Budget 2024: Expected costs and promised investment

There was great anticipation around today’s budget for a number of reasons. Not only was this the first budget from a Labour government for many years, it has been trailed as the event which will dictate – or perhaps foreshadow – the nature of the new Government’s approach. Armed with some much anticipated measures and gazing into an already hotly debated financial black hole, the Chancellor had already created some strong reactions before she even spoke.

According to a poll by The HR World, given a choice of four options, over half (55%) cited the cost of hiring people as being the biggest impact of the budget on HR. This was followed by employment law issues (33%) and ensuring processes are compliant at 11%.

In reality, the cost of hiring at this point in time does seem to be the dominant theme in reactions to what Reeves laid out.

No easy budget

“It was never going to be an easy budget given the need to invest in infrastructure whilst ensuring the economy continues to grow,” said Orlagh Hunt, Chief People Officer at One Savings Bank. “The investment in schools is positive given the huge skills agenda we face as employers getting our organisations ready for a more modernised digital work place.”

Hunt also notes the increase in employers NI & National living wage could impact on job creation, a facet of the budget highlighted by David Mason, Global Head of Talent Acquisition, PMI: “The rise in national insurance will certainly make international employers review the costs of being in London,” he said. “While this in no way would necessarily suggest a reduction in numbers at this stage, it does mean global companies are more likely to invest in cities with more favourable tax environments.”

“Job creation and the impact on entry level roles is something we will be monitoring at a Higher and Further Education level,” said Rob Taffinder, Assistant Director Careers Service, University of Bristol. “I am also about to head out to China and Hong Kong with work so it will be interesting to the get the perception of businesses we partner with to see whether this will have an impact on Student recruitment numbers for universities and also inward investment into the UK in the short, medium and long term.”

Higher costs for businesses will also have knock-on effects elsewhere in company practice: “The budget will likely bring a mixed bag for DE&I efforts across businesses,” commented Jo Major, Founder, Diversity in Recruitment. “Higher business rates and costs put more strain on budgets, which always means less cash available for things like training and DE&I change implementation projects. With tighter budgets, some companies might be tempted to scale back their initiatives, reduce headcount within DE&I teams and move away from equity-critical working conditions like flexible and hybrid working policies. We’ve seen this already happening to some degree, as leaders prioritise core financial goals over diversity, culture, and inclusion, it’s already pushing back the progress made post-COVID.”

In Brief:

• Employer’s National Insurance to rise to 15% up by 1.2 percentage points.
• Threshold for paying Employer’s NI lowered from £9,100 to £5,000.
• Employment Allowance expanded by removing the £100,000 eligibility threshold. Allowance will increase from £5,000 to £10,500.
• National living wage rate increase 6.7% to £12.21.
• National minimum wage for 18 to 20-year-olds increases by 16.3% to £10.00 per hour.
• Personal tax thresholds to be raised in line with inflation from 2028-29.
• Clamp down on non-compliant umbrella companies and ‘tax avoidance’ schemes.
• Government to publish the Get Britain Working White Paper plus £240 million investment to get people back into work: “This funding will be used to expand local services, particularly for those with long-term health conditions,” commented Dr Naeema Pasha, specialist in the future of work. “The Government has said it aims to break down barriers to work and increase employment rates with increased support. The Government also seems to be serious on the role of the employer in considering what they’re doing to skills and reskill people,” she added.