Budget Reaction

The CIPD, IR35 Shield & Parasol

The CIPD has welcomed the extension to the furlough scheme, saying it represents a lifeline to many businesses and workers. However, it warns the government must now start to shift gears and move from its focus from job protection to greater investment in skills and supporting jobseekers.

“The extension of furlough to the end of September will be a huge relief to businesses and workers across the UK,” said Peter Cheese, chief executive of the CIPD, “while gradual tapering of the wage subsidy from July will help avoid a ‘cliff edge’ end to support and protect thousands of jobs.

“However, while the furlough scheme will continue to support jobs over the summer there is still a huge challenge to address the reskilling needs of the new economy and to help jobseekers back into work,” he said. “Today’s announcements on skill investment and policy lack ambition and don’t meet the needs of businesses or workers. Spending on lifelong learning is still less than it was a decade ago at a time when investment in this area has never been more important. This must be addressed if the Government’s further education reforms are to meaningfully tackle the skills gaps and shortages that hold back the economy. There also needs to be much more sector-specific funded training and mentoring support to help job seekers develop the technical and employability skills they need to find work in parts of the economy that are set to grow.”

Elsewhere, Dave Chaplin, CEO of IR35 Shield noted that an errant clause in the Finance Bill which would have presented problems for umbrella firms has now been amended: “We are pleased that the Treasury has sought to correct the error we pointed out to them in September last year,” he said. “As it stood, the legislation required remuneration to be treated for employment tax purposes before reaching the intermediary, which would effectively render the role of the umbrella company redundant. The amendment would have posed numerous challenges and potential knock-on effects for the contractor supply chain. It was important to correct it lest it would have had the potential to wipe out a complete sector. When the new legislation takes effect, more contractors will opt to work through an umbrella firm as an increasing number of hirers issue blanket bans on using limited company contractors. It is important that all options are open to them and umbrella working is one way for them to continue contracting.”

Clarke Bowles, head of key accounts at Parasol noted however that the main statement avoided the issue of IR35 entirely: “Unsurprisingly there was no mention of IR35 in the Chancellor’s budget speech today, further confirming that what little hope there was for a postponement has now completely disappeared,” he said. “The government appears not to recognise the threat of these imminent reforms on the contracting industry, which is a further blow for limited company contractors at what is already a challenging time for all small businesses.

“IR35 may also lead to companies refusing to engage with contractors out of fear of getting assessments wrong and the associated liabilities, which could cause a subsequent talent vacuum in industries that will be vital to the UK’s economic recovery,” he said. “Companies that blanket ban rather than deal with IR35 through accurate assessment and compliance will inevitably lose out on top talent in the long run.”

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