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The Pre-Election Budget: A Gambler’s Last Throw?

Any Budget announced right before an election is bound to form part of a campaign, and will always include a few choice treats for the key voters a party is aiming to woo. The fact that the Liberal Democrats published their own version of the budget, despite being part of the Government, highlights this further.

Mr Osborne has announced he will increase the minimum wage to £6.70 p/h for adults and to £3.30 p/h for apprentices. This continues the government’s narrative that people and businesses still should not trust Labour and can trust the Tories to improve conditions at a sustainable rate.

In fact this 20p rise is probably just what the doctor ordered. It’s not a huge rise and is unlikely to put NMW-paying companies out of business, but with inflation at nearly 0% it could, according to Robert Peston at least, equate to a real-term wage rise of about 3%. Inflation may start to increase gradually by the time the extra 20p takes effect, but it’s still a plus. Britain may have one of the lowest minimum wages in Europe, but it is also one of the cheapest places to live.

Companies that flout the NMW are also being named and shamed. As usual though, the worst offenders are care providers. Interestingly, care providers tend to be the most common payers of NMW because the public sector contracts they work on do not pay enough for the company to pay employees any higher than NMW without making a loss. Whether the public sector will be prepared to pay higher contract fees to reflect the NMW rise remains to be seen.

A further relaxation of pension rules is also coming into effect with pensioners wishing to sell an annuity no longer having to pay the 55% or even 70% tax charge.

UK unemployment has fallen by a further 102,000 people, putting it at 1.86 million for the three months to January, including a small drop in youth unemployment. The number of people claiming JSA also fell to its lowest level since 1975 despite the population increase. That’s certainly good news and implies a general pro-business approach.

But the budget had very little for SMEs, unless of course you are a logistics company sending vans across the river Severn – in which case you’ll save a few quid at the toll and on fuel. We didn’t expect much, as a pre-election budget is often targeted at individuals, but a tangible reduction in NICs would have come as a welcome relief for many small businesses. Employees continue to cost a great deal of money, and smaller companies will only take the risk of employing more people if they can afford it.

The Budget was effectively an aspiration. Very little will come into effect before the May election, and a second Budget will probably be published by the winning party or winning coalition.

So we’ll be going through all this again. We can hope that the Summer budget – made during the next government’s honeymoon period – may risk a few more pro-business changes once the ‘savers’ have won it the election.

On a final, non-financial plea to whoever wins, please introduce a new, practical rule on victimisation. At the moment, an employee can raise endless discrimination-based grievances even if they are totally unfounded and even bitter. A grievance could be fairly ignored, but if you dismiss the employee for these grievances he or she could raise a valid complaint of victimisation. Management could be a great deal easier without this loophole. Let us hope!

Russell HR Consulting provides expert knowledge in HR solutions, employment law training and HR tools and resources to businesses across the UK.

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