On 15 March chancellor Jeremy Hunt’s Spring Budget announcement is expected to unveil a range of measures to tackle some of HR’s biggest problems with worker shortages and cost of living crisis.
The budget follows November 2022’s emergency budget, where the chancellor pledged tax freezes, boosted the national living wage and unveiled his principles of driving the economy along the ‘Four E’s’ of enterprise, education, employment and everywhere, which he is expected to build on next week.
Here is what is rumoured to be included so far.
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Worker shortages
One proposal to ease workforce shortages, reported in The Guardian, includes funding annual health checks for workers, giving companies subsidies for occupational health services, and helping GPs issue fit notes instead of signing employees off work altogether.
The plan would also involve increasing the number of visas available for sectors like hospitality and construction hit by labour shortages.
Ed Stacey, employment law partner at PwC, said that given larger employers’ likelihood to have an occupational health plan in place, any new health policy was likely to be most interest to smaller employers.
He said: “Whilst policies to support people back to work will generally be supported by employers, there will be challenges. Will there be capacity in the NHS, and specifically for GPs, to invest the time to better understand an individual’s workplace such that a recommendation can be made?
“The plan would also require time and support from the employer, in tandem, any phased or limited return can often place additional pressures on colleagues which employers will need to carefully manage.”
Pensions
Changes to pension laws have been predicted, including possible rise in the state pension age to 68 after Hunt’s November announcement that the state pension triple lock would be retained.
Steven Cameron, pensions director at Aegon, said: “This comes at a high cost. On affordability grounds, the government may argue the state pension age has to be increased to 68 sooner than currently planned, possibly in 10 to 12 years’ time. Increasing it even sooner would simply not give people enough time to plan ahead.”
He added Hunt’s wish to re-involve older people in the workforce would factor into any changes he makes to pension rules.
Cameron said: “Under the employment pillar of economic growth, the government wants to reduce economic inactivity, including among the over-55s, where the pandemic prompted a sharp increase in early retirement. But some pensions tax rules discourage over-55s from remaining in or returning to paid employment.”
Some senior staff with defined benefit pensions schemes, Cameron said, such as senior NHS doctors, are leaving the workforce because they would face tax penalties if they were to stay in work, as they are reaching the limit of their lifetime allowance.
Similarly, there is a need to increase the Money Purchase Annual Allowance.
He added: “Anyone over 55 who has used the pension freedoms to access their defined contribution pension flexibly, possibly during the pandemic or to get by during the cost of living crisis, faces a severe cut in how much then can subsequently pay into a pension.
“Rather than the standard £40,000 Annual Allowance, it falls to £4,000 a year for personal contributions, employer contributions and tax relief combined. Anyone considering returning to work could find they can’t take full advantage of the pension that comes with that future employment.”
The Budget may also include minor incentives or tax advantages for over-55s returning to the workforce, according to Charlotte Sallabank, tax partner at Katten UK, though she advised that other tax cuts were unlikely.
She said: “Overall, it’s unlikely that many, if any, tax cuts will be announced as the government is keen to ensure that it maintains the focus on ‘fiscal responsibility’.
“However, given the current cost of living crisis, it may be that the chancellor might announce some limited tax cuts, but they would probably not take immediate effect.”
IR35
While not expected, IR35 reform would be welcomed as part the announcement. Initially pledged under then-chancellor Kwasi Kwarteng, IR35 reform was rolled back when Hunt took up the post.
Dave Chaplain, CEO of tax compliance firm IR35 Shield, said: “The [existing IR35] legislation has inflicted damage on the economy, is holding back UK businesses and punishing the flexible workforce. In its current form, it is unfair, misaligned with Conservative values and impeding UK growth.
“Off-payroll needs to be fixed or ditched to win back the trust of the self-employed and whilst we are unlikely to see a u-turn, some straightforward amendments to the law would go a long way to achieving that.
“If the government wants to entice the 50-plus, grey-haired army of professionals back to work, to apply their skills on much-needed UK projects, it will need to fix the mess that HMRC and the Treasury have made.”
