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CIPD - Government’s Summer Budget puts productivity plan firmly in the spotlight

The Chancellor’s pledge to introduce a ‘national living wage’ of £9 by 2020 has raised the stakes for the UK’s productivity plan, according to the CIPD in its response to the Budget. 

On the National Living Wage: Mark Beatson, chief economist for the CIPD, the professional body for HR and people development, comments: “The proposed National Living Wage is an upgrade of the existing National Minimum Wage for the over 25s.  The Office for Budget Responsibility says it will have little net effect on employment, but their forecasts rely on assumptions about future productivity growth that have proved wrong to date.  This policy will only deliver higher pay without significant job losses if it is accompanied by a drive to increase productivity in low pay sectors such as retail, hairdressing, hospitality and the care sector – and that will need more than delivery of apprenticeship numbers or employment subsidies via the National Insurance Contributions system.”

On apprenticeships: “The Government’s introduction of an apprenticeship levy does highlight the importance of investing in training, but there is a concern that this could reduce broader workforce development if it is introduced in isolation without consideration of the UK’s broader skills challenges, for example inadequate leadership and management capability. We need to see more detail from the Government on how they intend to encourage a culture of lifelong learning, training and development and this must include opportunities for those aged over 25 right through to mature workers.”

On welfare reform: “Improved skills and employment opportunities for everyone is the glue needed to hold the government’s welfare reform agenda together. This means recognising the key role of further education and the importance of protecting the adult skills budget in order to support the roll out of Universal Credit and ensure that work does always pay more than benefits. In addition, it’s crucial that The Youth Obligation is accompanied by sufficient support to enable young people who are not going to university or into an apprenticeship to develop the skills they need to get into and on at work.”

On the gender pay gap: “The gender pay gap may be at an all-time low but it is still not low enough and is part of our productivity problem. There are still far too many obstacles preventing women from returning to work after maternity leave and barriers to progression within the workplace.  Especially important is access to flexible working, and we’d like to see the productivity plan spell out how employers can do more, with the public sector taking a lead.”

On public sector pay: “The announcement of a 1% pay ceiling for four years may be more challenging than pay restraint proved to be in the last Parliament.  Then, private sector average earnings were falling in real terms.  According to the Office for Budget Responsibility, average earnings will grow at an annual rate of nearly 4% a year from 2017 onwards, which could lead to increasing recruitment and retention problems where the public sector is competing with the private sector. Therefore, employers must be even more creative in how they use their reward package to attract, retain and engage employees.”

On the Government’s Productivity Plan, due on Friday 10th July: The CIPD wants to see a Government-led campaign to boost the productivity of Britain’s workforce. How? By:

  • Boosting leadership and management capabilities, particularly among SMEs, for example by providing targeted support through the new Business Growth Hubs
  • Extending skills development opportunities beyond apprenticeships to workers of all ages by protecting the adult skills budget
  • A concerted push to boost workplace productivity through sector-based industrial partnerships 
Beatson concludes: “There was a lot in the Budget that will have an impact on working lives. Improvements to pay are a step in the right direction, but to enable ongoing pay progression, the Government must work with industry and businesses to equip the workforce with the opportunities and skills they need to progress in work and add value to the economy.”
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