Budget good in the long run but of little immediate impact

John Philpott, the Chief Economist at the Chartered Institute of Personnel and Development (CIPD) said that “The OBR forecasts have moved closer to the economic outlook for 2011 published by the CIPD following Mr Osborne’s first budget last year, but still look very optimistic for 2012 onward and may well have to be revised further downward in due course. Set alongside the OBR figures, Mr Osborne’s ‘pain today, growth tomorrow’ budget reads like a long-term fitness plan for an economy whose immediate pressing need is for more sensitive intensive care than the Chancellor is prepared to provide.”

The CIPS employee relations advisor, Mike Emmott, went on to say that “The onus should be on government to bring forward only light-touch employment regulations that do good, not harm – irrespective of company size. A moratorium for the smallest firms is a dangerous precedent that risks creating a two-tier labour market, and could even act as a perverse disincentive for growth amongst firms considering employing the extra staff member that would bring them into the ‘regulated tier’ of the labour market.”

In terms of the potential merger of Income Tax & Employees National Insurance, Matt Duffy, partnerships manager at Lorica Employee Benefits said that “Payroll experts at two major customers think that from an admin perspective, combining NI and tax will make their job simpler. Currently the three tax bands and personal allowances create many parameters and processes which they need to work around. However, from an employee perspective we will be interested to find out, through the consultation process, how benefits in kind will be managed. If the traditional mechanism P11d is not adapted, we will see a significant increase in tax for employees.” Ian Dewar went on to say that “The bringing together of NICs with income tax and the removal of the difference in rates between self employed and employed would not only introduce a huge simplification but also lessen concerns of tax loss due to employment status. Politically, the merger of income tax and NICs would require bravery as it would finally make people aware of their real marginal rates of tax. However, it would bring substantial benefits by simplifying the tax regime.”

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