The Bank of England governor today joined Britain’s biggest retailers warning that job cuts are ‘inevitable’ after Rachel Reeves’ monster national insurance raid.
Andrew Bailey said dozens of businesses – including Tesco, Asda and Sainsbury’s – had been ‘right’ to sound the alarm in an open letter to the Chancellor.
Ms Reeves unveiled an extraordinary £25billion hike in employers’ NICs in the Budget last month. The rate has been raised and the threshold at which firms must pay has been cut, with ministers adamant it was the only way to prop up public services.
But the OBR projected that the fiscal package would boost inflation and unemployment.
In the letter today, the companies cautioned that the huge tax increase, together with packaging levies and increases to the national minimum wage could cost retailers more than £7billion a year.
‘We appreciate Government’s focus on improving the fiscal situation and investing in public services; we also recognise the role businesses have in supporting this,’ the letter said.
‘But, the sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.’
The bosses of Aldi, Amazon UK, Boots, Lidl, JD Sports, Primark, Morrisons and Greggs were also among those signing.
Giving evidence to the Treasury Select Committee this morning, Mr Bailey said: ‘I saw the BRC’s (British Retail Consortium’s) letter and I think they’re right to say, I think there is a risk here that the reduction in employment could be more. Yes, I think that’s a risk.’
He added that firms would feel more pressure on margins from the tax rises in the short term, before the effect eases.
He said: ‘Probably, initially, there will be more pressure on firms’ margins because it takes them longer to adjust and then they’ll probably rebuild those profit margins over time. I would expect that.’
The businesses said they would ‘welcome’ the chance to meet with Ms Reeves and urged changes including phasing the reduction in the NICs lower earnings threshold, delaying timelines for packing levy implementations and revisiting business rates proposals announced in the Budget.
‘By adjusting the timings of some of these changes, the Government would give businesses time to adjust and greatly mitigate their harmful effects on high streets and consumers,’ it read.
Another joint letter organised by UK Hospitality earlier this month raised fears that minimum wage jobs could become ‘unviable’ as a result of the NICs overhaul.
Keir Starmer has defended the Budget’s ‘tough’ fiscal decisions amid rising criticism from businesses and Farmers’ Union protests over changes to inheritance tax.
‘Make no mistake, I will defend our decisions in the Budget all day long
‘I will defend facing up to the harsh light of fiscal reality.
‘I will defend the tough decisions that would be necessary to stabilise our economy and I will defend protecting the pay slips of working people, fixing the foundations of our economy and investing in the future of Britain and the future of Wales, finally turning the page on austerity once and for all.’
