Asked about it earlier this week, Bank of England Governor Andrew Bailey said the way in which companies respond through the balance of pricing, employment levels, and wages will have significant bearing on the economic outlook. A swathe of businesses including major retailers M&S and Sainsbury’s have already warned of potentially higher prices at the tills.
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Scottish hospitality group Signature, which employs more than 700 people across 20-plus venues, has today added its voice to the chorus with founding director Nic Wood saying that the company has been pushed into a “loss-making position” through the combination of the recent UK and Scottish budgets. Further expansion and job creation, he added, is “nearly impossible”.
It remains to be seen how the hike in employers’ national insurance contributions will play out in reality, but economist James Smith of Dutch financial services giant ING has looked even further ahead and he believes the Chancellor’s “one-off” tax and spend Budget is actually just the beginning.
“Expect more tax hikes next autumn,” Mr Smith said. “Fiscal targets were barely met this October, and those targets aren’t especially taxing by historical standards. They also rest on the shaky assumption that spending will rise by less than 1% per capita in real terms beyond the next fiscal year.
“A big top-up is inevitable.”
Furthermore, Mr Smith adds that all the low-hanging fruit on tax has already been picked. Ms Reeves is banking on higher growth but the risk is that this disappoints, throwing Labour’s opening economic gambit after 14 years out of political power into peril.