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“The apprenticeship levy weighs on average earnings and consumption equally”

The apprenticeship levy and auto-enrolment of workplace pensions are estimated to reduce average earnings by 0.3 and 0.4 percent respectively by 2021, according to the Spring Statement.

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Chancellor Philip Hammond
Chancellor Philip Hammond

Chancellor Philip Hammond presented his first Spring Statement to Parliament on March 14.

 

The statement document reads: “Some of the weakness in our central forecast for earnings growth reflects judgements about the impact of government policies.

 

“We assume that the burden of these interventions is ultimately borne by workers, with wages lower than would otherwise be the case.”

 

The Chancellor said the most significant policies are the introduction of the apprenticeship levy and the continued rolling out of auto-enrolment into workplace pensions.

 

He said the above figures are based on the assumption that 80 percent of the additional cost to employers will be passed through to earnings.

 

He added: “As auto-enrolment boosts households’ pension savings in an offsetting way, we assume that the reduction in average earnings growth does not weigh on consumption growth. But we assume that the apprenticeship levy weighs on average earnings and consumption equally.”

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