Please find a link to our Budget review covering the key points of Alastair Darling’s second Budget. Against the background of a global economic crisis and rapidly increasing government borrowing, Mr Darling approved several significant tax changes, some of which had been trailed in last November’s Pre-Budget Report.

This year there were over 90 supporting notes with the Budget, demonstrating how many changes need consideration. The most eye-catching of these were:

• A new 50% rate of income tax on income over £150,000 from 2010/11.

• The phasing out of personal allowances for those with income over £100,000, again from 2010/11.

• Restrictions on higher rate income tax relief for pension contributions for people with income over £150,000.

• A temporary 40% first year capital allowance for businesses.

• An increase in the ISA contribution limit to £10,200.

We hope that this summary proves useful and, if any of the areas discussed seem likely to have an impact on your personal or corporate plans, we would urge you to contact us so that we can help guide you.

Tight labour market regulation increases unemployment all over the world, finds a study of 73 countries by the University of Bath.

The study, published in the Journal of Comparative Economics, is one of the first to cover not only industrial countries but also developing and transition countries.

Based on data for the years 2000 to 2003, the findings suggest that if, for example, Italy (a typical country with strict regulation) had enjoyed the same flexibility in labour market regulation as the United States (a typical country with flexible regulation), its unemployment rate might have been 2.3 percentage points lower among the total labour force, 3.4 percentage points lower among women and 5.6 percentage points lower among young people.

“The adverse labour market effects are probably due to lower investment by domestic firms as well as lower foreign direct investment inflows caused by stricter labour market regulation.” said Dr Horst Feldmann, from the University’s Department of Economics & International Development, who carried out the research.

One area of labour market regulation that appears to have particularly adverse effects on unemployment are stringent hiring and firing rules, the study finds.

While strict hiring rules restrict temporary work agencies and the use of fixed-term contracts, tight firing rules make it difficult and costly for employers to lay off workers.

According to the findings, these rules, as well as strict labour market regulation in general, have a particularly adverse impact on women and young people.

Dr Feldmann explained: “Women often take a career break to have children and later on try to get back into employment. Young people are just entering working life.

“Therefore, it is plausible that both groups are more strongly affected when employers are reluctant to hire staff due to stringent labour market regulation.”

Another type of labour market regulation that appears to raise unemployment on a world-wide scale is military conscription, the study finds.

“A main reason may be that conscripts leaving the armed forces after the end of their service have difficulties finding a job because they did not gather the skills and work experience that employers are looking for.” said Dr Feldmann.

“The longer the conscription period, the more severe this mismatch is likely to be. According to my findings, this effect is the strongest among young people. This is obviously because conscripts typically are in this age group.

“This is the first time the effects of military conscription on the labour market have been analysed.”

Apart from the indicators that measure the strictness of hiring and firing regulation and the use of conscription, Dr Feldmann used indicators that measure the strictness of minimum wage laws, the centralisation of wage bargaining and the generosity of unemployment benefits.

His aggregate indicator measuring the overall strictness of labour market regulation is the average of these five individual indicators.

On average over the years 2000-2003, Italy’s flexibility of labour market regulation (as measured by the aggregate indicator) was rated 3.6 out of 10 – while the United States was rated 7.2 and the United Kingdom was rated 6.8.

Dr Feldmann said: “The research suggests that the UK’s fairly flexible labour market regulation is likely to strengthen the economy’s resilience to weather the current crisis.

“Although unemployment is going to rise sharply for some time, countries with more flexible regulation will probably experience a faster and more pronounced fall in unemployment once the crisis is overcome.”

The University of Bath, March 17, 2009

The European Court of Justice (ECJ) has called on the UK Government to prove to the High Court in London that there is a ‘legitimate aim’ behind the retirement age or it could be in breach of European law.

EU Directive 2000/78 prohibits discrimination on grounds of age as regards employment and occupation.

By way of exception, it provides that certain differences of treatment on grounds of age do not constitute discrimination if they are objectively and reasonably justified by legitimate aims, such as those related to employment policy, the labour market or vocational training.

However, the charity Age Concern, which promotes the well-being of older people, challenged the legality of UK legislation on the ground that the possibility to dismiss an employee aged 65 or more by reason of retirement is contrary to the directive.

The ECJ rejected the charity’s claim that the Government’s 2006 retirement age regulations were discriminatory on their own.

However, the court added that the rules were not merely in place to protect business.

In a statement, the judges said: “The court notes that the aims which may be considered legitimate by the directive, and, consequently, appropriate for the purposes of justifying derogation from the principle prohibiting discrimination on grounds of age, are social policy objectives, such as those related to employment policy, the labour market or vocational training.

“By their public interest nature, those legitimate aims are distinguishable from purely individual reasons particular to the employer’s situation, such as cost reduction or improving competitiveness.”

