cipdThe CIPD today welcomed support for the young unemployed and the introduction of measures to tackle public sector pension costs, contained within the Pre-Budget Report, but has called for:

  • A jobs guarantee to be extended to older jobseekers
  • The scrapping of the “tax on jobs” increase in employers’ National Insurance Contributions (NICs), particularly in the wake of the new increase in employees’ NICs
  • A more fundamental review of public sector pay and pensions policies

Guaranteeing jobs for young and old alike:

Gerwyn Davies, Public Policy Adviser at the Chartered Institute of Personnel and Development comments:

“Modest increases in unemployment in recent months mask the growing challenges faced by jobseekers, particularly if they are young and have been unemployed for more than six months. We therefore wholeheartedly welcome the reduced qualifying period for the jobs guarantee for 18 to 24 year olds. However, with the jobs market still flat on its back, the challenges facing older workers are set to worsen in the coming months. We therefore urge the Chancellor to urgently consider extending the jobs guarantee to ensure over 50s who have been unemployed for more than six months are given the real help they need to get back into work.”

National Insurance Contributions increase:

Charles Cotton, Reward Adviser at the Chartered Institute of Personnel and Development, says:

“The Chancellor would have done better to use any increase in employee NICs to scrap the planned increase in employers’ NICs from 2011. This tax on jobs will hit at a time when we are still likely to be in the early stages of a ‘jobs light’ economic recovery – this is not the tonic a sickly labour market needs.”

Public sector pay and pensions:

Charles Cotton, Reward Adviser at the Chartered Institute of Personnel and Development, says:

“We would have preferred a 1% cap on the public sector pay budget as a whole, to better allow managers to increase pay rates for key jobs where there are shortages and for those who are high performers, while freezing them where there is no market reason.

“However, the government is missing a trick by solely focusing on pay freezes and cuts. While these measures will reduce the size of the total pay bill, they will not deliver for taxpayers a public sector payroll spend that is any more effective. To get real value for money in the public sector, government needs to firmly link employee pay to service delivery and performance.

“We welcome attempts to reduce public sector pension costs. However, capping the contribution level and making higher earners contribute more will not significantly reduce the cost burden and risk that taxpayers have to shoulder. What is needed is a more fundamental review of what is sustainable in public sector pensions, to ensure the cost and risk is more equitably shared between taxpayers and tax-funded workers.”

Negative Reception from the CBI and IOD

In other feedback on the Report, the Institute of Director’s commented that the ” increase in national insurance contributions, both on employers and on employees with average incomes, is just wrong. Employers and employees up and down the country will oppose this increase for what it is, a tax on jobs. The Government are right to focus on reducing unemployment but the additional National Insurance rise will directly put jobs at risk and make it even more difficult for businesses to rehire once the recovery starts.”

While the Richard Lambert, CBI Director-General, was aslso damning, saying:  “There were two tests this Pre-Budget report. First, would it increase the credibility of Government plans to restore the public finances? Second, would it be a platform for job creation and economic growth? The Government has failed on both counts.

“The Chancellor has made a serious mistake imposing an extra jobs tax at a time when the economic recovery will still be fragile. Increasing National Insurance contributions will hold back job creation and growth.”

On bankers’ bonuses, Mr Lambert said: “A headline-grabbing tax on bankers’ bonuses may have populist appeal, but the Government needs to take care not to put the UK’s financial services sector at a comparative disadvantage internationally. The threat of an exodus of talent is real.”

However, he was more favourable to the public sector pay cap, adding: “We applaud the Government’s courage in beginning to tackle the thorny issues of public sector pensions and pay, but it is only a start.”

And Mixed reviews from the TUC

TUC General Secretary Brendan Barber said: ‘A centralised pay cap on public sector staff is unfair, inefficient and will damage long-established independent review systems – which already take affordability into account. Public sector workers – many of whom are low paid – should not have to pay the price for a crash they did nothing to cause. And we will need to study the small print to look at where the cuts the Chancellor has announced will hit.

‘There is good news on tax. The tax on bonuses not only raises a useful amount that will help the young unemployed, but it – and other measures – begins to ask those who did so well out of the boom years and whose recklessness caused the crash to make a proper contribution, particularly through getting tough on avoidance.

‘But today the Chancellor could have been much bolder in moving to a fundamental reform of tax where the super-rich were asked to pay their fair share. The National Insurance increase will hit ordinary workers and business, though of course we welcome the exemption for those earning £20,000 or below, which is nearly half the workforce.’

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