Autumn Statement: UK Job Creation Higher Than Expected

07 Dec 2012

Peak unemployment revised down from 8.7 to 8.3 per cent

Chancellor George Osborne said “the British economy is healing” as he highlighted higher than predicted job creation figures in today’s Autumn statement.

Osborne said that 1.2 million jobs had been created in the private sector since May 2010, which is 600,000 more than previously forecast by the Office for Budget Responsibility (OBR).

In addition to this positive news, the OBR has revised down its forecast for peak unemployment from 8.7 per cent to 8.3 per cent.

“Employment, already at a record high, is set to go on rising each year of the forecast,” Osborne said. “For every one job less in the public sector, two new jobs are expected to be created in the private sector.

“And Britain now has a greater proportion of its people in work than either the Eurozone or the United States.

 “More jobs mean that the impact of the weaker than forecast GDP on the public finances has been less than some might have expected.”

In a further boost for jobs, Osborne announced a £5 billion investment for UK infrastructure projects such as upgrading the M25 and work on the rail network.

However, the chancellor also reiterated the Coalition’s commitment to continue its austerity policies, as he vowed to make further efficiency savings by cutting pensions tax relief and capping out of work benefits.

From 2014-15, the government will cut the pensions life time allowance from £1.5 million to £1.25 million and reduce the annual allowance from £50,000 to £40,000.

Osborne explained that this move will only affect the top 2 per cent of pension savers, while saving the taxpayer £1 billion a year by 2016-17.

And take home pay for lower paid workers received a boost as the chancellor announced a rise in the personal tax allowances. The figure had been set to rise to £9,205 from next April, but today Osborne revealed it would rise by an extra £235. This means workers will have to earn £9,440 before paying any income tax from next year.

The chancellor has also raised the 40 per cent tax threshold from £41,450 to £41,865 and then to £42,285 in the tax years 2014-15 and 2015-16 respectively.

Meanwhile, Child Tax Credit and the Working Tax Credits will increase by 1 per cent for the next three years – although previously planned freezes will go ahead.

Plans to bring in localised pay across the public sector have been shelved as the chancellor committed to maintaining national pay arrangements in the NHS, prison services and civil service. This commitment is based on recommendations in a report from the pay review bodies on market-facing pay.

However, reward management changes could be afoot for teachers as the School Teachers’ Review Body recommended giving “greater freedom to individual schools to set pay in line with performance”.

In response to the Autumn statement, Peter Cheese, CIPD chief executive, said: “Today’s statement underlines that the road to recovery hinges on the continued ability of the UK’s flexible labour market to support employment growth in tough economic conditions.

“It also depends on the efforts of employers to improve employee engagement, innovation and productivity against a backdrop of prolonged fiscal consolidation and a squeeze on business and household finances.”

Sarah Jackson, chief executive of Working Families, said: ‘The chancellor’s statement today does not give low income working parents confidence that he’s on their side.

"With inflation at 2.7 per cent, his proposed 1 per cent increase in benefits will hit many working parents in receipt of tax credits and child benefit hard, when they are already struggling with pay freezes and rising costs, including childcare.”

Source: http://www.peoplemanagement.co.uk/pm/articles/2012/12/autumn-statement-uk-job-creation-higher-than-expected.htm