The statement added: “It is for the national court to ascertain, first, whether the United Kingdom legislation reflects such a legitimate aim and, second, whether the means chosen were appropriate and necessary to achieve it.”

Scottish Legal News, March 5, 2009

Last month figures showed almost 1.98 million people, including those not eligible for benefit, were looking for work.

The latest numbers to be published by the Office for National Statistics are set to show more people are unemployed since Labour came to power in 1997, when the total was just over 2 million.

Job losses have continued to mount across British industry in recent weeks, leading to fears that unemployment will soar well over 3 million in 2010, using the International Labour Organisation (ILO) measure, which counts people not eligible for benefit.

Howard Archer, chief economist at Global Insight, said he predicts the latest figures to show a rise of 176,000 for the three months to January, taking unemployment to 2.04 million.

He added that the unemployment rate is expected to jump to 6.6 per cent, while the number of people claiming jobseeker’s allowance increased by 90,000 in February, following a rise of 73,800 in January.

This would be the largest monthly increase since March 1991 and take claimant count unemployment up to 1.323 million.

He added that the claimant count unemployment rate is forecast to rise to 4.1 per cent in February from 3.8 per cent in January.

Mr Archer said: “Reports of companies laying off workers are prevalent, while an increasing number of companies are folding.

“With the economy seemingly set to contract through 2009 and very possibly beyond before starting to recover gradually, we expect unemployment to rise to a peak of 3.3 million on the ILO measure around late-2010/early-2011. This would give an unemployment rate of around 10.5 per cent.”

Yahoo News, March 18, 2009

One in ten practising solicitors in Scotland has been sacked during the credit crunch, according to Scotland on Sunday.

Lorna Jack, chief executive of the Law Society in Scotland, said her members were telling her they did not remember a situation as bleak as the current one.

She said: “This is definitely the worst of any recessions.”

Based on her analysis, the redundancies are across the profession, from trainees to experienced partners. In recent weeks, a number of Scottish law firms have announced redundancies or have been forced to ask employees to work part-time to reduce staff costs.

Dundas & Wilson, Scotland’s largest law firm, is axing 50 positions, Shepherd and Wedderburn is making 14 redundancies and Brodies is to cut up to eight jobs.

While legal graduates are still coming through the pipeline, Jack said she was “very worried” about trainees who are already in posts at struggling firms.

She said she was aware of partners being asked to contribute more to their firms to boost income in the face of declining fees.

Jack added: “It’s not an atypical situation for partners to be asked for more cash to sustain their firms. They are having to make business decisions that they have never had to address before.”

Conveyancing and corporate finance are among the hardest hit areas because of a collapse in the housing market and a lack of deals being done, but even busier parts of the profession are struggling.

said: “The money is just not around. Firms have reported to me that their litigation and family law divisions have high levels of work. However, payment for this work might be a problem and cash flow isn’t easy.”

The Law Society is encouraging solicitors who have been made redundant to maintain their skills by doing pro-bono work for charities or voluntary organisations.

“We want to ensure that individuals who have been most affected can keep their skills while they wait for the upturn to come,” she said.

Recruitment agencies are now talking to a small number of legal professionals who are interested in retraining to find work in other sectors.

Denholm Associates has launched a ‘transitional service’ for displaced workers, including solicitors, to help them get their careers back on track.

However, Jack does not predict any improvement until banks start lending again and consumers regain confidence in the property market.

She said: “On the mortgage lending side you need a willing public to get the conveyancing market going again.”

A further concern in an already stagnant housing market is the impact of home reports.

She said: “It’s difficult to separate the impact of home reports on conveyancing from that of the recession.”

On the corporate side, she admitted that the headquarters of Scottish companies have proved a great source of business. The loss of banking headquarters and the takeover of Scottish & Newcastle will have hit this market.

To compensate for any losses, the Law Society is working with its members to ensure they are in a position to prove they can handle UK-wide corporate work from their Scottish offices and their branches south of the Border. However, this will not stop the legal profession shrinking in Scotland.

Jack said: “We’ll see more consolidation in the legal sector. Some of that might be precipitated by the recession, but I think it might have happened anyway.”

The Law Society itself has been hit by the downturn. Staff numbers have been reduced, mainly by ‘natural wastage’, from 135 last year to 123.

The Law Society has set up a hotline for trainees who have job concerns. It is offering advice to firms on how to change their ways of working to allow them to hold on to talent.

Scottish Legal News, March 9, 2009

In Richmond Pharmacology v Dhaliwal, a director had said to a senior employee who was leaving the company, “We will probably bump into each other in future, unless you are married off in India”.

She claimed that amounted to an act of harassment on grounds of her race. Upholding the tribunal’s finding that it did amount to harassment, Underhill P reminds practitioners that the ‘old’ caselaw on harassment, created before the statutory definition, should be largely disregarded – as should caselaw under the Protection from Harassment Act 1997.

