Chancellor Jeremy Hunt delivered the spring Budget on Wednesday 6 March focusing on key changes for agency staffing in the healthcare sector, AI skills, and National Insurance.

NHS agency staffing

In the announcement, Hunt addressed the NHS productivity plan and funding and said the government will work with NHS England to reduce the costs of agency staffing, including ending the use of expensive “off-framework” agency staffing from July 2024, while ensuring that emergency cover can continue.

Alongside this, the NHS will introduce a wider set of measures to review agency price caps, tighten controls and rules around agency staffing, and improve support and transparency.

Overall, the NHS productivity review will give £3.4 billion in capital investment to boost NHS productivity in the next parliament (i.e. not until after the general election, and potentially a new government) through a variety of  Artificial Intelligence (AI), digital and other tech-related investments so the NHS can increase its annual productivity increase to 2% per year by 2028/29, in line with the ambitions of the NHS Long Term Workforce Plan.

The plan also states that £1 billion will be invested to transform the use of data to reduce time spent on unproductive administrative tasks by NHS staff, enabling more than £3 billion of savings over five years. This includes pilots to test the ability of AI to automate back-office functions.

AI upskilling

The government is also announcing a new £7.4 million upskilling fund pilot that will help SMEs develop AI skills of the future. This will complement the SME Digital Adoption Taskforce, which the government will be launching shortly.

According to Hunt, the taskforce will investigate how best to support the adoption of digital technology by SMEs to boost their productivity. The work of the taskforce will support that of the AI Opportunity Forum, which brings pioneering companies together to encourage AI adoption across the private sector to boost productivity, fuel innovation, and deliver growth in all areas of the economy.

National Insurance

The UK government is also cutting the main rate of employee National Insurance by 2% from 10% to 8% from 6 April 2024. Combined with the 2% cut announced at Autumn Statement 2023, this will save the average worker on £35,400 over £900 a year.

Furthermore, the government is also cutting an additional 2% from the main rate of self-employed National Insurance on top of the 1% cut announced at Autumn Statement 2023. This means that from 6 April 2024 the main rate of Class 4 NICs for the self-employed will now be reduced from 9% to 6%.

“Combined with the abolition of the requirement to pay Class 2, this will save an average self-employed person on £28,000 around £650 a year,” the government stated. “The combined effects of these reductions to National Insurance also means that a person on the average wage now has the lowest effective personal tax rate since 1975.”

The OBR (Office for Budget Responsibility) forecast that, as a result of the reductions to NICs at spring budget, total hours worked will increase by the equivalent of almost 100,000 full-time workers by 2028-29. Combined with the impact of the NICs cuts announced at Autumn Statement 2023, the OBR expects that total hours worked will increase by the equivalent of around 200,000 full-time workers by 2028-29.

Spring budget 2024 also set out a ‘Life Sciences Vision’ which highlights the government’s commitment to grow the UK’s life sciences sector and establish the UK as a leading global hub. Through the Life Sciences Innovative Manufacturing Fund, the government is supporting over £430 million of company investment in high value manufacturing and 1,100 jobs.

OBR forecast

Meanwhile, the OBR forecasts inflation to fall to its 2% target in Q2 2024, a year earlier than in their November 2023 forecast. As a result of falling inflation, real wages are rising. The OBR now expects living standards, as measured by real household disposable income (RHDI) per person, to grow by 0.8% in 2023-24 and continue to grow in each year of the forecast. In the latest data, people’s real incomes were around £1,100 higher than the OBR expected in their March 2023 forecast.

The OBR forecasts the economy to grow by 0.8% in 2024, with growth then increasing to 1.9% and 2.0% in 2025 and 2026. Growth then returns towards the OBR’s estimate of its potential rate, averaging 1.8% in 2027 and 2028. GDP per capita is forecast to grow in every year from 2025.

Spring budget 2024 also briefly addressed tax avoidance.

The government said it is building on strong actions at recent fiscal events, including measures to clamp down on promoters of tax avoidance, and is now going further to strengthen taxpayer protections, making it harder for bad actors to provide tax advice that could cause harm. It is consulting both on options to strengthen the regulatory framework in the tax advice market, and on requiring tax advisers to register with HMRC if they wish to interact with HMRC on a client’s behalf.

