Calls for a 2014 “Budget for Productivity”

  24th February 2014      
 Company News

The CIPD, the professional body for HR and people development, has today urged the Chancellor to focus on delivering a “Budget for Productivity” when he delivers his 2014 Budget on 19 March. The organisation has put forward a package of three proposals to help champion better work and working lives for the benefit of individuals, business, the economy and wider society.

The three calls to government are:

  • A fundamental review of UK skills policy, together with a new focus on the workplace, the nature of jobs for the future, and how skills are being utilised. This, the CIPD argues, is critical if the necessary leap in productivity is to be delivered to boost real wages.
  • To help young people make the all-important transition between education and work by allocating £50 million to the National Careers Service (NCS) to boost their work with schools and to improve the labour market prospects of the UK’s young people by helping to bridge the gap between education and work.
  • To ensure Universal Credit works for the benefit of employers, employees and jobseekers by producing targeted communications aimed at jobseekers to increase their understanding of the new system and to drive positive engagement, and to review whether an increase in the employer National Insurance Contributions (NICs) threshold from £148 to £220 a week or more could encourage employers to increase the hours of some existing staff.

Peter Cheese, Chief Executive at the CIPD, said: “The UK economy has finally started to grow solidly again but the deepest recession for decades has exposed critical underlying issues in our competitiveness and utilisation of skills. It’s important that government, key policy makers and businesses come together to work on improving the UK’s productivity, where poor relative performance predates this financial crisis. Productivity growth is vital to our international competitiveness, but also must underpin growth in real wages. Effective people management and development is essential in supporting productivity, effective skills utilisation, innovation and growth.

“Government and businesses need to work together to ensure we don’t create a generation of wasted talent, with high systemic youth unemployment and under-utilisation of skills. We need to promote labour market inclusion and the development of productive, inclusive, and engaging workplaces, to create a stronger and more sustained demand for employment at all levels. Just focusing on the supply of skills is not enough. The need to pull these agendas together for the long term benefit of the UK economy is one reason why the CIPD is calling for the establishment of a Workplace Commission. This would be an ongoing forum bringing together key stakeholders from government and the business community alongside employees and their representatives, to ensure workplace issues are given the coherent and integrated attention they deserve in a labour market where skills supply and demand are interlinked. Such a forum would help shape policy and promote practices for improving productivity and work opportunities and contribute to better work and working lives for all.”

Recent research from the Office for National Statistics reveals that skills utilisation lies at the core of the UK’s productivity problem.  Labour productivity fell sharply during 2008 — 09 and is still nearly 4% below its pre-recession level. And on an output per worker basis, UK productivity was 19 percentage points below the average for the rest of G7 in 2012. A CIPD report  explains that already weak UK productivity has worsened as a result of less job losses during the recession and an extraordinary run of hiring that has preceded the recent return to growth.

The number of young people unemployed now stands at approximately just under 920,000; a figure which the CIPD believes is exacerbated by the skills-work mismatch apparent in the UK. The CIPD’s Learning to Work campaign aims to tackle this problem and improve employer engagement with young people. Research reveals that out of the employers surveyed, over 53% believe that young people do not receive adequate careers guidance. With extra funding the NCS could help to bridge that gap.

Further research from the CIPD into job-seekers attitudes towards the roll-out of Universal Credit reveals that when people are fully informed about how Universal Credit will work and how it will affect them, they tend to view it positively — reinforcing the need for targeted communications around the scheme.

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