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The July 2105 Budget and the research industry

There have been plenty of talking points around this year’s budget. Now that the dust has settled we have decided to look a bit closer to home and think about how all of this will impact the research industry.

Education

Apprenticeships:

The recent budget contained a number of measures which will potentially have a major impact on the future of school leavers in the UK over the coming years. Of these the most significant of these is the introduction of a new Apprenticeship levy for large employers.

The aim of the Apprenticeship levy (not perhaps the natural step for a Conservative party with a predilection for free market solutions) is to fund increases in apprenticeship numbers and quality (e.g. the pledge to create 3m new apprenticeships in the course of this parliament).

Although the nature of the levy is not yet clear (who will pay it and how much) from a research perspective the key questions appear to be:

1. Will the levy generate the required increase in apprentices, while also maintaining quality?

2. How will this vary across different sectors and at different apprenticeship levels?

3. What is the employer view on this?

  • Which employers will benefit from these changes?
  • What affect does the levy have on employer non-apprenticeship training activity, and hence their overall investment in training?

Having conducted extensive research on support for the training levy in the construction sector, on employer views on Apprenticeships and on employer investment in training, we look forward with interest on the government’s research programme in this area.

Student maintenance grants:

The replacement of the Student maintenance grant by loans is another stand out consideration in the education space and will undoubtedly have an impact on those considering the option of University. Currently, students from families with annual incomes of £25,000 or less get the full grant of just under £3,400 a year; more than half a million students in England receive the grant costing taxpayers more than £1.5bn annually. The government hopes scrapping the grant will reverse under-funding of universities, and stops the basic unfairness of taxpayers funding grants for people likely to earn above average salaries. Critics focus on social injustice and the fact that scrapping the grant will make university unaffordable and unappealing for those from the poorest backgrounds.

On this basis the overriding question for research must be what impact does the introduction of the loan have on student numbers, particularly on (planned) applications from low and middle income families?

Welfare

Our recent blog challenging the stereotype of the benefit claimant discussed how the government may look to achieve its cuts of £12bn to welfare payments by 2018-19 – read our blog on here. This budget gives us a first look at how the government aims to approach these cuts. The flagship announcement regarding benefits from this year’s budget has been the new national living wage. This will see a reduction in the benefits provided to low paid workers but in turn businesses will be obliged to pay them a higher wage.

From a research perspective it will be interesting to consider what impact this will have on employment and the way in which employers recruit. It raises some interesting questions:

1. Will we see more under 25’s recruited as employers look to avoid paying the £7.20 living wage in favour of the standard £6.50 minimum wage?

2. Will we find employers recruiting individuals to work restricted hours – for instance, in retail or services, recruiting to cover narrower windows of ‘peak demand’?

3. Will it apply a ‘chilling’ effect to further recruitment, making employers consider more carefully whether to take on further staff?

A more difficult question to answer is whether the national living wage – like the national minimum wage before it – acted as a ‘default position’ that led some employers to pay less than they might otherwise have done –thus ‘flattening out’ wages paid, rather than acting as a ‘safety net’ at the bottom of the wage scale.

Taxation

There have been a number of changes to taxation in this budget with adjustments being made to personal tax thresholds and a reduction to the rate of corporation tax.

Researchers will play a key role following:

1. The impact of the proposed rise in Personal Allowance

2. The Inheritance Tax threshold for individuals

3. The reduction of Corporation Tax and changes to the Annual Investment Allowance for businesses (the August round of our Business Omnibus will be assessing the reaction to the budget across businesses of all sizes and sectors to see what kind of impact these changes have had).

Insurance Premium Tax:

As part of this budget the chancellor also announced that Insurance Premium Tax (IPT) will rise from 6% to 9.5% from November of this year. It is very likely that the IPT change will not be picked up by the majority of people even though it will have a significant impact. To put it in perspective, from November over 20 million households that hold contents / buildings insurance or motor insurance will see their premiums increase (it is estimated typical car insurance will increase by between £12 and £15).

Premium increases are likely to become another barrier for insurance providers to overcome as they look to engage with an already frustrated client base. See our blog on recent insurance innovations.

Healthcare

The words ‘challenging ‘ and ‘impossible’ have been bandied around with the conflicting demands of £22 billion in NHS efficiency savings by 2020/21 while also working to achieve a 7 day a week service in the same period. While there is certainly no ‘silver bullet’ with finance directors talking of general efficiency savings (without discussing specifics), procurement savings and ‘supporting staff to work in different ways’ (isn’t this falling under the efficiency savings heading?), all external suppliers are going to have to work within this austere context.

Only time will tell how deep and far these cuts will go, however what is clear is that ‘efficiency’ is going to be a key word for all suppliers to the NHS and other public sector health organisations, especially in terms of the service sector suppliers such as research.

In conclusion…

All research suppliers are going to have to think smarter in their research solutions and demonstrate this during the procurement process over the coming months. There are a lot of conflicting demands on limited budgets and research suppliers will need to actively demonstrate that the results of a project will enable efficiency savings as well as insight.

IFF Conference Review

Thoughts from this year’s SRA conference (7/07/15)

The end of 5 years of coalition government and the day before the first “pure” Conservative budget in almost 20 years felt like a perfect time to take stock. This was a chance to share what our industry can tell us about the way society has changed since 2010, and to ask what the next parliamentary term might have in store.

Did attitudes change as we would expect during the coalition years?

The British Social Attitudes survey (BSA) has long been a rich source of data on the changing face of British society. We heard from Naomi Jones of NatCen Social Research, who made some interesting comparisons between what we might have expected to see in terms of public opinion during the coalition years and what actually happened.

