Budget 2003 is 'just the job'

John Philpott, Chief Economist at people management experts the Chartered Institute of Personnel and Development (CIPD), today welcomed the Budget's focus on full employment, skills, regional pay flexibility, and a balanced approach to red tape.

Philpott comments, While many commentators consider Gordon Brown's statement to be 'low key', the welfare-to-work measures contained in this year's Budget are the most substantial since Mr Brown's first Budget in 1997. Greater discretion to local job centre managers to be innovative in how they help jobless people, plus additional emphasis on jobless people to search for and travel to work, offers the best hope of tackling the deep local pockets of joblessness that blight every region of the UK.

With the aggregate UK employment rate already close to a record high, the extent of the Chancellor's ambition on jobs is most fully expressed in setting the goal of full employment in every region and every nation of the UK.
Philpott says that Brown's ambitions for full employment in every region and every nation of the UK are reflected by the incentives to get lone parents and incapacity benefits back into work. The costs associated with job search, the initial costs associated with starting jobs, and worries about income security when moving from welfare to work have long been identified as major barriers to employment. In aiming to reduce these barriers, the Chancellor is offering good news not only to jobless people but also to hard-pressed HR managers seeking to fill job vacancies.

He applauds the new - initially piloted - 40 a week financial bonus, offered to lone parents during their first year in work, and easier rules governing the payment of housing benefit to people entering work so that jobless claimants do not immediately lose out when they find a job.

Regional pay flexibility
The CIPD strongly welcomes the Government's proposal to shift from national to regional and local pay setting within the public sector. This is clearly a controversial matter. But while the CIPD sees little merit in two-tier pay setting for similar groups of workers providing public services in the same locality, there is a strong argument for allowing pay to vary over geographical space in order to reflect local differences in inflation and labour market pressures.

Skills and immigration
HR managers will also be encouraged by the Chancellor's decision to ease immigration rules for skilled migrants, though the CIPD is concerned that immigration is not seen as a 'quick fix' for the UK's underlying skills shortages. The same applies to the limited easing of restrictions on the entry of low skilled migrants to fill vacancies in sectors such as hospitality. The merit of greater low skilled immigration is questionable, especially at a time when the Chancellor is seeking to assist less skilled UK benefit claimants into work.

As for the various skills initiatives contained in the Budget, the CIPD welcomes in particular the extension of the Employer Training pilots but would have liked a clearer signal from the Chancellor on the issue of compulsory time off for training. A meaningful assessment of the effectiveness of the pilots will not be possible until the government makes up its mind on the matter of compulsion.

Red tape
The Chancellor's statement suggests a sensible and balanced approach to the matter of regulation and red tape. Mr Brown has listened to business concerns and implemented several measures that recognise that regulation can stifle enterprise and stand in the way of his cherished goal of closing the productivity gap with the United States.

However, the Chancellor is right not to cave in to simplistic business rhetoric on regulation. The CIPD is thus pleased to see that while the Chancellor expressed concerns about the potentially damaging effect of possible changes to the EU Working Time Directive, he also stressed the benefits to employers, workers and families of new legislation on flexible working. In this latter respect, the CIPD also welcomes modest measures contained in the Budget that buttress the move to more flexible working, notably the small tax free annual payment of 104 that employers will be able to offer staff to cover additional costs associated with working from home.

Philpott concludes: Although most attention in the coming days will focus on the Chancellor's macroeconomic forecasts, the state of the public finances, and whether Mr Brown is being too optimistic at a time of obvious economic uncertainty, it would be wrong to dismiss Budget 2003 as lacking substance. The Budget contains some important and useful measures that will help prepare the ground for the next upturn, improve the long-term performance of the labour market, and in due course lead to both a higher employment rate and higher productivity.