CIPD warns UK Chancellor against tax hikes as AI pressures hiring

The Chartered Institute of Personnel and Development on Monday cautioned Chancellor Rachel Reeves against weakening the UK’s fragile labour market with tax. The warning comes after employers have warned that artificial intelligence (AI) risks leading to job losses.

The CIPD also noted that employer confidence has remained at a record low. The professional body for HR, Learning, and Development, urged the Chancellor not to weaken the labour market by increasing business costs in her upcoming Budget.

CIPD survey found that AI has weighed on hiring

There have been concerns over Labour’s tax hikes amid Reeves’ plans to fill an estimated 30 billion euro budget gap. The threat of higher employer costs is also clouding an already weak jobs market.

A new CIPD survey confirmed that the surge in AI has weighed on hiring, showing that one in six employers is set to furlough their workforce over the next year. The initiative comes as AI is expected to replace humans more quickly. The study also found that junior and administrative roles are at a higher risk.

A quarter of the companies that expect to offload employees due to AI said they were preparing to lose more than one in 10 staff. According to the survey, large private companies are expected to have the biggest cuts. A flurry of firms have already revealed AI-related job cuts. 

Tech giant Microsoft revealed earlier this year plans to cut 9,000 jobs as it doubles down on its AI-based investments. The world’s largest accounting firms, Deloitte and EY, have also reduced hiring graduates as technology takes over entry-level work. James Cockett, an economist at CIPD, argued that artificial intelligence risks leaving many people jobless.

CIPD believes the UK government needs to ensure that measures in the Budget and Employment Rights Bill don’t further worsen hiring. Despite the concerns of job losses, Labour is planning an initiative to protect workers’ rights by establishing day-one protections against unfair dismissal.

The legislation is expected to make it more expensive and risky to hire workers, which aims to reduce job-related insecurity. Prime Minister Keri Starmer said the bill is good for UK workers, businesses, and the economy. He also acknowledged that it’s a core part of their agenda to make people better off, and hopes the legislation will improve people’s lives.

Reeves is expected to hike the minimum wage

Reeves is expected to hike the minimum wage in her Budget from 12.21 euros to around 12.70 euros an hour. The initiative will further increase labor costs amid Reeve’s hiking of employer National Insurance (NICs) rates last year.

The surge in NIC rates has already led to lower employment across Britain. Retail and hospitality trade groups argued that the hike in the Chancellor’s NICs rates led to the loss of hundreds of thousands of jobs.

A survey of 1,000 business owners from Employment Hero found that a third of companies said they would slow hiring if Reeves further increased the cost of employment. The study also found that 24% of the companies said they would consider redundancies. Half of the businesses said they would need to consider raising prices.

Reeves has been keen to keep a lid on inflation, which is currently standing at 3.8%, above the Bank of England’s 2% target. Reeves argued that lowering prices would be the main focus of her Budget later this month. She urged voters to contribute to fix the public finances, raising the prospect of her going against Labour’s manifesto pledge not to hike income tax.

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