The Budget and employers an unexpected partnership?

09 July 2015

Bill Longe

In his Budget the Chancellor set out his road map for the future, moving Britain towards a higher wage, lower tax and lower welfare economy. Many employers will have asked what this means for them in practice and perhaps shuddered at the prospect of having to increase wages.

In simple terms we have a system where the Government collects taxes from employees and employers alike and then gives some of those taxes back to the lowest paid workers in the form of tax credits. What George Osborne is attempting to do is to take the Government out of the equation by, as he puts it, introducing a lower-welfare economy.

The first tentative steps were announced in the Budget with the reduction in various tax credits being balanced by the introduction of the living wage. The increased wage cost for employers was softened by both the reduction in corporation tax and increased employment allowance.

This is an ambitious plan on the part of the Chancellor. If he pulls it off in a manner which is fair to all, then he will rightfully have secured his place in history not only for his innovative approach but also for the fact he will be the first Chancellor to actually reduce welfare spending. If he fails, history will not be kind to him.