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Charlie Duff

Sift Media

Editor, HRzone.co.uk

Read more about Charlie Duff

Budget 2010: our forecast

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So what did Alistair Darling have to offer employers and employees in his 2010 budget? Here’s a light hearted forecast at how the budget will affect you at work.

Unemployment – be grateful, but not too grateful
Mr Darling was quick to remind us that the unemployment rate is lower than it was during the recessions of the 1980s – however with the squeeze on benefits, actually being truly unemployed and claiming Job Seeker’s Allowance is harder than ever – being on New Deal, training or very part time work will all mean you won’t show up in the figures. Clever stuff. And with the targeting of NEETs, positive though this may be, the figures are likely to remain untrustworthy.

Clamping down on the NEETS
The government isn’t going to stand for young people being on the dole for more than six months. If they haven’t sorted themselves out in half a year they’ll have to go on a training course, and as now won’t be able to turn down positions offered to them. The sceptical among you will know that this ends up with young people moving from course to course to course, without any guarantee of ever doing anything useful but never mind, at least the 18-25 year-olds won’t be clogging up the unemployment figures any more…

Jane Scott Paul OBE, chief executive of AAT said: “Young people should not be put onto courses or work placements simply to meet Government targets – they actually need to be more employable at the end of it – so it’s a shame that the Chancellor did not address how these activities will ensure people are work ready. The only way that is going to happen is if employers are involved right at the start of the process to ensure that the training or employment offered provides the skills that businesses need.”

Get ‘em while they’re young
The youngsters thinking about leaving school are to be given work experience to help them get ready for work, and if they’re good at Maths or Science then they might even get to go to University too. If they were interested in humanities, it’s a bit tough, should have been born earlier. Those who might have consoled themselves over this news with a nice drink of cheap booze in the park should possibly reconsider their choice too – cider is to be taxed by an extra 10%. Frankly, it’s got away with being cheap for too long and Darling clearly doesn’t care for the Westcountry vote. Don’t worry Chancellor; they’re all Tory, Lib Dem or Wurzel down there anyway.

Bonuses
Mr Darling was very pleased that the bonus tax has raised double the estimated count at £2 million, claiming this policy was reforming and preventing risk taking behaviour. Governments, he opined, had responsibility to protect jobs and skills. Nice lip service there, Darling, but it was all a bit style with no substance, as there wasn’t any detail to be added to that.

Relocation, relocation, relocation
Public sector in London – you’re moving out. Darling claims he’s going to shift 15,000 civil servants (1/3 of the current workforce) out of central London, including 1000 Ministry of Justice workers. He reckons it’ll save £41 million as he ships them out over the next five years. Whether this is going to work out is of course another matter – leases on buildings, relocating and sourcing new sites is all expensive stuff, although it would be good to see more decision making departments spread around the country. (Although in reality, would that be the case?) You might be pleased if you’re in the public sector to have a lower cost of living though, because pay rewards are to be frozen at 1% from 2011.

Incidentally, top marks to the directgov twitter account here: they posted “Civil servants in London to be reduced by a third and 15,000 relocated from central London within the next 5 years” – causing immediate panic among public sector workers watching on twitter who understandably read it as ‘one in three of us is for the axe and the rest of us need to move to the ‘burbs’. Now, if it turns out that is the case, you saw it here first. But at the moment it stands as yet another government twitter #fail.

Don’t earn too much
Earning over £150k PA? You might want to reconsider that high-flying career. Sean Drury, international mobility partner, PricewaterhouseCoopers LLP, said: “From next month, the UK will rank second only to Italy in the G20 countries in terms of tax unattractiveness for a high earner.” If you’re hitting this kind of dough, you can expect to pay 50% of everything you earn above £130k back in tax. Ouch.

Pension bonus capped
Confirming the pre budget report, in case you were ever considering retiring, here’s another reason to end that well paid career now – the pensions tax relief for people earning more than £130,000 is to be largely removed. If you or some of your employees earn more than £130k, the employer contribution will count as income, which could well push them over the £150k tax trap barrier. Oh noes! Basically, once you hit that, the tax relief reduces. This budget has created a new tax trap – in short, if you’re earning more than £100k pa, perhaps it’s about time you became a generous patron of charity. Either way you should definitely seek professional advice and advise your employees to the same if they fall into this bracket.

Childcare window dressing
Listen up all those getting employer supported vouchers or childcare, and those providing it; currently you can’t take part in a salary sacrifice if you’re a low earner as it may mean you drop below the NMW. Which makes sense, except that you have to shell out for childcare anyway and therefore may end up paying more than you would have salary sacrificed – plus you’d get taxed beforehand by having to do it this way around. The government plans to relax this rule so less well off families can take advantage of salary sacrifice but as they don’t plan on going through with it unless re-elected, it could well be just a lot of hot air.

Family tax credit threshold
Now this looks like a good idea. With the recession meaning many people now work shorter hours and therefore take home less money lowering the threshold sounds like a good idea. Apparently this has benefitted 440, 000. They’re seeing themselves a whole £38 a week richer, according to Darling, which is admittedly far preferable to a poke in the eye with a sharp stick.

Addressing the DRA
Many are in favour of full scrappage of the default retirement age, although some employers remain concerned about what this may mean for them. At the moment some companies seem satisfied to play it by ear and continue to employ older workers in suitable positions, but public sector has a track record of being much stricter about these types of guidelines.

Exactly what will be done is not clear at this point but Rachel Krys, Campaign Director of leading age campaigners, the Employers Forum on Age (EFA), is keen, saying: “We are delighted that the Government has finally come to its senses and realised it is time to do something concrete and positive about the antiquated default retirement age, and strengthen the position of the employee.

However, it’s been a long time coming. The Employer’s Forum on Age (EFA) has been campaigning against the forced retirement of workers for many years because it is fundamentally discriminatory. It is based on the assumption that age affects someone’s ability to do their job, and unlike other characteristics like race or gender, age can be used arbitrarily to fire people.”

The government is essentially going to push through a mini-bill before Easter, leaving the other stuff until after the election – so this could be the flimsiest budget ever, but with some items coming onto force this week, we suggest you stock up on cider (before Sunday) and remain vigilant for tax traps.

And to ensure the financial health of your employees, get some actual professional advice. This is just a bit of fun, an early warning system of what to expect in the stormy time ahead…

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Charlie Duff

Editor, HRzone.co.uk

Read more from Charlie Duff
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