CBI calls for government focus on low pay and living costs

10 Nov 14

Business leaders are urging the government to boost the living standards of low earners by raising the National Insurance threshold and expanding the provision of free childcare and maternity pay.

In a report launched at the start of its annual conference today, the CBI also set out some long-term measures designed to raise pay sustainably, including better routes into higher-skilled work and measures to ensure young people don’t fall behind in school.

CBI director general John Cridland said the return of economic growth would not, on its own, improve people’s living standards.

‘Even before the recession, the income of a child’s parents determined too many of their own life chances,’ he said.

‘The UK needs to face up to some real long-term challenges changing skills needs, greater global competition and low social mobility mean for many that the pathway to a better life is tough and far from clear.’

The report, A better off Britain, noted that the average couple saw their income fall by £2,132 a year in real terms between 2009/10 and 2012/13. The business lobby claimed that families have been hit by rising childcare costs and employees have seen much of their income go on NI contributions and pensions.

Raising the NI threshold to £10,500 in a series of steps until 2020/21 would provide ‘immediate relief’, the CBI said. It also suggested extending free childcare to 15 hours for all children aged 1 and 2, extending maternity pay from 39 weeks to 52 weeks and businesses adopting a presumption in favour of flexibility to help employees save on childcare costs.

‘Overhauling childcare in the UK would be a triple shot in the arm for our economy, raising family incomes, getting more adults into work and improving the life chances of many children,’ said Katja Hall, CBI deputy director general.

‘Many parents want to come back to work or put in more hours, but can’t because of soaring childcare costs. It’s ludicrous that the average working couple in the UK now spends over a third of their joint income on childcare.’

Other recommendations include a new focus on productivity, giving the Office for Budget Responsibility the job of reporting on key productivity trends and challenges and making employee value-added a business priority, focusing on areas like management skills, job design, innovation and investment.

It also called for more vocational routes to higher skills, more commitment from business on their employees’ career development and rewarding colleges for employment outcomes, not just course attendance.

Hall said: ‘Our economy is changing. Middle-level jobs now require ever higher levels of skills, and many firms across the country are crying out for people to fill these kind of roles.

‘At the same time a third of workers in the lowest pay group have been stuck there for at least 14 years, which is an unforgivable waste of potential.

‘We need to help more of these people re-train, boost their skills and confidence, increasing their chances of moving up in their careers to the higher paid roles our economy is creating.’

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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