Well, this is long overdue. Anticipation for the first Labour Party budget in fourteen years has been mounting since July’s election walkover. Two weeks of mainstream media drip-feeding us tax-hike terror has hyped the tension further. The budget is now here, and naturally we’re all asking how it’s going to affect us, our customers and our businesses.
Here’s my take. I’m no economist. I’m certainly not a politician either, but at least that means while you’re not getting an expert opinion, you are at least getting an honest one…
The first thing to say is that the country is in a bit of a state, to put it mildly. Everything seems broken and desperately lacking investment. The NHS, to me, feels like a ball and chain around our ankles. I live opposite a massive hospital and some days I can practically feel it zapping stacks of taxpayer money (is there any other type?). Yet where are the results?
Let’s not even get started on the roads, rail, water, energy and everything else. I have two working-age sons and right now the future suggests they should leave while they can. One’s already gone!
So with this bleak backdrop it’s hardly time for a tax cut, is it? Yes, the country needs more investment but more than anything it seems to need reform and restructure. Maybe streamlining will be a higher priority for ‘the other lot’. I guess we’ll see what their new leader says in the coming weeks.
This government champions growth but the worry is their budget will stifle it. The first headline grabber is the National Insurance increase for employers. What does that actually mean for us? Well, higher costs. Take Zahara: we’ve got 25+ UK-based employees. Back-of-the-envelope maths puts that at around £1000 a month in extra costs, if not more – all money hard earnt, all money we could invest.
Probably of more impact for hospitality and retail, headline grabber no.2 is the minimum wage rise. Both sides can argue till the sun comes up on this one but if I were, say, Wetherspoons, employing a lot of ‘non-career’ labour, it’s surely going to hurt. My guess is we’ll see reflected in their prices.
Likewise, they will see it in our response to price hikes in declining sales. We will go out less. Taken with that lethal change in consumer behaviour post covid – A meal out or a pint in a pub being less preferable to the same on the sofa – and the industry looks dead in the water. Unless the proprietor passionately cares about their food offering, I can’t see them surviving. I give you exhibit A – TGI Fridays. Exhibits B, C and D will be any other chain backed by private equity, in it for the money and not the offering.
There’s an ominously ticking bomb of low birth rates and an aging population in the UK. Growth is the cutter we can take to its red wire – or should it be the blue? That growth will come from serious inbound investment. Does increasing capital gains tax support or detract from that? What message do we send to the super wealthy when we make life more difficult for them?
The problem here is mobility and remaining competitive. The wealthy are the most mobile in history. They can head off to literally warmer climates, pitch up their yachts and base themselves wherever they want. Likely a sunny shore with the most favourable balance of tax regime, stability and lifestyle – so probably not ours. Amalfi anyone?
We must be the only country in the world to tax education. This groundbreaking work is now the stated plan of our government (and another reason for the wealthy to run for cover). As someone who did pay for their kids to go private, with numerous sleepless nights over the costs and the anxiety, I totally empathise with the parents who just want to do their best for their children. The lion’s share of them aren’t the mega-rich they’re being lumped in with. They’re more than likely making sacrifices with a tatty car and a modest holiday. Not everyone is born into a dynasty and goes to Eton. That’s just one tiny elite.
The chancellor threw a bone with the fuel duty freeze. My instinct here is for a fixed fuel price, annually reviewed. It wasn’t long ago the price of a litre of unleaded was £1.50. Why not cap it at £1.45? They make more money when the price is low, like now, and take less tax revenue when the price increases, yet we get stability. You’re welcome.
Oh, and what’s all this about a penny off a pint of draft ale? One for the ‘working man’s club’ – a contingent that haven’t been seen since 1978!
I’ll say this too: racing to the bottom with tax and NI must stop. Rather than all this sleight of hand, why not go for the jugular and increase income tax by 2p? That’s significant cash raised at modest costs – and without nibbling at the edges of CGT and inheritance tax. The bottom line here is there simply aren’t enough rich people to pay for the services we need. Everyone who works needs to contribute. All those that don’t work but should work need to get back in the saddle, skill up and join us on the daily commute. Them’s the rules.
So, what does it actually mean to an entrepreneur like me? Increased running costs for one, and caution on future sales. It also means exploring new options to save money. Here’s an interesting case on the subject of the latter: We have two remote developers based in Eastern Europe. They are fully committed to our team but they invoice us. No tax, no NI – That’s for them to sort out. And they are brilliant. We also use a testing team in India. The same rules apply. So, when it comes to taking on additional employees, am I likely to chance it with another Brit and the tribunal rights they come with, or do I look outside of the UK for remote talent?
It’s a dilemma, and very much buyer beware, but it demonstrates that I don’t need someone ‘down the pit’, so to speak. If work is done at home, on the keyboard, that talent can work anywhere. Right now, my writer has just arrived in China and my designer is in Panama waiting for a boat to Colombia. That’s the reality of today’s labour market.
Above all I think the people I mix with – people who are largely self-employed or run businesses – have a distinct feeling that the current government, like the bunch before it, don’t really appreciate what we do. Nor do they seem to understand it. I get the impression they think it’s The Apprentice, all money-making games and firing people because we like it. The strivers get a bad rap these days. And that’s a really sad indictment.
I’m not sure this budget has done much to address any of the underlying issues. I could be wrong. I hope I am. Labour had no choice but to raise taxes, that money is so badly needed for infrastructure investment. I just can’t help but think what we also need is a defibrillator to the chest of the economy, and maybe a few supply-side reforms to make “doing business” easier.
Let’s see how things play out. Someone wise once said there are two types of forecast: A wrong one and a lucky one. Listening to the chancellor rattle off all hers, I couldn’t help but think they will be the former of those two outcomes.
