The Resolution guide to hiring staff and protecting their payslips

Afternoon all,

Plug in baby – what a week. We published our pre-budget analysis – Black Holes and Consolidations – and I put out my first Budget Muse-ing on why there’s a strong case for putting up income taxes. The Chancellor stole our thunder though, confirming we’re going to see an Uprising in taxes. But could OBR revisions to wage growth forecasts offer some Starlight at the end of the tunnel? Join us at our post-budget event for our diagnosis…

Coming back to earth, as the Chancellor makes her final decisions she could do worse than glance at this brilliantly clear Centax report, highlighting the need for big-picture tax reform to support growth.

As speculation about whether 2p or not 2p continues, we have a chart to get you up to speed. For those already sick of the Budget, read on for COP 30, the woes of renting and the risks of easy interviews.

Have a great weekend,

Ruth
Chief Executive
Resolution Foundation

Unwell workers. Sir Charlie Mayfield has published his final report for the Keep Britain Working review, replete with sensible recommendations and next steps. He accurately identifies a culture of fear, a dearth of support and structural barriers to work as key challenges. The headlines generated on inactivity rates were a tad overblown. At least one-in-five working age people have been inactive for the last 50 years so this represents an opportunity not a crisis. The country *is* getting older and sicker, and boosting employment is a progressive way to lift living standards. The key challenge – as with any independent review – is to turn recommendations into concrete action. More on that here. Charlie avoids the trap of proposing a quick-fix solution to a complex problem and instead recommends an evidence gathering process kicked off by an impressive group of employers keen to take part. Moving from headlines to solutions will need sustained effort, and even on day one we detect some ambiguity about whether the Government is establishing the Workplace Health Intelligence Unit that Charlie called for?

Making a house a home. Last week Awaab’s Law came into force, but the Private Rental Sector still needs reform. The law was named after Awaab Isak, who died at the age of 2 after prolonged exposure to mould in social housing. The law empowers tenants and punishes social landlords who dismiss requests for repairs. It is undoubtedly a welcome step – but it remains limited to social tenants. It excludes temporary accommodation, which houses more than 130,000 homeless households often in similarly hazardous conditions. The linked blog describes mothers in Birmingham who are too scared to complain about the poor conditions in their privately rented homes, fearing eviction and relocation. Even for the social tenants covered by the law, the onus remains on them to act in a system that already leaves them feeling (and often, being) powerless. The shortage of safe, affordable housing across the UK remains a defining factor in our housing policy. If this is of interest to you, don’t miss our event next Thursday discussing what role housing might play in the Budget.

Limp handshake? We’ve been grilling some excellent candidates at RF towers this week and so I was pleased to read that a tough interview is a good sign. Using data from 500,000 Glassdoor interview reports for high-paid jobs, the research finds that candidates were more likely to reject an offer if the interview was easy. This increased with wages – for the highest paid roles, rejection rates for easy interviews were more than a third, compared to under a quarter for more difficult interviews. Easy interviews made candidates four to five times more likely to think the firm would hire anyone. People who did take jobs after easy interviews had lower job satisfaction and were 10 per cent less likely to stick around for at least a year. So next time you have a testing interview reassure yourself – it might just be a good sign for them and you.

Skin in the game. This paper studies how CEOs’ personal retirement accounts (which lose value if their company struggles financially) affect whether US companies voluntarily disclose their political spending. Analysing S&P 500 firms, researchers found that CEOs with more “skin in the game” through these retirement plans are more likely to be transparent about political spending. Why? Doing so reduces bankruptcy risk, improves the company’s reputation and loan terms – all of which protect their own retirement money. Bottom line: when CEOs have personal money staked on the health of their companies, they’re more transparent about politics. So does that mean we can look forward to even more transparency about Musk’s political views? Wonderful…

Something for the weekend | Cop out

November will be big for fans of a non-burning planet, as COP30 rolls into Belém, Brazil. The jamboree kicks off formally on Monday, although prizes have already been handed out and Starmer has already been there and back again. Leaders will often meet before the official kick-off to discuss cold hard cash (or the lack thereof), but the discussions next week will also have serious implications for a planet at a tipping point.

This year’s gathering is taking place at the gateway of the Amazon rainforest, and it’s Brazil’s first-time hosting since the 1992 summit that kicked the whole thing off. With climate veteran André Corrêa do Lago at the helm, there will be extensive negotiations afoot to bump climate finance from the $300 billion agreed in Baku to a whopping $1.3 trillion. Brazil will launch its signature Tropical Forest Forever Facility (no thanks to us), a $125 billion investment fund to reward countries for not chopping down their forests.

One weird sub-plot to this year’s COP is that hotel prices have gone bonkers – a one bedroom apartment was apparently listed for more than $17,000 per day. Not to mention a new highway slicing through the rainforest, which organisers insist is not officially linked to the conference.

As has been widely reported, the most polluting countries are notably absent from this year’s summit and only 64 countries had submitted their climate pledges as of October. The net zero transition is happening – but in an increasingly fractured world, it’s starting to feel more like a competition and less like a shared endeavour.

Chart of the week

The Budget rumour mill has sped up a notch today, with several papers reporting that variants of our 2p ‘tax switch’ are being considered by the Chancellor. To recap, we propose raising Income Tax rates by 2p whilst cutting employee National Insurance rates by 2p. This would raise £6 billion from pensioners, landlords and self-employed workers, while protecting payrolled workers from tax rises. Chart of the Week (which also includes a rise in dividends tax) shows what this would mean for tax rates on different income sources. In both charts, you’ll see that tax paid on income differs wildly depending where the money came from. This is mad, economically inefficient… and disincentivises employment. Our proposal would align employee and self-employed marginal rates (at 28 per cent) for taxes paid directly by the employee for the first time. There is no good reason why a builder charging £50,000 should pay £5,000 less in tax than a teacher earning £50,000 (under our proposal, that gap would shrink by £750). Taking into account employer national insurance the total tax on employment would still remain much higher than other forms of income. Looking at tax rates over time, many would remain close to historic lows. The first Income Tax rate rise since 1975 would take the basic rate back to its level in 2007, and the basic self-employment tax rate would still be lower than at any time before the pre-election tax cuts of 2024. Tax switches are not as damaging as you might think…