes for 2022 to replace the Kickstart and apprenticeship grants that have been extended into early next year.
Jane Amphlett, head of employment at law firm Howard Kennedy suggested that the Chancellor may consider schemes to boost hiring in industries where there are skills gaps.
She said: “The government has announced special work visa schemes for EU workers to reduce skills gaps in the short term, such as a special scheme to increase the number of HGV drivers, and there are opportunities for employers with the new graduate route, which does not require businesses to have a Sponsor Licence, and the addition to the countries eligible to apply for the Tier 5 (Youth mobility scheme) visa (allowing 18 – 30 year olds to stay in the UK up to 2 years and work without sponsorship) from January 2022.
“The Budget might include more sector-based schemes, similar to the funding for 2,000 AI scholarships recently announced by the Chancellor. There may also be successor schemes to the Kickstart scheme, which allows small businesses to hire young people on Universal Credit for six month work placements, and the apprenticeship grant scheme.”