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Five things the Government could do to keep Britain working

Monday, February 08, 2010 | Posted by: Richard Jameson
Categories: Business, Employer, Protecting your wealth | Tags: government, economy, Richard Jameson, tax policy, NICs, Tax Manifesto, labour, National Insurance Contributions, flexible, manifesto, jobs, personal tax allowance, relocation, working

Flexible working, targeted National Insurance holidays, tax breaks for new workers or the long-term unemployed… with 1% going on National Insurance Contributions, we need to stimulate the jobs market to keep workers off state benefits. Here’s some free advice for the next government…

Rise in cost of working and employing
So 2010 has finally brought a series of positive trading results and signs of renewed optimism. It’s clear the UK isn’t out of the woods yet, however. The strength of the economy is still at stake and further rises in unemployment are a concern.

At the Pre-Budget Report 2009, Chancellor Alistair Darling announced a 1% rise across the various classes of National Insurance – a measure that will be felt by workers and employers alike.

The Chartered Institute of Personnel and Development (CIPD) recently argued that the minimum wage for younger workers should be frozen in absolute terms in 2010 to assist with any wider economic recovery. With the tax cost of working and employing workers to rise, it is not a great time to increase the burden on this part of the economy.

So if we resign ourselves to these increases, what else could be done to encourage jobs?

As part of Grant Thornton’s Tax Manifesto we suggest these five ideas.

1. A National Insurance Contributions (NIC) holiday for one year for new entrants to the workforce
Offer a NIC holiday for the first year for younger entrants to the workforce and the recently unemployed. The Government also needs to promote the current, and generous, tax relief available for work-related training.

2. Review relocation expenses
Boost the tax exemption for relocation expenses incurred by staff who have to move as a result of their work. At present, it allows only £8,000 of qualifying expenditure to be paid tax-free. This has been unchanged for 17 years and needs to be more realistic.

3. A fully transferable income tax personal allowance between partners
Couples can find that the costs of childcare wipe out, or substantially reduce, the benefit of having both parents in the labour market. Making the income tax personal allowance fully transferable between partners could mean more take-home pay for the entire family.

4. A temporary increase in personal tax allowance for new workers
As a short-term incentive, the Government should consider increasing the income tax personal allowance, at least for the first year of employment. This would help tip the scales clearly against a perception that an individual is “better off claiming benefits”.

5. Extend flexible working
The right to work flexibly should be extended to all employees, not just those with caring responsibilities. More opportunities for flexi-time, staggered hours, job sharing, term-time or home working could bring more potential workers into the market.

The jobs market will be a key battleground with the forthcoming general election. Let’s hope that whichever government is in power in June, it is able to give the economy and jobs market the shot in the arm it needs.

Image: © Ingorrr, 2007

If you agree, please take a second to sign our tax policy committee petition on the Number10 web site – so that we don’t leave UK tax policy to the politicians.

Read Grant Thornton’s Tax Manifesto – our proposals for pragmatic tax changes following the 2010 general election. The Tax Manifesto combines economic analysis undertaken in conjunction with Lombard Street Research with the solicited views from a business community of 500 UK Finance Directors.

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