Budget 2013: What does it mean for the jobs market?
For a Budget report that many expected to reflect the stagnant condition of our economy, Chancellor of the Exchequer George Osborne’s 2013 statement was packed full of headline grabbers. While the economy is tipped for a meagre 0.6% growth this year with national debt expected to reach 85% of gross domestic product by 2017, Osborne’s budget mirrors the intentions of a government looking for an instant economic reaction. The budget is aimed towards creating a modern, reformed state that will strengthen the economy, develop small businesses, provide further opportunities for the unemployed and get potential homeowners on the property ladder, but will Osborne’s ideology of an ‘aspiration nation’ improve the jobs market, or will this quick-fix collapse it further?
Jobs market overview
The Office for Budget Responsibility revised their employment forecasts and announced a further 600,000 people will be in jobs by the end of 2013, with some 60,000 fewer people expected to be claiming benefits. This will provide significant relief for the jobs market, which has seen around 25 applications for every 1 job in 2011 and 2012, while jobs posted have failed to fluctuate more than about 6% in either direction since 2010.
In addition to this, Employers’ national insurance will be cut from April next year, granting businesses an extra £2,000 for every employee, while many small businesses will pay no national insurance at all. This should prompt a huge boost in the amount of small businesses rising out of the recessive slump and expanding, opening up more opportunities for people seeking employment while cutting the hiring costs for each company.
This budget has clearly been designed for quick progression, as Osborne’s report also outlines a new personal tax allowance that will limit tax deductions to £10,000 starting from 2014. This means that every employed person will not be taxed until they reach £10,000 in a year, making it easier for businesses and employees to create momentum and progress before pay deductions. Furthermore, a 1% corporation tax cut will make the UK the most competitive nation for taxes in the G20, and an open-shop for global trading which will boost the exports industry.
Transportation & Logistics
Transport and Logistics jobs as well as occupations that require long distance travelling will also receive a boost, as the budget reveals that the fuel duty escalator set for September will be scrapped. This means that fuel duty will no longer take a 3p per litre increase, which will keep fuel costs for drivers at a manageable rate. This, coupled with a £3bn injection into infrastructure, will improve jobs based in transportation while also promoting regional economic development across the UK.
Schools & NHS
Osborne also announced that schools and health budgets will be protected, which should help provide some relief to the understaffed nurses of the NHS, who stand at a ratio of 1 to 8 patients according to a survey conducted in 2013. The budget statement also identified education as the most important growth policy going forward, meaning that the demand for teachers and education professionals should take a significant increase in the following years.
The public sector
The budget reveals bleak news for the public sector, as the 1% cap on pay has been extended to 2016, while limits on progression pay have also been exerted on jobs within the field. The military, however, is exempt from progression pay cuts.
Although budgets for education and the NHS will be protected, these pay cuts may bring the family budgets of many nurses, council workers and civil servants to breaking point.
Osborne’s budget will incorporate a new ‘Help-buy-scheme’ which will provide homeowners with a 20% loan once they have put down a 5% deposit on a property less than £600,000, which amounts to 90% of all homes. The budget also specifies a further £130bn for a new mortgage lending scheme which will continue for three years from 2014. This will help lenders provide loans to people without deposits.
This is obviously designed to create a knock-on effect for jobs in the estate-agent and construction sectors, as the number of people stepping onto the property ladder will increase, prompting further demand for homes to be built and sold. The construction sector, which has seen steep year-on-year declines, will also benefit from the aforementioned spend on infrastructure.
Although it is a positive step towards amending a number of issues at once, could this unexpected housing boom could create an asset bubble that could burst before reaching any significant height?
The budget has also allocated £750 million to childcare vouchers that will help relieve taxes by 20%, or £6,000 per child from 2015. This could prompt stay-at-home mothers to return to work given the more relaxed environment provided by child-minders and carers, providing an influx in mid-management and senior roles. However, this may prove untactful as mothers have started expressing their discomfort at the idea of being ushered back into work after having made a commitment to look after their child.
Conclusion: the main points
What we can ascertain from this year’s budget report is that there is a large emphasis on rebuilding the economy from the ground up, and taking an aggressive stance with getting people into work and living in their own homes. This framework has also been designed to improve the jobs market in the trade, transport, industrial and construction sectors, with new demand for houses due to the ‘help-to-buy’ scheme and railways, buildings and roads because of the new spend on infrastructure.
Just looking at the sectors above, it is clear that the budget is aiming to revert to the bare bones of industry in an attempt to get the UK back on its feet. This budget is also heavily directed towards improving small businesses via corporation and national insurance tax cuts. This will improve the jobs market further as many smaller businesses will have the money to expand and make cheaper hires.
Given the sluggish movement of the economy at the moment, Osborne’s budget seems like an attempt to shock the UK out of the recession, but could too many radical allocations put the jobs market back to square one in the long-run?