Daniel Barnett, February 16, 2009

Here’s a very interesting case on the statutory dismissal procedures.

It is authority for the proposition that employers who announce an intention to dismiss before the step 1 letter and step 2 meeting can recover the situation by sending the letter and holding the meeting afterwards, provided they have not actually dismissed the employee.

In Smith Knight Fay v McCoy, the EAT held that the phrase ‘action taken’ in the statutory dismissal procedure referred to the act of dismissal, not the decision to dismiss. Thus an employee who was told he was being made redundant, and then given a step 1 letter and invited to a meeting, was not automatically unfairly dismissed.

Daniel Barnett, March 11, 2009

In a dismissal case, the old rules continue to apply if the employer has sent a step 1 letter, or held a step 2 meeting, before 6th April (or, obviously, dismissed the employee before 6th April).

So where the employer holds off doing anything until after 6th April, the statutory dismissal procedure rules are abolished and we’re back to the pre-2004 position.

In a statutory grievance case (the importance being that the employee needs to have sent a step 1 letter and waited 28 days before being allowed to bring a tribunal claim), the statutory grievance procedure rules are abolished provided the action about which the employee complains occurred on or after 6th April 2009.  Where the action occurred wholly before 6th April, then the statutory grievance procedure will continue to apply. However, it gets a bit more complicated for acts which began before 6th April 2009 but continue after that date.

For such acts:-

• for almost all types of claim (except equal pay, redundancy payments and some industrial action claims), the old statutory grievance procedure applies if the employee sends a step 1 grievance letter, or presents an ET1, by 4th July 2009. If that date passes without a step 1 letter or ET1 being sent, then the new regime applies and the statutory grievance procedure will not engage.
• for equal pay, redundancy payments and some industrial action claims, the same applies except the changeover date is 4th October rather than 4th July.

Note: this is a summary – the transitional provisions do contain some traps for the unwary.  For a much fuller consideration of these provisions, I recommend Barry Clarke’s excellent paper Dispute Resolution: Frying Pan to Fire (available to members of the Employment Lawyers’ Association).

Daniel Barnett, March 3, 2009

Technology firm NCR is to end manufacturing work in Dundee with the loss of about 252 jobs.

The ATM manufacturer blamed “unprecedented contraction in the global economy” for the cuts.

Engineering, manufacturing, marketing and support staff will be affected by the reductions in the workforce.

About 450 people will continue to work for the firm in the city, focussing on areas such as research and development and new product introduction.

Two years ago, 650 jobs were lost at NCR in Dundee.

Rick Marquardt, NCR’s vice president of global manufacturing, said: “Like many companies, we have taken a number of prudent steps to better manage our cost structure in recent months.

“However, based on the current business outlook, we now need to make the difficult but necessary decision of proposing further workforce reductions in Dundee in order to protect our position.

“We realise that these changes will bring challenging times for those employees affected and we are committed to helping any individuals affected with comprehensive outplacement support.”

Workers were given the news at 1100 GMT and then sent home until Monday.

Fiona Farmer from the Unite union said: “They’re absolutely devastated.

“There was an expectation that production was heading downwards and there may be some job losses, but certainly this is way and beyond what anybody was expecting.

“This is just a major blow for Dundee and those employed in manufacturing at the site. In a lot of cases it will be husband and wife, father and son, whole families will be affected.”

Grahame Smith, general secretary of the Scottish Trades Union Congress (STUC), said: “This announcement is a massive blow to the NCR workforce and the city of Dundee.

“The impact on the supply chain is not yet clear but potentially very serious. The Scottish Government and its agencies must do everything in their power to ensure that the redundant workers are re-employed as quickly as possible.”

A 90-day consultation on the proposed restructuring is set to begin with union and employee representative groups.

Speaking outside NCR’s Gourdie factory, Dundee West MSP Joe FitzPatrick said: “NCR are making a mistake losing the highly skilled workforce that they have here.

“NCR have been the bedrock of Dundee’s manufacturing base and for that to effectively come to an end today is heartbreaking.

“There will be tears – not just from the staff inside, but there will be tears across Dundee. This is the end of an era.”

Dundee West MP Jim McGovern added: “I was devastated to hear this morning of NCR’s proposed 252 job losses in Dundee. This is another massive blow for Dundee and in particular NCR employees.

“I will do all I can to help those who are to lose their jobs and I will be in contact with the union and NCR regularly to ensure the 90 day consultation period is conducted honestly and fairly as the NCR employees deserve.”

Dundee Lord Provost John Letford said: “The fact that NCR has made this announcement in the current financial climate cannot be a surprise to anyone, but that is no consolation to the people who now find themselves looking for work.

“NCR has a long and proud connection with Dundee, and that is being maintained with the retention of the company’s research and development section at Kingsway West.

“That is not much comfort to those affected by today’s news, but the company is looking to its own future and the future of the city by retaining this facility here.”

BBC News, March 13, 2009