Recruiters welcome Chancellor Hammond’s infrastructure investment

Recruiters have welcomed the expected boost to business from the chancellor’s commitment to increased spending on infrastructure and science research announced in today’s Autumn Statement.

Wed, 23 Nov 2016

Recruiters have welcomed the expected boost to business from the chancellor’s commitment to increased spending on infrastructure and science research announced in today’s Autumn Statement.

Addressing Parliament earlier today, Chancellor Philip Hammond committed to a raft of measures boosting infrastructure expenditure, including:

  • A new National Productivity Investment Fund providing £23bn of additional spending in areas he said are key to boosting productivity including transport, digital communications, research & development (R&D), and housing
  • £2.3bn for a new Housing Infrastructure Fund to be used for projects such as roads and water connections supporting construction of up to 100,000 new homes in the areas where they are needed most
  • £1.4bn used to provide 40,000 new affordable homes, including some for shared ownership and some for affordable rent, and £1.7bn to speed up the construction of new homes on public sector land
  • £390m investment in future transport technology including driverless cars, renewable fuels and energy efficient transport
  • £1.1bn to cut congestion and upgrade local roads and public transport
  • £220m to tackle road safety and congestion on Highways England roads
  • £27m to develop an expressway connecting Oxford and Cambridge
  • £450m to be spent on trialling railway digital signalling technology, which will expand capacity and improve reliability
  • £1bn to invest in full-fibre broadband and trialling 5G networks
  • £2bn more per year in R&D funding by 2020-21
  • A major increase in R&D funding for universities and businesses with R&D projects, helping the UK remain an attractive place for businesses to invest in innovative research backing scientific R&D of technologies such as robotics, artificial intelligence and industrial biotechnology
  • £400m through the British Business Bank to invest in growing innovative firms.

 

Commenting on the chancellor’s announcements on infrastructure Brian Wilkinson, chief executive at international recruiter Gattaca, told Recruiter the cumulative effects of a today’s and past announcements such as a third runway at Heathrow, Hinkley Point and HS2 are good for infrastructure recruiters. 

“Improving slip roads, smart motorways, road widening, cycle paths – all bread and butter stuff which is ‘shovel ready’ and doesn’t need to go through lengthy planning processes. The recent announcements on research funding are also good for us.”

In a statement Wilkinson also welcomed the promise of £4.7bn to go toward science & innovation: “The scientific, engineering and technology communities will benefit from the continued investment and we anticipate growth in demand for technical skills as a result of this investment. Innovation is a key driver of economic growth, so this really is welcome news. 

“We look forward to contributing to the growth of the UK's engineering and technology sectors, in whichever areas research may be focused upon. Furthermore we hope that the investment will entice more young people to consider a technical career and take up STEM subjects as a result.”

Meanwhile David Leyshon, chairman at technical recruiter CBSbutler, told Recruiter the additional spending on R&D for the science and tech sector by 2020-21 is a welcome fillip for recruiters involved in science, technology, engineering and maths (STEM) skills.

“Moreover, a further £1.1bn invested in local transport projects, combined with 100% business rates relief on digital infrastructure over the next five years, will create serious demand for skilled engineers,” he added.

Tax avoidance

Hammond also announced a crackdown on tax avoiders and those who help them, with a new penalty introduced for those helping someone else to use a tax avoidance scheme. Tax avoiders will also not be able to claim – as a defence against penalties – that relying on non-independent tax advice is taking reasonable care.

Commenting on these measures, Julia Kermode, CEO of the Freelancer & Contractor Services Association (FCSA), a trade association for professional employment service providers, said the organisation welcomed any measures that tackle disguised remuneration schemes.

“Such schemes have become more prevalent, some with particularly complex offshore structures, which entice contractors and self-employed by the high returns offered. It has become increasingly difficult for legitimate businesses to compete with these schemes, so we fully support the chancellor's move to tackle them.”

However, Kermode added she is outraged that the 5% tax-free allowance for business expenses will be removed from off-payroll workers in the public sector. 

“The new complexities around IR35 status means that professional contractors and interims will be forced into making deemed payments throughout the year, which in turn means that they will need more accountancy support going forward to reconcile their financial affairs, and therefore more justification for the 5% allowance. Once again, the hardworking freelancers and contractors who are propping up the UK economy are being penalised.

“On the flat rate VAT scheme, we are not surprised that measures have been introduced by Hammond today. We have seen an increase in structures being set up to benefit from the flat rate scheme so it was inevitable that action would be taken. It seems unfair that those operating legitimately will suffer, but in the current economic uncertainty this change represents significant gains to the Exchequer of £195m 2017-18 which cannot be ignored.”  

Kermode also welcomed government’s move to align tax and National Insurance.

“While there will be some winners and losers from the change, we welcome the move in terms of the overall simplification that will be delivered. Changing to an annual, cumulative and aggregated (‘ACA’) approach for calculating NI will be simpler for employers, and OTS research shows that from the employee perspective, there will be more winners than losers,” she said.

Meanwhile Samantha Hurley, operations director at the Association of Professional Staffing Companies (APSCo), said the organisation is furious that the government has ignored all industry stakeholders and has overridden the concerns of its own department with regards to IR35 tax changes, resulting in personal service company (PSC) contractors in the public sector losing their right to determine their tax status.

“We are furious that the government has ignored all industry stakeholders and has overridden the concerns of its own departments. This change will give recruitment firms and other engagers, who pay the contractor, liability and responsibility for operating payroll and paying the correct taxes to HMRC.

“These changes will convert the UK from having one of the most flexible labour markets in the world to having one of the most inflexible labour markets in the world.

“Despite the government framing this as a duty on the public sector to ensure that those who work for them pay the correct tax, the reality is that the vast number of contractors work via recruitment firms and other engagers. In fact, it is these unconnected third parties that will bear the responsibility and legal liability for making the correct decision on tax status – namely whether the contractor is working in a similar way to an employee, and therefore liable for paying same taxes as an employee, which is an over-simplification of IR35.

“This is a disappointing and illogical move. The public sector will inevitably see its costs rise at a time when budgets are already very tight.”

Jobs growth

Hammond also told the House that UK growth remains positive, with employment continuing to rise in each of the next five years, with half a million more people forecast to be in work by 2021, according to Office for Budget Responsibility (OBR).

Commenting on the predictions, Ian Brinkley, acting chief economist at professional body for HR and people development CIPD, said: “The economic forecasts from the independent OBR show that low growth and weak productivity will persist until at least 2018. The forecasts also show that real wage growth over the next two years will be close to zero. Even this may prove optimistic, as continued uncertainty, difficult market conditions, and higher unemployment are likely to constrain firms’ ability or need to pay more. The OBR is forecasting a slow recovery in productivity, but previous forecasts have been optimistic.”

Lee Biggins, founder and managing director of CV-Library, added: “The chancellor’s optimistic outlook on the UK’s labour market is extremely positive to see. Our economy’s employment is currently at a record high and in order for this to continue, we must tackle the upcoming challenges head-on and prepare to be resilient as we embark on our exit from the EU.

Other measures the chancellor announced included:

  • A cut to Corporation Tax of 17% by 2020
  • Rural Rate Relief to increase to 100%
  • The National Living Wage for those aged 25 and over will increase from £7.20 per hour to £7.50 per hour
  • The Universal Credit taper will be reduced from 65% to 63% from April 2017. Under Universal Credit, as a person’s income increases, their benefit payments are gradually reduced. The taper rate calculates the reduction in benefits as a person’s salary increases.

 

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