“Following consultation in 2023, the government will set out next steps for tackling non-compliance in the umbrella company market shortly,” it stated. However it did not add any further details.

Recruitment industry reacts

On the budget announcement yesterday, Recruitment and Employment Confederation (REC) Chief Executive Neil Carberry, said, “If the Chancellor’s goal was to stimulate investment and drive per person growth, he hit the post.”

“There were plenty of initiatives in the budget today that business will welcome,” Carberry added. “From AI skills support in professional services, to growth support on finance for small businesses and a patchwork of sectoral measures. There were many sensible steps. But taken together – they didn’t add up to the industrial and workforce strategy we really need.”

“It beggars belief that the Chancellor made GDP per capita, driven by the domestic workforce, a core goal of his speech but had nothing to say about the skills system beyond a few specific pots of spending and pieces of devolution. Further focus on childcare will be welcomed by employers all over the country, though,” Carberry contined.

“Cutting employee National Insurance is the right call when addressing personal taxation, because it is targeted on workers and particularly helps the low paid. REC members agree with the Chancellor that taxes on labour are too high but would have welcomed the acknowledgement that this is also true for businesses, many of whom are really struggling with a cauldron of rising costs. From a minimum wage that has risen 20% in two years to inflation and higher business taxes – there needed to be more to really get investment going,” Carberry said.

On temporary staffing and the NHS, Carberry said, “Healthcare agencies keep the NHS open. But on-framework provision has been made unsustainable over the past few years by poor management and unrealistic cost assumptions. You can’t freeze wages for temporary nurses through a pandemic and inflation spike, but that is what this government tried to do, super-charging higher cost off-framework provision and hidden high-cost Bank provision.

“Hopefully, today is the start of a discussion where agencies can finally be allowed to help the NHS reduce cost and improve the standards of care, but that requires a true partnership. We are ready to help. The deadline the government has set for ending off-framework this summer is unrealistic and would likely damage the quality of care and increase waiting lists,” Carberry said.

Tania Bowers, Global Public Policy Director at APSCo (Association of Professional Staffing Companies), said, “For the staffing sector, there were numerous elements missing that we had expected to see and very little on the workforce or skills. The Chancellor is continuing to rely on previously launched programmes to get the 10 million adults of working age back into work plus the cuts to employee National Insurance. We think this will offer greater encouragement to the lower paid and lower skilled to enter work.”

“We welcome the launch of the NHS Public Sector Productivity Plan and the £3.4 billion to be invested in IT systems modernisation, which will create many permanent and flexible nonclinical roles. However, we hope there are the specialists in technology and AI in the labour market to deliver. We fear an overreliance on consultancies, which are generally far more expensive overall than the use of skilled flexible contractors through recruitment businesses,” Bowers said.

On the agency staffing plans, Bowers said, “The highly skilled contract workforce requires less protection and more freedom than others employed under different contracts. That’s why we believe highly skilled workers need to be excluded from the Agency Workers Regulations. It was also disappointing to see an anti-immigration approach from the Chancellor when we know that a flexible short-term visa scheme could deliver growth without affecting the plan to get people back into work.”

“Cuts to National Insurance are welcome and it was encouraging to hear the OBR predictions of higher economic growth. In summary, you get the impression the Chancellor’s focus has moved away from skills to boosting investment; a strong policy approach, but one that will be weakened if there are simply not the workers to deliver.”

Crawford Temple, CEO of Professional Passport, an independent assessor of payment intermediary compliance said, "Buried in the detail of the Chancellor's red book we read that the government will set out the next steps for tackling non-compliance in the umbrella company market shortly. 

“I would like to remind the government and policymakers that while they drag their feet the promoters of tax avoidance schemes continue to thrive,” Temple said. “Today, we have heard nothing about plans to step up enforcement against the rampant non-compliance plaguing the umbrella company market. The lack of policing has created an unlevel playing field that punishes compliant firms while allowing shady operators to thrive unchecked.  The government already has the tools; it just needs to start using them and equip HMRC with more resources to expand the enforcement dragnet to capture offenders quicker."