A Budget for Jobs

A Budget for Jobs: CIPD calls on the government to prioritise vital measures to keep people in work while also offering hope to the young and long-term jobless

The Chartered Institute of Personnel and Development (CIPD) today advises the Chancellor to present a genuine ëBudget for Jobsí by focusing on keeping people in jobs during the recession, primarily through a cut in employers National Insurance Contributions, backed by a focus on job creation for the young and long-term unemployed.

In a paper launched in advance of the Budget, Dr John Philpott, Public Policy Director, advises that delaying the national insurance increase planned for 2011, as well as cutting current contributions, would bring the Chancellor one step closer to sowing the seeds of recovery. The advice follows the results of this quarterís CIPD/KPMG Labour Market Outlook survey, which shows 37% of the 500 employers surveyed across all sectors naming NIC cuts as a policy MOST likely to improve their organisationís resilience through recession. This is followed by a temporary cut in corporation tax (19% agree) and a further temporary cut in VAT (8%).

According to KPMG in the UK, cutting the Class 1 employer rate of NIC by one percent for a period of six months during the current tax year would cost just under 2.5 billion, based on HMRCís own figures.*

Colin Ben-Nathan, Employment Tax Partner at KPMG in the UK, says: ìWhilst we recognise that the scope for any further tax reductions is severely limited by the extreme pressures on the public finances, we urge the Chancellor to focus any resources available on measures to help keep people in work and to encourage hiring and trainingî

Holding off the annual rise in the National Minimum Wage this October is also recommended to help reduce the risk of job losses in low-paid sectors such as retail. CIPD also calls for the introduction of a manufacturing specific subsidy to support short-time working.

In the CIPD/KPMG Labour Market Outlook survey, 56% of respondents from the manufacturing sector said they were most likely to use a short-time working subsidy, compared with an overall average of 28%. They were also most likely to say that it would make a difference to their organisational resilience (27% as compared to an average of just 8%).

Dr John Philpott, public policy director, CIPD, comments: ìThis yearís Budget should be about saving existing jobs as well as helping the jobless find work. Employers in general are urging the Chancellor to adjust payroll taxes to support employment, while a majority of those in the manufacturing sector believe a short-time working subsidy would enable them to hold onto staff during the recession.î

The paper, How to Make a Policy Virtue out of a Fiscal Necessity, also advocates a temporary job creation programme targeted directly at the young and long-term unemployed as a last resort for jobless people for whom other measures already introduced by the government have not proved suitable.

Based on the experience of previous UK job creation programmes for the unemployed, the CIPD estimates a net cost of 5,500 per place per year on such a programme in 2009-10. The Chancellor could announce an initial programme with 250,000 participants at a net cost of around 1.4 billion. The programme would be in operation by the beginning of 2010.

The CIPD predicts that a given increase in public borrowing to finance a targeted job creation programme would generate:

25 times as many jobs as an equivalent sum used to cut personal income tax

21 times as many jobs as an equivalent sum used to cut VAT

12 times as many jobs as an equivalent sum used to increase public investment

8 times as many jobs as an equivalent sum used to increase current government spending

Dr Philpott adds:

ìRightly or wrongly, the Chancellor may decide he canít afford another substantial fiscal stimulus in this yearís Budget. But by highlighting the relatively large ëbang for the buckí from a targeted job creation programme for the young and long-term unemployed, Mr Darling can offer real hope to tens of thousands of jobless people without breaking the bank.î

*http://www.hmrc.gov.uk/stats/tax_expenditures/table1-6.pdf