Bullish Brown banking on a better future

Gordon Brownís 10th Budget turns a blind eye to current weaknesses in UK economic performance and focuses instead on long-term prospects. But despite some welcome micro-measures, todayís statement has a very familiar look and seems unlikely to bring about the productivity breakthrough the Chancellor hopes for, says Dr John Philpott, Chief Economist at the Chartered Institute of Personnel and Development.

The economy, productivity and jobs
John Philpott says:
ìThe Chancellorís recovery growth forecast for 2006 is broadly in line with that of most economists. But the Budget rhetoric glosses over last yearís slump in UK productivity growth and rise in unemployment. Particularly disingenuous is the statement that underlying productivity rose faster in the first half of the current economic cycle than in the previous two economic cycles. This excludes the recent decline in productivity growth, which may in part be structural. Meaningful historical comparisons are best delayed until the current economic cycle is complete.

ìThe specific Budget measures targeted at increasing productivity are much the same as the Chancellor has introduced since 1997. There is nothing to indicate that they will be more successful. The accompanying Treasury document on the key drivers of productivity growth continues to overlook the importance of people management and development. Welcome new initiatives on work-related training, particularly those aimed at women, are relatively small in scale, while the final recommendations of the Leitch Review of skills are still awaited.

ìTwo of the more interesting Budget measures for jobs appear to toughen the governmentís welfare to work agenda. Jobless lone parents who have been out of work for more than a year will now have to attend six monthly work focused interviews even if their youngest child is aged under 14. And people on Jobseekerís Allowance will be subject to tougher fortnightly Job Reviews. This is a welcome development and may suggest that the Government believes that last yearís rise in claimant unemployment may in part be due to inadequate job search by claimants.

ìOf particular significance also is the announcement that there will be a review of measures to help people with mental disabilities into work, in order to inform policy decisions ahead of next yearís Comprehensive Spending Review. People in this position have very low employment rates and, as CIPD surveys of employers find, face particular difficulty in finding jobs.î

Public service efficiency and delivery
John Philpott adds:
ìThe Budget indicates encouraging progress toward meeting the Gershon efficiency targets, though it is important to note that the 40,000 reduction in back office staffing levels is a gross rather than net figure. Also encouraging is the Chancellorís tougher stance on public sector pay.

ìIt is, however, disappointing to see that the Chancellor remains wedded to over centralised management of the public services. While the Budget promises that front-line professionals will be given greater operational autonomy over service delivery the CIPD believes that this should be a priority for the public sector workforce as a whole. In addition, the remit of the promised review of service delivery should be extended beyond a consideration of largely technological matters to cover people management requirements.î

Review of national insurance and income tax for low paid workers
John Philpott says:
ìThe announcement by the Chancellor of a review of national insurance and income tax arrangements for low paid workers, with a view to better aligning the two systems, is timely and welcome.î

Childcare
John Philpott says:
ìThe CIPD welcomes measures to make it easier for working parents to find and fund childcare to enable them to return to work, including grants to encourage more workplace nurseries to be established and an increase in the value of tax-free childcare vouchers.î

Reforms to further education
John Philpott says:
ìThe CIPD will wait to assess the fine detail. But in principle we welcome measures to make FE colleges more responsive to employer need. This sector has a key role to play in boosting workplace skills, including the provision of courses to help people onto the first rung of a career in effective people managementî.