During a time characterised by the rise of UKIP and considerable cuts to public spending, one may reasonably expect to see a rise in Euroscepticism and some degree of backlash against austerity. In reality, the BSA shows that any spike in Eurosceptic opinion before the 2015 General Election has now returned to pre-2010 levels.  In the run up to referendum on EU membership, IFF’s Business Omnibus will be tracking the business perspective on a possible European exit.

In terms of the cuts, the BSA has not shown a notable fall in support for welfare since 2010, with no pick up in the popularity of tax and spend. Whether this is a lack of faith in the welfare system – certainly elements of the popular UK press have contributed to a negative discourse – or whether it shows wider support for austerity is not clear. But figures such as these may have been on the mind of opposition politicians, many of whom have been reluctant to outright reject the cuts planned for the next parliament.

Could opposition to further cuts pose a threat to this government?

What remains to be seen is whether further cuts may just tip the balance of public opinion and provide a problem for the current government. Not necessarily, it seems, given what we heard from John Hills, Director of the Centre for Analysis of Social Exclusion (CASE) at the London School of Economics, who provided us with a view on the social policy impact of the cuts which characterised the last parliament. The cuts in welfare, he argued, have been selective and his analysis shows that their impacts have not been universally felt. In particular, while the young and the ‘working poor’ tend to be worse off, pensions have been protected.

Whatever happens next, the SRA conference was a great opportunity to celebrate how social research can shed light on complex issues in uncertain times as well as acting as a platform to discuss these issues with old friends and new.

IFF Conference Review: Innovation and insurance

The UK Financial Services Experience Awards

Wednesday 8 July saw the inaugural UK Financial Services Experience Awards ceremony take place in London. Financial Service providers from across the industry battled it out to show the judges how they were seeking to improve experience for their customers.

It was a fantastically hosted event and judging at these awards really showed me how, as a sector often treated with suspicion (and quite rightly in some instances) the Financial Service industry is really looking to put customers’ experience back at the heart of what they do.

This is not an easy task, particularly for insurance providers where trust is low and engagement with providers is often seen to be a ‘necessary evil’.  Having had the opportunity to judge five papers in the insurance category – it was clear to see how technological innovation is really changing the way in which insurance is sold and delivered to consumers. Advances in technology now mean customers can expect to see pop up web-chat when at the point of purchasing online and some providers are even beginning to offer customers the option of streaming video of damage directly to their claims adjusters.

What I found most interesting is that the eventual winner of the category – Direct Line Group in partnership with True & Good – demonstrated that real innovation does not always have to be technological in nature. They deservedly won the insurance award for their fresh approach using simpler language which was more in keeping with their brand. In turn, this improved customer experience and is also likely to lead to better outcomes for customers.

All forms of innovation designed to improve customer experience within the insurance industry (and more widely within the Financial Services sector) should be welcomed. Having witnessed the rate of change first hand, over the next few years I would expect that the ‘benchmark’ of what counts as a good customer experience from an insurance provider to be raised much higher.

For more information on how IFF help clients in the Financial Services space CLICK HERE 

A necessary burden

“If you have ten thousand regulations you destroy all respect for the law.” Winston Churchill 1931

Although not one of the great man’s best known quotes this one sums up the attitude of many UK businesses. To state the obvious these are difficult economic times and many businesses are under great pressure just to survive.

Regulation can often be regarded by businesses as another hurdle to overcome. That is not to say that regulation is a bad thing per se. Most business people would accept there has to be some setting of standards and guidelines – at the very least to ensure a competitive level playing field and to provide some basic protections for employees and customers. Rather it is the number of regulations and the burden these regulations impose in terms of direct costs and staff time which are often seen by businesses as a real barrier to growth. So whilst the UK is ranked 10th out of 142 countries as a place to do business in the World Economic Forum’s Global competitiveness report 2011/12, we are only ranked 83rd out of 142 countries in terms of the burden of government regulation on business.

Recognising the impact of regulation upon business growth, from 2010 the Government announced a range of deregulatory measures designed to ease the burden on UK businesses and in particular SMEs. These measures included One-in One-Out provisions (where to bring in new legislation that will impose a direct cost on businesses, the Government has to remove or modify an existing regulation of an equivalent cost), sun-setting clauses for new regulations (the regulation automatically expires after seven years, unless it is renewed) and a micro-business moratorium (a three-year freeze on new domestic regulation for businesses with fewer than 10 employees). But can Government ever move fast enough in this area for businesses? Can it deliver significant deregulatory measures that reduce the burden on businesses and how can it deregulate effectively when much of the regulatory agenda is driven by Europe?

The answers to these questions can only emerge over time but there are indications of some light at the end of the tunnel.

Earlier this year IFF conducted a survey of over 2,000 senior business decision makers on behalf of the National Audit Office, in collaboration with the Local Better Regulation Office and the Better Regulation Executive to determine businesses’ views on the extent of the burden of regulation, both in general and in specific regulatory areas, and how that burden might be reduced.

The survey found that fewer businesses felt that the overall level of regulation in the UK was an obstacle to their business success when compared to three years ago, but still half of all businesses – particularly SMEs – reported that there is too much regulation. There is also evidence to suggest that year on year fewer businesses are finding some aspects of regulation and compliance burdensome.

Nevertheless there is still work to be done in demonstrating to businesses that government understands their needs and is able to consult meaningfully with business on regulation and enforcement more widely.

A copy of IFF’s report is available to download.