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Budget Comments

March 23 2006 - A selection of comments on Gordon Brown's Budget speech:


Dr John Philpott, Chief Economist at the Chartered Institute of Personnel and Development: 'The Chancellor's recovery growth forecast for 2006 is broadly in line with that of most economists. But the Budget rhetoric glosses over last year's 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.

'The 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.

Two of the more interesting Budget measures for jobs appear to toughen the government's 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 Jobseeker's Allowance will be subject to tougher fortnightly Job Reviews. This is a welcome development and may suggest that the Government believes that last year's rise in claimant unemployment may in part be due to inadequate job search by claimants.

Of 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 year's 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.'

Child Care

TUC General Secretary Brendan Barber: 'The continuing focus on childcare and childcare support is particularly welcome. From this April the childcare element of the Working Tax Credit will be increased to cover up to 80% of childcare costs (up to a maximum of £240 per week), which will be of particular benefit to low to middle income families. Furthermore, the Chancellor has recognised that employers have a role to play in supporting the childcare needs of their workforce and the TUC welcomes the introduction of capital grants for SMEs to provide workplace nurseries. The recent focus on childcare vouchers has seen some workplaces shut their on-site childcare support and replace them with vouchers. This initiative may help to reverse that trend.'

Ben Black, spokesperson for the REC (Recruitment and Employment Confederation) Childcare sector group: 'The news not to cut the taxes for families further but instead use the money to raise the child element of the child tax credit by 14% makes no sense whatsoever. Largely because nobody understands the childcare tax credit never mind uses it. According to Government figures, only a third of people who are eligible for the childcare element of the working family tax credit actually take it up. It's a mystery as to where this money actually goes.'

'The announcement that child care vouchers will increase by £5 a week is a small step in the right direction, but yet again, nothing has been done to help parents afford home based childcarers such as nannies. The childcare voucher scheme is the only part of childcare spending that has really worked and therefore, should have been increased substantially. Less than 2000 of the 120,000 home based childcarers are approved for even minimal tax breaks despite the fact that it is the preferred choice of 60% of parents. The priority should have been to get tax breaks for childcare to parents to make the vouchers accessible and easy to use.'

Skills and FE

REC Managing Director Gareth Osborne: 'Although we welcome the Chancellor's commitment to a skilled and flexible labour market, today's budget has not alleviated fears that the UK is increasingly losing its competitiveness, with the health of the UK labour market very much under threat. The REC's monthly Report on Jobs - conducted in association with KPMG and NTC Research - has shown signs of a slowdown in UK recruitment and points to a job market on the cusp of a downward trend.'

TUC General Secretary Brendan Barber: 'The TUC welcomes the increased funding for skills and further education. We look forward to more detail on the proposals in the upcoming FE white paper. The TUC particularly welcomes the support for learners in the commitment to enable all young people up to the age of 25 to receive free funding to study up to level 3, with support available from the Adult Learning Grant.

'Measures to help low-skilled women into work in response to the Women and Work Commission are also particularly welcome. A new pilot aimed at achieving level 3 qualifications for women with low skills, additional skills coaching pilots focusing on women and funding for Sector Skills Councils to develop new ways of recruiting and training low skilled women into industries with skills shortages are helpful strategies to increase the opportunity for higher skills, higher pay and sustainable employment for women.'

Public service pay and public spending

REC Nursing and Social Care group spokesperson, Peter Cullimore: 'It is encouraging to see that the Chancellor has announced a fairness in pay, with more for nurses, where recruitment is urgently needed.

'However, it is a serious concern that there are some areas that are not covered by the pay review such as care workers working through agencies or in residential or nursing homes. Such workers are unlikely to receive similar increases due to the rigid financial climate that local authorities are operating in.'

TUC General Secretary Brendan Barber: 'The TUC is deeply sceptical that five per cent falls, in real terms, for three years in the Departmental Expenditure Limits of the Department for Work and Pensions, HM Revenue and Customs, HM Treasury and the Cabinet Office, can be achieved without affecting the quality of the service given by those departments. We believe it is simply not possible to take £1.8 billion in total out of the budgets of these departments without affecting the quality of the service provided. Nor do we accept the distinction between front-line services and back office staff. In most cases, the two work together and these cuts will be felt by users, such as benefit claimants.

'The tight target for public sector pay will ring alarm bells across the public sector and is storing up trouble for the future. The responsibility for controlling inflation cannot be carried by public servants alone. Ministers will not achieve the public service improvements they seek unless they can recruit and retain quality staff. This will not be possible if public sector pay falls behind the private sector. Recruitment difficulties in the public services remain, and unfilled vacancies in the public services are increasing relative to the rest of the economy. And the government faces the challenge of ending discrimination against women in public sector pay.'


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