Labour cheered 1p off a pint but the Budget leaves a vicious hangover
As Rachel Reeves delivered her Budget one week ago, the loudest cheer on the government benches came when she declared that her policies will take 1p off the cost of a pint. Labour was so pleased with this bit of good news that the claim dominated their post-match social media output.
This self-congratulatory victory lap now looks particularly tin-eared as the wider consequences of the Chancellor’s policies are being digested by furious businesses – including large pub and hospitality groups.
The impact of the hikes to employers’ national insurance combined with a chunky rise to the minimum wage constitute a major disruption to employers in the retail, leisure and hospitality space who tend to have a higher number of lower paid employees than other sectors.
A note released last night by Shore Capital contained some painful number crunching on the impact of the Budget on the hospitality sector’s labour costs, describing the fiscal statement as “thin gruel” for the sector and noting that while the industry will try its best to mitigate the effects of these policy changes, they “now expect price inflation across hospitality of at least three per cent.”
Moving from analyst notes to the real world, Sky’s Mark Kleinman reported yesterday on a heated call between business secretary Jonathan Reynolds and employers.
It was reported that the CEO of Greene King, Nick Mackenzie, told Reynolds the national insurance changes would cause a “£20m shock” to his company while fellow pub-co Fullers reportedly warned that it would have to slash its planned investment from £60m to £30m as a result of the increased costs. Kleinman notes the British Beer and Pub Association, also on the call, talked of a “tsunami” of cost increases.
Barely a day has gone by since the Budget without an employer – large or small – warning of the sometimes catastrophic impact of the business tax increases unleashed by this government, and even the Chancellor has had to acknowledge what everyone has been saying for days – that taxes on business invariably end up hitting employees. How is it possible that Labour so misjudged the fallout from its tax raid on business? We must conclude that they either didn’t understand how their policies would hit employment, or didn’t care. The former is more likely.
They may have cheered the penny off a pint when Reeves announced it, but they should brace themselves for a hangover from hell.