Employers and unions lobby government over budget

Ahead of the budget statement by the Chancellor of the Exchequer in April 2009, the Confederation of British Industry and the Trades Union Congress both issued budget submissions that aimed to influence the government’s policies for tackling the current economic recession and growing unemployment. The budget itself elicited mixed reactions from the social partners.

Social partner budget submissions

The Confederation of British Industry (CBI) and the Trades Union Congress (TUC) both issued their own ‘budget submissions’ that sought to influence government policy ahead of the April 2009 budget statement by the Chancellor of the Exchequer, Alistair Darling.

In its submission (393Kb PDF) to the Exchequer, issued on 7 April 2009, the TUC called for a ‘budget for jobs’ that would aim to tackle rising unemployment rates. The TUC budget submission urged the government to adopt a GBP 25 billion (€27.6 billion as at 24 April 2009) public investment programme, which it said would create and safeguard one million jobs. Specifically, the TUC called for a new active labour market programme that would aim to provide jobs and training in areas of high unemployment, a new ‘short-time working subsidy’ for companies to avoid redundancies, and the extension of financial support schemes to unemployed people and workers earning low incomes.

Promoting employment was also the key theme of the CBI’s [budget submission (177 Kb PDF)](http://www.cbi.org.uk/ndbs/Press.nsf/0363c1f07c6ca12a8025671c00381cc7/06bb53c3f423bcae8025757e003c371e/$FILE/CBI Letter to Alistair Darling re Budget 2009.pdf) released on 23 March 2009. The employer organisation highlighted the need to improve the provision of training and support for unemployed people, and also stressed the necessity of reducing the financial and regulatory burdens on companies in order to safeguard and promote jobs. CBI Deputy Director-General, John Cridland, highlighted: ‘We need to see measures to instil confidence by supporting as many businesses through the recession and safeguarding as many jobs as possible. That means not adding to the cost of employing people with business tax rises at a time when companies are fighting for survival.’

Budget announcement

The 2009 UK budget was announced by Mr Darling on 22 April 2009. Among other things, the budget increased public borrowing and introduced a new income tax rate of 50% for those earning over GBP 150,000 (€165,360) a year. The key measures relating to employment included:

• an increase in the rate of statutory redundancy pay from GBP 350 (€386) to GBP 380 (€419) a week;

• an extra GBP 1.7 billion (€1.87 billion) in funding for UK job centres, and the announcement of government support for the economy with the aim of protecting 500,000 jobs;

• a commitment that, from January 2010, all those under the age of 25 years who are unemployed for a year will be offered a job or training place, with financial inducements in addition to benefits for those who enter training.

Social partner reaction to budget

The reaction by the social partners to the budget was mixed. The TUC’s reaction was largely receptive. TUC General Secretary, Brendan Barber, said: ‘There is much to welcome in this budget, particularly action on youth unemployment, some first steps in creating a fair tax system and better support for the unemployed’. However, the TUC were more critical of the extent to which the budget attempted to tackle unemployment with fiscal policy. Mr Barber also stated that ‘[the budget] does not bring the same boldness and vigour to getting the real economy right as the government showed in dealing with the banking collapse. The biggest drain on the public finances will be continuing mass unemployment and we needed a bigger and better targeted stimulus to the economy today.’

The CBI was broadly critical of the budget. CBI’s Director-General, Richard Lambert, declared: ‘The key question for this budget was whether it set out a credible and rigorous path for restoring the public finances to health. The CBI’s preliminary judgement must be that it does not.’ However, the employer organisation responded rather more positively to the budget’s measures to help unemployed people. Mr Lambert said in this regard: ‘With unemployment rising sharply, the extra funding put in place for Jobcentre Plus will be vital in ensuring the recently unemployed do not slip into the ranks of long-term unemployed.’

Commentary

Although the positions of the UK social partners on the budget both stressed the need for measures to promote employment in the current economic context, the means they advocated to promote this end differed markedly. The TUC continues to advocate a more interventionist economic policy to combat unemployment, while the CBI urges the balancing of public accounts and the removal of ‘burdens’ on businesses. The introduction of the new 50% income tax rate for higher earners and the expansion of public borrowing may suggest that the UK government is leaning towards the former view.

Thomas Prosser, IRRU, University of Warwick