The UK Spring Statement may not have brought immediate changes to business taxation or regulation, but it sets the stage for an important shift in the months ahead, one that will have significant implications for the way businesses engage with both their workforce and the wider economy.
Rising Employer Costs: The National Insurance Increase
While no direct changes were announced for businesses in this Statement, employers will soon face a 1.2% increase in National Insurance contributions, rising from 13.8% to 15% next month. At a time when many small businesses are still struggling post-pandemic and post-Brexit, even modest increases in employer costs must be carefully scrutinised.
Challenges Facing Chancellor Rachel Reeves
Chancellor Rachel Reeves faces a daunting challenge: stabilising the economy amidst global uncertainty, addressing structural issues inherited from previous governments, and managing the economic fallout from Brexit. Additionally, she must reform and protect the UK’s social support systems, adding further complexity to her role.
Controversy Over Personal Independence Payments (PIP)
One of the most controversial elements of the Spring Statement is the proposed changes to Personal Independence Payments (PIP). Concerns have emerged regarding the impact on society’s most vulnerable, though the details remain somewhat unclear. While PIP payments will not be taken away immediately, they will be reassessed, and their growth will slow. However, Universal Credit is set to increase by £98 per week, £7 more than initially proposed, providing some relief for low-income households.
Gaps in Government Forecasting
It’s also worth noting that current Office for Budget Responsibility (OBR) forecasts do not fully reflect the government’s plans. Key policy elements, such as income protection for individuals with no prospect of health improvement and a premium for such cases, have not yet been costed. The OBR has acknowledged that “key components” of the policy are still under development by the Department for Work and Pensions, raising questions about the reliability of current forecasts. Without this full picture, the reliability of the forecasts is somewhat limited, and both the media and public should bear that in mind.
Investment in Employment, Health, and Skills Support
There’s also a commitment from the government to invest an additional £1bn annually into employment, health, and skills support. This includes tailored one-to-one assistance for disabled and unwell individuals, with a focus on skills development, not just work-readiness. In principle, this shift toward a more “pro-work” system is a step in the right direction, especially if it empowers individuals with support that is meaningful, personalised, and not solely punitive.
The Role of Businesses in an Inclusive Workforce
Encouraging people to work if they are able is a reasonable goal, but businesses must also be part of the solution. Large and profitable companies should create inclusive environments and invest in their workforce, while small businesses—many of which are not yet profitable—may need additional government support. Incentives such as staggered corporation tax bandings based on inclusive hiring practices could encourage businesses to employ more disabled or chronically ill staff, ensuring social value is rewarded alongside financial success.
A Gradual but Meaningful Shift
The Spring Statement may not have delivered dramatic reforms, but it does reveal the shape of the government’s longer-term direction, one focused on cautious economic management, targeted welfare reform, and a shift towards a more inclusive workforce. Businesses have a role to play in realising that vision, but only if they’re supported to do so. Politically, however, Labour must be careful not to lose sight of the people who brought them to power in the first place, particularly in places like Wales, where trust in the party is already starting to fray.
