The 2018 Budget

So despite all the stories around how the UK is going to collapse after Brexit, going as far as losing Netflix (ridiculous “journalism”…), the budget announcement gave the indication that this is instead a time for prosperity! But how true is this? And how is going to effect the recruitment market?

What do we know?

• Borrowing is down and expected to keep falling – great news!
• The UK economy is expected to grow!
• IR35 private sector rollout has been moved back to April 2020 – a short-term win!
• ￡6.5bn has been allocated to Universal Credit!
• The National Living Wage is increasing!
• Personal allowance on income tax has increased!
• Beer and cider won’t change in price! (but wine and cigarettes are going up – can’t win them all…)
• The work allowance will be increased by ￡1000 for households with children and people with disabilities from April 2019!
• NHS funding in England is to increase by ￡20.5bn over the next five years!

So it looks like lots of great news for many of us!

However, The Resolution Foundation have argued that the top 50% of households will benefit from 84% of the cuts, particularly with reference to the changes in tax and work allowance. The overall package of tax and benefit changes announced since 2015 will deliver an average gain of ￡390 for the richest fifth of households in 2023-24, compared to an average loss of ￡400 for the poorest fifth. Not a great start for those most at need.

In better news, The National Living Wage is increasing in April by over 4% to ￡8.21, though how this will affect SME businesses remains to be seen. The Living Wage Foundation believe employees currently need to earn at least ￡8.75/hour (￡10.20/hour in London) to live and support their families, but at least it’s a step in the right direction!

Regarding the interim recruitment market, the biggest news is the Government’s decision to roll out changes to IR35 in the private sector in April 2020, but only for contractors engaged by large or medium sized businesses. Still, this push back is a big win for agencies who recruit for private sector businesses.

IR35 is the name given to a tax legislation that is aimed at identifying individuals who are avoiding paying the tax that they should be. It challenges those who supply their services via their own company but who the HMRC do not recognise as ‘self-employed’ from a taxation perspective. Therefore they should be taxed the same way that a permanent employee should be. HMRC is convinced that a large proportion of contractors, are “disguised employees”. This legislation change means the way which IR35 is enforced shifts the responsibility away from HMRC and onto the end client.

The Government then have delivered a 17-month lead time to allow businesses to adequately prepare. For those who were involved in the public sector rollout and subsequent issues regarding loss of contractors, this is a valuable reprieve.

Obviously the future is uncertain and Brexit could still change everything. Even though salaries are increasing, it’s clear unemployment is dropping. I believe the increase in living wage will slow down recruitment in SMEs and for some, may drive them to losing staff. However, The Office for Budgetary Responsibility Predictions have said we’ll have an extra 800,000 people in work by 2022 so it’ll be interesting to see how the layout of the UK job market in the next four years changes!

So lots of positives, some areas that may cause concern, but all in all, the future might be looking brighter – let’s just wait and see what happens next!