Chancellor's autumn statement 2011 - no surprise as growth figures reduced again

While much of Europe appears to be heading into recession, the UK will be spared, but growth in 2011 and 2012 will be less than 1%. We look at the key points from the Chancellor's autumn statement. 

The Chancellor opened his autumn statement (made this year in place of his pre-Budget report) by admitting that "much of Europe appears to be heading into recession", but said that "we will do whatever it takes" to protect Britain from this. However, the Office for Budget Responsibility, whose forecasts were also released today (PDF format, 133KB) (external website), does not predict a recession in the UK, instead forecasting 0.9% GDP growth in 2011 and 0.7% in 2012. By 2015 and 2016 growth is expected to be at 3%. 

Key reasons for the reduction in the OBR's forecasts include the effects of unexpected external inflation shocks - energy price and commodity price rises - which "explains the slowdown in growth in Britain in the past 18 months". In addition, the pre-recession "unsustainable boom" was bigger than previously thought, and the bust was subsequently bigger. 

The statement itself included a number of announcements of interest to HR professionals. For those in the public sector, pay was high on the agenda:

  • The Government cannot afford the 2% pay rise that many in the public sector are expecting after the end of the two-year pay freeze (this will be April 2013 for most, April 2012 for some). Therefore they will set public sector pay rises at an average 1% in each of the two years after the pay freeze. The Chancellor said that public sector pay has risen at twice the rate of private sector pay over the past four years, partly due to progression payments, and therefore the 1% "is tough; it is also fair". 
  • Departmental budgets will be adjusted in line with the limit on pay rises, a measure that it is estimated will save £1 billion by 2014/15. 
  • The independent pay review bodies are asked to consider how public sector pay can be made more responsive to local labour markets, and ask them to report by July next year. 
  • Quoting John Hutton, the Chancellor said that it "is hard to imagine a better deal than this" on public sector pensions. He says that he asks the unions "why they are damaging our economy like this. Call off the strikes.  Come back to the table. Let's agree generous pensions that are affordable to the taxpayer."

Other employment-related announcements include:

  • An increase in the state pension age from 66 to 67 from 2026 - "securing a long-term future for the basic state pension". 
  • A number of measures designed to increase the number of jobs, including more than 500 infrastructure projects and help for businesses. 
  • Help for businesses seeking to employ a young person, in order to tackle the seven-year rise in youth unemployment - which is "primarily because of a lack of jobs, made worse by a lack of skills". There will be a new "youth contract", which includes help to pay for a job or apprenticeship in a private business for those unemployed for nine months or more. 

The Chancellor repeated previously announced plans for employment law reform, including calls for evidence on:

  • the effectiveness of the TUPE Regulations, leading to a consultation on proposals for any changes in early 2012;
  • the impact of reducing the consultation period for redundancies of 100 or more employees from the current 90 days to 60, 45 or 30 days;
  • the introduction of compensated no-fault dismissal for micro-businesses with fewer than 10 employees; and
  • a move to a simpler, quicker and clearer dismissal process, potentially including a revised Acas code of practice. 

The autumn statement also confirmed Government proposals to:

  • look for ways to provide a quicker and cheaper alternative to a tribunal hearing in simple cases under a "rapid resolution" scheme; and
  • reduce health and safety regulation for small firms. 

Also

Government announces "the most radical reform to the employment law system for decades" More information from XpertHR on recently announced proposals for reform of employment law and the tribunal system. 

Autumn statement 2011 Full details of the Chancellor's statement on the HM Treasury website. 

Economic and fiscal outlook November 2011 (PDF format, 3.25MB) The Office for Budget Responsibility's updated forecasts.