Praise and dismay from recruitment bodies over Budget

Recruitment trade bodies have given a mixed response to yesterday's Spring Budget Statement.

Some have praised the chancellor for his emphasis on skills development but also expressed dismay over announcements relating to the tax treatment of the self-employed.

Among the measures aimed at improving UK productivity in yesterday's Spring Budget Statement, Chancellor Philip Hammond committed to:

  • New T-levels for 16-19-year-old technical students to be introduced from autumn 2019. Students will be able to choose from 15 different routes such as construction, digital or agriculture. The number of hours of training for these students will increase by over 50%. As part of the course, all students will take part in an industry work placement.
  • £300m investment in new academic research placements. Of this, £90m will provide 1,000 new PhD places, including in science, technology, engineering and maths (STEM), with the remaining £210m going towards creating new fellowships, including programmes to attract top global talent to conduct research in areas such as bioscience and biotechnology, quantum technologies, and satellite and space technology.

Recruitment trade bodies have broadly welcomed these measures.

The Recruitment & Employment Confederation’s head of policy Kate Shoesmith said these announcements were welcome news for recruiters and employers who continue to face “acute” skills shortages.

Samantha Hurley, operations director at the Association of Staffing Companies (APSCo), added: “We welcome the T-levels initiative and the commitment by government to improving the technical skills-base of UK PLC by getting young people into technical careers and improving the perception of their education – however, our members would argue that the skills gap is very much here and now.”

The chancellor also announced government is to invest £5m to increase the number of returnships, helping people back into work after a career break.

Commenting on this cash injection, Shoesmith said investment in returnships, technical education and life-long learning pilots are a “good start” but the benefits will not be felt overnight. “That’s why Britain needs continued access to people and skills from abroad to ensure businesses can keep growing,” she added.

However, the self-employed were left reeling by the chancellor's announcement that from 2018, Class 4 National Insurance Contributions (NICs) will rise from its current rate of 9% to 10% in April 2018 and to 11% in April 2019, equivalent to a 60p rise for every self-employed worker, as well as a further measure cutting the tax-free dividend allowance from £5k to £2k from April 2018 to stop people from setting up a company to benefit from favourable tax treatment.

The chancellor's move caused Julia Kermode, CEO of the Freelancer & Contractor Services Association (FCSA), an independent trade association whose members provide professional support services to freelancers and contractors, to accuse him of "punishing freelancers".

Shoesmith added the chancellor’s Spring Budget Statement would be remembered as one in which the self-employed would be remembered as the group hardest hit.

“Differences in tax for people who might be doing similar work but are on different types of contracts is something the government needs to address. Many of the employment practices seen today are a direct consequence of our complex tax system. 

“It’s a shame that the chancellor chose to tinker with one element of the problem without taking a more comprehensive look at the whole issue of aligning employment status and tax.

“We’d like to see a broader, cross-departmental review. Taxation should either be incorporated into the scope of Matthew Taylor’s work, or deferred until his review and the Office for Tax Simplification have reported on the findings of the cross-departmental working group into employment status.”

Meanwhile, Adrian Marlowe, chairman of the Association of Recruitment Consultancies, said he thinks it is now clear from the chancellor’s decision to raise NICs for self-employed workers that it is government policy to harmonise the tax differential between all workers. 

“We are disappointed that the chancellor did not use the occasion to announce a thorough review of the different kinds of tax status matched with different appropriately protective rights as we have requested and implied from the Matthew Taylor review, which is not yet complete. The NICs measure would appear to be jumping the gun.”

Meanwhile, Azmat Mohammed, Institute of Recruiters director, called the chancellor’s decision to increase self-employed NICs and slash tax-free dividends that company directors can receive from £5k to £2k “appalling”. 

“I don’t see how this budget encourages people to start recruitment firms at all. Small business owners face all sorts of financial hurdles for being self-employed, and this is just a further slap in the face,” he added. “With so much pressure on the chancellor to make concessions I hope he reconsiders these measures.”

Hurley also said she was disappointed that, despite press reports to the contrary, a government review into how different workers are taxed failed to materialise.

“APSCo has been lobbying for a number of years for a complete review of tax and NICs for Personal Service Companies (PSCs) and the self-employed, rather than the ill-conceived bolt-on legislation such as the public sector off-payroll rules.

“However, we eagerly await the results of the Matthew Taylor Review referenced by the chancellor – and at which APSCo was invited to present evidence. We hope that the review will address the issue of differentiation between the professional and potentially vulnerable ends of the labour market, simplify employment status legislation and suggest a vehicle to allow professional contractors to work through whichever employment model they choose.” 

Hurley added APSCo is “very concerned” that the chancellor made clear that preliminary thoughts from the review suggest that the main driver for individuals to incorporate as companies is to maximise tax savings. 

“In the professional sector this is simply not the case – these are bona fide business to business relationships where the individual has no guarantee of continuity of assignments, has genuine business risk and liability – and none of the benefits enjoyed by permanent employees.”

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